Chiang v. VenemanChiang v. Veneman
Peter D. Keisler, Assistant Attorney General, David M. Nissman, United States Attorney, Ernest Bategna, Assistant United States Attorney, Robert M. Loeb, Charles W. Scarborough, Colette G. Matzzie, (Argued), Attorneys, Appellate Staff, U.S. Department of Justice, Washington, DC, for Appellant.
OPINION OF THE COURT
BECKER, Circuit Judge.
This is an interlocutory appeal by the defendant, United States Secretary of Agriculture, Ann M. Veneman (Veneman) pursuant to
Chiang also alleges that the USDA administrators in Vermont further instructed Virgin Islands officials to give applications only to those class members on the waiting list who became a problem, and then told local employees you know what to do with it. This message was uniformly understood by local USDA officials to mean that the applications were not to be processed, but rather that actions were to be taken to make it difficult or impossible for the inquiring parties to meet qualifications and deadlines, the intention being that the applicants would become so frustrated that they would withdraw their loan applications, or that delays would result in disqualification or other justification for denial of the applications. In Chiang‘s submission, this became known in the local USDA office as the Impossible Yes: an application would be given out, but the USDA would make it impossible for the putative applicant to have the application fairly processed.
Furthermore, Chiang alleges corruption in the administration of the loan program in the Virgin Islands-in the rare instances in which loans were approved-through favoritism to local contractors who were not building homes in a safe and workmanlike manner. This resulted, it is said, in placing Virgin Islanders into inadequate and unsafe housing, representing a further form of discrimination against Virgin Islanders.
At the behest of Chiang, the District Court granted a
All persons who are Black, Hispanic, female and /or Virgin Islanders who applied or attempted to apply for, and/or received, housing credit, services, home ownership, assistance, training, and/or educational opportunities from the USDA through its Rural Development offices (and predecessor designations) located in the U.S. Virgin Islands at anytime between January 1, 1981 and January 10, 2000, and who believe they were discriminated against on the basis of race, gender or national origin.
In Veneman‘s submission, the District Court abused its discretion when it certified what she describes as a sprawling and unmanageable class action seeking $2.8 billion in damages from the USDA. She complains that the class definition is overbroad, and that it is internally inconsistent insofar as it encompasses every Virgin Islander who applied or attempted to apply for any of the different Rural Housing Service (RHS)1 credit and benefit programs during a nineteen-year period (from 1981 to 2000), including those with non-credit claims, those with untimely claims, and Caucasian loan applicants who the complaint alleges benefitted from the discrimination.
Chiang counters this with the contention that determination of loan eligibility would, in fact, be susceptible to class proof because those determinations were purely ministerial in nature. In her supplemental exhibit 1, Chiang submits a chart for our consideration which she claims was the primary document used by USDA employees to determine eligibility, contending that those employees did not have any particular knowledge or skill, but rather, were mere clerks charged with matching income to columns on the chart. According to Chiang, the evaluations of eligibility constituted neither in-depth nor discretionary assessments of the circumstances of each applicant, and hence are subject to common proof.
Veneman is surely correct that the plaintiff in an ECOA case must establish that he or she was qualified for loan eligibility as part of the prima facie case. The record developed thus far leaves us in some doubt as to the validity of Chiang‘s contentions about the susceptibility of eligibility determinations to common proof. Nevertheless, we believe that this question will be best resolved by the District Court in the first instance. We have no doubt, however, that the question of the existence vel non of the phony waiting list — and associated techniques used to prevent Virgin Islanders from gaining access to loan applications and loans — is a matter appropriate for class determination. We will therefore affirm that portion of the District Court order certifying the class pursuant to
We are not troubled by the seeming internal contradiction in the class definition because, inasmuch as the plaintiffs’ primary claim is that they were discriminated against for being Virgin Islanders, a cognizable class, we will treat the claim as such and modify the District Court‘s certification order accordingly. While some claims allege individual gender and race discrimination, the number of such complaints appears to be small, and we think that certifying a class of Virgin Islanders best captures the plaintiffs’ arguments. Since 76% of the population of the U.S. Virgin Islands is black and 14% is Hispanic, it is possible that the claims of racial and national origin discrimination may overlap. We therefore leave to the plaintiffs the option to seek to amend the class definition to allege racial and gender, rather than national origin, discrimination; any decision on such amendment will be for the District Court in the first instance. Additionally, for reasons explained infra, we will further modify the certification order to eliminate the reference to the class members’ belief in discrimination, thereby removing such a subjective criterion from the class definition.
I. Facts and Procedural History
We begin with a recitation of the allegations supporting class certification, derived both from the first amended complaint and from extensive informal class action discovery (largely exchange of documents). We note that it is not necessary for the plaintiffs to establish the merits of their case at the class certification stage, and that, in determining whether a class will be certified, the substantive allegations of the complaint must be taken as true. See Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177-78, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974).
Between January 1, 1981 and January 10, 2000, thousands of Virgin Islanders requested loan applications from the USDA in order to purchase or make repairs on homes. As noted above, Chiang alleges that all class members who requested home loan applications were forced to put their names on an illegal waiting list instead of actually being given an application.2 Chiang contends that the existence of this list, generated in the USDA regional office in Vermont which had jurisdiction over the Virgin Islands, was in direct contravention of USDA instructions and regulations, and that no equivalent list existed anywhere else in the United States. Chiang represents that the justification USDA gave for placing class members on the waiting list was that (1) the USDA did not have any applications and (2) applications were not being given out because the USDA had no money available for loans. However, Chiang contends that applications were, in fact, available, and that a certain low level of funding was also available despite her allegation that the USDA failed to seek or obtain proper levels of funding for rural housing loans for each of the 19 years at issue.3
The plaintiffs filed their initial complaint on January 11, 2000 and filed their first amended complaint (FAC) on March 23, 2001. The FAC named 39 plaintiffs and sought class certification. Veneman opposed class certification on the grounds that the threshold requirements of
On February 28, 2003, the District Court filed its decision certifying the class under
In making these findings, the District Court rejected Veneman‘s argument that the class definition improperly turned on a class members’ state of mind-i.e., whether they believed themselves to have suffered discrimination. It rejected Veneman‘s argument that
On July 22, 2003, a motions panel of this Court granted Veneman‘s petition for permission to take an interlocutory appeal under
A. Standard of Review
In order to obtain class certification, plaintiffs must establish that all four requisites of
B. Rule 23(a)
In any class certification, the threshold issue is whether the four requisites of
One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.
Veneman does not now contest numerosity, typicality, or adequacy of representation. Rather, she focuses on the commonality prong, arguing that the eligibility determinations for loans are not susceptible to common proof. She also argues that the definition contains an internal contradiction, and that the class as certified is fatally overbroad.
1. Commonality
Veneman‘s first objection to the class certification is that there are not sufficient questions of law or fact common to the class. See
As noted above, ECOA makes it unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction ... on the basis of race, color, religion, national origin, sex or marital status, or age.
As presented by Chiang, and as certified by the District Court, the heart of the complaint alleges discriminatory attempts to keep class members from having access to rural housing loan programs in the Virgin Islands. Chiang submits that the so-called phony waiting list and the other practices that allegedly contributed to prevent Virgin Islanders from having access to loans are all susceptible to common proof. Those multifarious practices include the following: the refusal to accept submission of loan applications from class members; the refusal to issue loan applications; the refusal to process loan applications; the refusal to provide reasons for failing to process the loan applications; the unlawful denial of access to established procedures and national funding computer systems; the refusal to notify class members of eligibility for loans and assistance; the refusal to employ mandated priority funding system; the refusal to engage in mandated processing procedures to determine eligibility; the concealment of discriminatory acts by refusal to issue notification stating reasons for failure to process; the failure to issue notices of available funding and requests for information needed to process a loan; the refusal to notify class members of next quarter funding availability; the concealment of class members’ attempts to access programs by refusal to enter their information in national database; the failure to advise class members about requirements for keeping loan applications active; the unlawful denial of access to non-program loans; the refusal to advise class members of their right to review and appeal; the unlawful refusal to provide for administrative review of non-appealable decisions; the failure to investigate and process discrimination complaints; the denial of access to non-program procedures for assumption of existing USDA loans and properties; the systematic denial of access to housing programs; and the unlawful discouragement and refusal to process applications by way of the impossible yes.
In our view, these claims allege a uniform course of conduct common to all class members subject to common proof in a single trial. In Hoxworth v. Blinder, Robinson & Co., 980 F.2d 912, 924 (3d Cir.1992), we held that a uniform scheme or uniform course of conduct would support a finding of predominance even where injuries resulting from a fraudulent securities scheme were different for each class member; while imposing a higher standard, preponderance presupposes commonality. See also Int‘l Brotherhood of Teamsters v. United States, 431 U.S. 324, 336, 97 S.Ct. 1843, 52 L.Ed.2d 396 (1977) (holding that a pattern or practice would be present only where the denial of rights consists of something more than an isolated, sporadic incident, but is repeated, routine, or of a generalized nature). Chiang has alleged such a practice here. We will therefore affirm the class certification insofar as it deals with the waiting list and associated techniques.
Chiang contends that the issues are appropriate for class certification because determinations of loan eligibility are a purely ministerial matter. At oral argument before this Court, counsel for Chiang submitted a chart concerning income limit qualifications for certain RHS loans. Counsel argued that the one-page document demonstrated that qualification for the loans at issue was a mechanical function that could be undertaken by any low-level clerk simply by reading the chart. See http://www.rurdev.usda.gov; see also
Veneman, on the other hand, submits that determining eligibility for loans is quite complex and involves the exercise of discretion. She contends that in order to show that he or she was qualified for a loan, each applicant would need to demonstrate that he or she met each of the regulatory requirements including income limitations and ability to repay the loan. See
The USDA highlights an internal contradiction in the class definition, and argues that this contradiction is so egregious that it renders the class, if not fatally overbroad, then at least logically impossible. In certifying the class, the District Court defined its members as all persons who are Black, Hispanic, female and/or Virgin Islanders. The USDA argues that a class consisting of Blacks, Hispanics, women, and/or Virgin Islanders is inherently contradictory as it would necessarily both include and exclude white males. We agree. However, rather than decertify the class, as the USDA urges us to do, we prefer to take a less drastic course and simply modify the class definition to remove the ambiguity. See
We modify the class definition to include all Virgin Islanders, rather than to include only persons who are Black, Hispanic, [and/or] female, because we understand Chiang to be alleging mainly discrimination against all Virgin Islanders, rather than racial discrimination among Virgin Islanders. However, at various points in her submissions, Chiang does in fact appear to be alleging individual racial and gender discrimination against Black, Hispanic, and female Virgin Islanders (and in favor of white male Virgin Islanders). The number of specific complaints in these areas appears to be small in comparison to the claims of discrimination against all Virgin Islanders. We note that 76% of the population of the U.S. Virgin Islands is Black, and 14% is Hispanic, see U.S. Census Bureau, Population and Housing Profile: 2000, at http://www.census.gov/ Press-Release/www/2002/usvistatelevel.pdf; thus, it is quite possible that claims of racial and national-origin discrimination might overlap here. At all events, we reform the class definition based on our understanding of the main thrust of Chiang‘s claims, but we leave it open to the plaintiffs to seek to amend the class definition should they actually want to allege racial and gender, rather than national origin, discrimination. We agree with Veneman, however, that plaintiffs’ current allegations of both kinds of discrimination present an internal contradiction.
Although we have not previously held that Virgin Islanders is a legitimate designation of national origin for purposes of a federal discrimination claim, we have certainly implied it. See Moravian Sch. Advisory Bd. of St. Thomas v. Rawlins, 70 F.3d 270, 278 (3d Cir.1995) (Becker, J. concurring) (tacitly assuming that Virgin Islander is an acceptable designation of national origin in a federal discrimination suit). To the extent that the USDA objects to the inclusion of the term Virgin Islanders in the class definition, we understand the objection to be based on the confusion it creates when contrasted to persons who are Black, Hispanic, [or] female, rather than on the ground that Virgin Islander cannot be a legitimate national origin designation. We have held, for example, that the term Puerto Rican can designate national origin for purposes of a federal discrimination suit, see, e.g., DiMarco-Zappa v. Cabanillas, 238 F.3d 25, 36 (1st Cir.2001); cf. Fuentes v. Perskie, 32 F.3d 759, 763 (3d Cir.1994) (accepting the District Court‘s conclusion that the plaintiff made out a prima facie case of employment discrimination based on his Puerto Rican heritage), and see no reason to distinguish the cases as to the national origin designations.
Veneman also contends that class certification should be set aside on the ground that the certified class is overbroad. In Veneman‘s universe, it seems that overbreadth is being used as a catch-all to address a number of issues that do seem potentially to bear on class certification without fitting neatly into any other category. While we note that many of these issues seem to relate at least in part to the commonality prong of
a.
First, Veneman argues that the class definition includes untimely claims. She submits that, by attempting to encompass credit discrimination claims dating back to January 1, 1981, Chiang‘s definition ignores ECOA‘s two-year statute of limitations. Veneman contends that having brought suit on January 11, 2000, the class may not sue based on acts of discrimination predating January 11, 1998, with the only exception being for those individuals who filed an eligible complaint about such an act with the USDA by July 1, 1997.8 However, we believe that the issue of timeliness goes to the merits of the case, not to the definition of the class. The claims therefore can not be prejudged to deny certification. See Huff v. N.D. Cass Co., 485 F.2d 710, 714 (5th Cir.1973) (en banc) (holding that requiring a class representative to prove the merits of his or her claim before being able to represent a class is reversible error); see also Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 178, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974) (In determining the propriety of a class action, the question is not whether the plaintiff or plaintiffs have stated a cause of action or will prevail on the merits, but rather whether the requirements of Rule 23 are met.) (citation omitted); Gruber v. Price Waterhouse, 117 F.R.D. 75, 80 (E.D.Pa.1987) (holding that a statute of limitations defense goes to the merits and hence is not an appropriate objection in the context of class certification).
b.
Second, Veneman argues that in this case the District Court approved a class definition that was explicitly rejected in Williams v. Glickman, Civ. No. 95-1149, 1997 U.S. Dist. LEXIS 1683 (D.D.C. Feb. 14, 1997), a case in which the plaintiffs defined their class as:
All African American or Hispanic American persons who, between 1981 and the present, have suffered from racial or national origin discrimination in the application for or the servicing of loans or credit from the FmHA (now Farm Services Agency) of the USDA, which has caused them to sustain economic loss and/or mental anguish/emotion [sic] distress damages.
In Williams, the Court rejected this definition as overbroad, finding that [I]t is not limited to any specific policy or practice which is alleged to be discriminatory; instead, the class purports to include those blacks and Hispanic farmers who have suffered any type of discrimination in their dealings with the FmHA. Williams, at *14 (emphasis added). The USDA argues that Chiang‘s proposed class is an exact parallel to that rejected in Williams. We disagree.
Besides the fact that both putative classes share references to Blacks, Hispanics, and loan discrimination, they actually have little in common. In Williams, plaintiff farmers filed suit against defendant the USDA claiming that the Farmers Home Administration (FmHA) discriminated against them based on race or national origin. Like the putative class here, the farmers sought recovery under the Equal Credit Opportunity Act. However, in Williams, the Court ruled that the farmers’ bare allegation of a common thread of discrimination did not satisfy the requirement that potential class plaintiffs make a specific presentation identifying the common questions of law or fact. Chiang‘s class, on the other hand, did just that in alleging the existence of a uniform scheme aimed at preventing class members from gaining access to loans. We therefore find Williams distinguishable.
c.
Veneman also argues that the class is overbroad because it consists of two groups with conflicting interests. See Penn. Dental Ass‘n v. Medical Serv. Ass‘n of Penn., 745 F.2d 248, 263 (3d Cir.1984) (upholding District Court‘s refusal to certify class where proposed class consisted of two groups with inherently conflicting interests). More specifically, Veneman urges us to decertify the class on the basis that there is a significant risk of intra-class conflicts between those class members who received loans and those who did not, as well as between those who have claims concerning their properties and those who do not.
We do not see any of the purported conflicts of interests that Veneman claims are present here. Rather, we believe that the class definition properly identifies a group of people who attempted to gain access to the USDA‘s Rural Housing program in the Virgin Islands and were systematically denied that access. The fact that some class members were able to make more progress than others does not translate into intra-class conflict, nor does it mean that the class as defined is fatally overbroad.
d.
Finally, Veneman argues that defining a class by reference to those who believe they were discriminated against undermines the validity of the class by introducing a subjective criterion into what should be an objective evaluation. We agree.10 See, e.g., NOW v. Scheidler, 172 F.R.D. 351, 357 (N.D.Ill.1997) (explaining that an identifiable class exists if its members can be ascertained by reference to objective criteria and that when membership in a class is defined solely by state of mind, the class is generally deemed unascertainable); Zapka v. Coca-Cola Co., No. 99 CV 8238, 2000 WL 1644539, at *3, 2000 U.S. Dist. LEXIS 16552, at *7 (N.D.Ill. Oct. 26, 2000) (noting that an identifiable class does not exist if membership in the class is contingent on the state of mind of the prospective members); Fears v. Wilhelmina Model Agency, Inc., No. 02 Civ. 4911, 2003 WL 21659373, at *2-*3, 2003 U.S. Dist. LEXIS 11897, at *6-*7 (S.D.N.Y. July 15, 2003) (explaining that membership in a class should rest on objective criteria that are administratively feasible for the court to rely on to determine whether a particular individual is a member of the class).
For similar reasons, we decline to modify the class definition to include Virgin Islanders who claim that they were discriminated against, or those who were discriminated against. Claim seems to be a mere substitute for believe and a class defined with reference to the state of mind of its members will not be allowed to proceed under
We will therefore modify the class definition to eliminate the notion of belief. In combination with our first modification, see supra Part II.B.2. the class will now be defined as:
All Virgin Islanders who applied or attempted to apply for, and/or received, housing credit, services, home ownership, assistance, training, and/or educational opportunities from the USDA through its Rural Development offices (and predecessor designations) located in the U.S. Virgin Islands at any time between January 1, 1981 and January 10, 2000.
Thus, with the modifications we have made to the class definition, and keeping in mind the caveats about loan eligibility we have set forth, we are confident that the waiting list question satisfies all four requisites of
C. Rule 23(b)
In addition to meeting the prerequisites of
An action may be maintained as a class action if the prerequisites of subdivision (a) are satisfied, and in addition:
...
(3) the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy.
Veneman argues that, in this case, common issues do not predominate over individual ones.
In order to predominate, the common issues must constitute a significant part of the individual cases. Jenkins v. Raymark Industries, Inc., 782 F.2d 468, 472 (5th Cir.1986); see also Watson v. Shell Oil, 979 F.2d 1014, 1022 (5th Cir.1992). Veneman contends that because the damages sought, on the order of 2.8 billion dollars, are so high, and will require such exacting, specific, individual proof, that those individual questions are, in reality, the predominant issues in the case.
Chiang concedes that the eventual calculations of damages will require individual proof. However, she points out that it is settled law that the necessity for proving damages individually does not defeat class predominance or class certification. The presence of individual questions as to [each class member] does not mean that the common questions of law and fact do not predominate over questions affecting individual members as required by
To be sure, there are cases where the question of damages is so central that it can, in some sense, overtake the question of liability. But as noted in Bogosian v. Gulf Oil Corp., 561 F.2d 434, 456 (3d Cir.1977):
[I]t has been commonly recognized that the necessity for calculation of damages on an individual basis should not preclude class determination when the common issues which determine liability predominate. If for any reason the district court were to conclude that there would be problems involved in proving damages which would outweigh the advantages of class certification, it should give appropriate consideration to certification of a class limited to the determination of liability.
(citations omitted).
That does not seem to be the case here, and we are satisfied, based upon the analysis set forth earlier in this opinion, that both the predominance and the superiority requirements of
For the foregoing reasons, we will affirm the class certification pursuant to
All Virgin Islanders who applied or attempted to apply for, and/or received, housing credit, services, home ownership, assistance, training, and/or educational opportunities from the USDA through its Rural Development offices (and predecessor designations) located in the U.S. Virgin Islands at any time between January 1, 1981 and January 10, 2000.
The certification will be vacated in all other respects. The District Court should reevaluate the appropriateness of class certification on certain discrete issues such as the eligibility facet of liability and the calculation of damages, and may entertain any applications for revision of the class definition in accordance with this opinion.
Notes
Chiang also contends that because class members were placed on the alleged waiting list, they were never entered into the official USDA database which tracks the number of loan applications in each jurisdiction. She further submits that due to that lack of data entry, the level of need for funding was never properly assessed and so was never allocated to the Virgin Islands. The lack of funding, she maintains, was then used as a reason for putting class members on the waiting list, thereby keeping them out of the database and creating a vicious circle
There is, however, no basis in the record to support the contention that the amount of funding is tied to the number of persons who seek loans. The methodology for allocation of housing funds can be found in
To the extent that Chiang alleges an unfair allocation of funds to the Virgin Islands, as opposed to discriminatory behavior on the part of the USDA in administering those funds, she seeks relief in the wrong forum and would be better served directing her complaint elsewhere.
Because we are not deciding the question of appropriateness of class certification for loan eligibility determinations, we need not rule on Chiang‘s Motion to Correct the Record and Reply in which she wishes to introduce two exhibits. The first document was presented to us only during the course of oral argument and consists of the one page income qualification chart. Since the District Court will be called upon to make the determination as to whether class certification is appropriate for determining the question of loan eligibility, that Court should decide how to proceed with the request. The second document relates to evidence (past loan applications) allegedly destroyed by the USDA (willfully according to Chiang; in the process of routine destruction of records, according to Veneman). To the extent that the alleged intentional destruction of this evidence would have bearing on class certification by making it impossible for the USDA to undertake the individual review of all class members’ application files that it advocates, the District Court will again be in a better position to evaluate that request
Similarly, we need not decide what the applicable test would be to rebut the prima facie case. Veneman would have us hold that a but for test applies, and that putative class members would have to show that but for the discrimination, a loan would have been granted in each particular case. Chiang, on the other hand, argues that the burden-shifting framework set forth in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973), applies because ECOA should be construed in accordance with the law of Title VII discrimination cases.
We have not yet had occasion to decide whether it is appropriate to shift the burden to a defendant to rebut a prim a facie claim of discrimination under ECOA. Several of our sister Courts of Appeals have so held, but one Court of Appeals has questioned whether the McDonnell Douglas model can be imported from the field of employment discrimination to that of credit discrimination. See Lewis v. ACB Bus. Servs., Inc., 135 F.3d 389, 406 (6th Cir.1998) (holding that ECOA‘s legislative history suggests reviewing claims of discrimination using the same burden allocation system found in Title VII); Moore v. United States Dept. of Agriculture, 55 F.3d 991, 995 (4th Cir.1995) (noting that the McDonnell Douglas test would apply to ECOA case but for the fact that plaintiffs had direct evidence of discrimination); Mercado-Garcia v. Ponce Fed. Bank, 979 F.2d 890, 893 (1st Cir.1992) (noting that the language of ECOA and EEOA is nearly identical); Bhandari v. First Nat‘l Bank of Commerce, 808 F.2d 1082, 1100-01 (5th Cir.1987) (explaining that language of ECOA is closely related to that of EEOA and was intended to be interpreted similarly); Williams v. First Fed. Sav. & Loan Ass‘n, 554 F.Supp. 447, 448-49 (N.D.N.Y.1981) (Protections afforded by the ECOA should be applied in the same manner as those created by the EEOC), aff‘d, 697 F.2d 302 (2d Cir.1982). But see Latimore v. Citibank Fed. Sav. Bank, 151 F.3d 712, 713-15 (7th Cir.1998) (holding that lack of direct competition between applicants in credit context renders analogy to Title VII cases flawed).