IN THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF ILLINOIS 

EASTERN DIVISION 

MICHAEL J. CHRISTIAN; BETTY 

FLEMMING; EARTHA C. JOHNSON, 

As Attorney-in-Fact for MINNIE 

ALICE LARK; and CLAUDIA 

DORTCH, on behalf of themselves and 

all others similarly situated, 

Plaintiffs, 

 v. 

GENERATION MORTGAGE 

COMPANY,

Defendant. 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

No. 12 C 5336 

Judge John J. Tharp, Jr. 

MEMORANDUM OPINION AND ORDER 

The plaintiffs in this case, on behalf of themselves and a class, allege that defendant 

Generation Mortgage Company employs a pricing policy that discriminates against AfricanAmericans and single females. Generation is a “reverse mortgage lender,” meaning that it makes 

loans to borrowers that are not repaid until the home is sold; effectively, Generation makes 

installment payments on a portion of the equity in a home and recoups its principal, with interest, 

from the proceeds when the home is sold. 

The plaintiffs allege that Generation has a national pricing policy that sets a minimum 

price for loans but vests its brokers with discretion to charge higher prices and incentivizes them 

to do so. They claim that Generation’s brokers have applied this policy in a way that has resulted 

in higher interest rates on loans to African-Americans and single females. They also allege, in 

the alternative, that Generation engages in “reverse redlining.” “Redlining” refers to an unlawful 

practice of denying services (such as offering mortgage loans) to defined (“redlined”) 
2 

neighborhoods within a metropolitan area; the plaintiffs allege that Generation practices “reverse 

redlining” by “targeting unfair, predatory and/or grossly unfavorable loan terms” to AfricanAmericans and single females.1

 

The dispute addressed here concerns discovery scheduling. The plaintiffs seek broad 

discovery in support of their claims, and their initial discovery requests sought information 

relating to every loan Generation has originated since August 2007, a request that would require 

review, redaction, and production of data from (according to Generation) more than 20,000 loan 

files comprising between four and six million pages of data. Seeking to forestall the burden and 

expense of such class-wide discovery, Generation has moved to bifurcate discovery, arguing that 

the class-wide discovery plaintiffs seek should be deferred until the plaintiffs have presented a 

meritorious motion for class certification. The plaintiffs maintain, however, that it is “simply not 

possible” to bifurcate discovery in this case because “class and merits discovery not only overlap 

but are indistinguishable.” Without class-wide discovery, the plaintiffs concede that they “will 

not be able to discover . . . even whether the individual plaintiffs suffered discrimination.” 

There are two reasons that class and merits discovery completely overlap in this case. 

First, the plaintiffs have defined the class by reference to the merits of their claims. As to each of 

their claims (pricing discrimination and reverse-redlining), the plaintiffs have identified four subclasses: (i) African-Americans in Illinois; (ii) African-Americans nationally; (iii) Single females 

in Illinois; and (iv) Single females nationally. The Second Amended Complaint (“SAC”) defines 

 

1

 The gist of both the pricing discrimination and reverse-redlining claims is that Generation’s 

brokers charged higher rates to the putative class members. Further, the plaintiffs acknowledge 

that both their discriminatory pricing claims and reverse-redlining claims require evidence of a 

causal relationship between a challenged practice and a resulting disparate impact. For purposes 

of this motion, there appears to be no reason to distinguish between the claims (and the parties 

have not done so), so for the sake of simplicity the Court will refer to the claims collectively as 

discriminatory pricing claims. 
3 

each of these eight subclasses by reference to the claim of discrimination allegedly suffered by 

that sub-class. The first sub-class, for example, is defined as comprising “African-Americans in 

Illinois who received disparate pricing”; another comprises “Single females nationwide who 

experienced disparate treatment/reverse redlining.” No wonder, then, that the plaintiffs assert that 

their class claims overlap entirely with their discrimination claims—proof of class membership 

requires proof of discrimination. 

The Seventh Circuit has highlighted one problem with defining class membership by 

reference to the substance of a claim: “Using a future decision on the merits to specify the scope 

of the class makes it impossible to determine who is in the class until the case ends, and creates 

the prospect that, if the employer should prevail on the merits, this would deprive the judgment 

of preclusive effect: any other former worker could file a new suit, given that the losing ‘class’ 

lacked any members.” Bolden v. Walsh Constr. Co., 688 F.3d 893, 895 (7th Cir. 2012). This case 

presents another, related, problem with this practice; if allowed, it would permit plaintiffs to 

forestall class certification until the end of the discovery process, rather than promoting 

consideration of the question of whether a class can be certified at “an early practicable time,” as 

Rule 23(c)(1)(A) requires. 

That the plaintiffs have defined the putative class improperly is a pleading defect that 

can, presumably, be fixed. More problematic, though, is the plaintiffs’ concession that absent 

class-wide discovery, they cannot establish that there are questions of law or fact common to the 

class as required by Federal Rule of Civil Procedure 23(a)(2). Here, the plaintiffs’ claims on 

behalf of the putative class implicate thousands of decisions about the loan terms extended to 

African-Americans and to single women; to move forward as a class action, Rule 23(a)(2) 

requires that there be “some glue holding the alleged reasons for all those decisions together . . . 
4 

produc[ing] a common answer to the crucial question why was I disfavored.” Wal-Mart Stores, 

Inc. v. Dukes, 131 S. Ct. 2541, 2552 (2011) (emphasis in original). 

The plaintiffs allege that Generation’s nationwide policy of affording pricing discretion 

to its brokers provides the commonality—“the glue”—necessary to obtain class certification. 

“Commonality requires the plaintiff to demonstrate that the class members ‘have suffered the 

same injury.’” Id., 131 S. Ct. at 2551 (quoting Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 157 

(1982)). The plaintiffs argue that they will be able to show common injury if analysis of 

comprehensive loan-level data shows that African-Americans and/or single women received loan 

terms that were worse, by a statistically significant margin, than those received by white men. 

And they maintain that such an analysis is “indispensable” to the viability of their class claims 

because only a statistical analysis of all of Generation’s loans will uncover whether Generation’s 

policy of affording its brokers pricing discretion had a common effect on class members. The 

plaintiffs stake their entire claims on the statistical analysis they seek to conduct, maintaining 

that “the evidence of the common effect of Generation’s nationwide policy lies in the loan data.” 

Surreply at 2 (emphasis in original). 

The problem with this argument is that a statistical disparity in the loan terms received by 

African-Americans and/or single women says nothing about the cause of the disparity—which is 

the reason that the Supreme Court rejected the very same argument in Dukes. There, the Court 

addressed the propriety of certification of a class comprised of female Wal-Mart employees in a 

case alleging that Wal-Mart managers exercised the discretion the company afforded them over 

pay and promotions in a manner that discriminated against the female employees. 131 S. Ct. at 

2547. As here, the Dukes plaintiffs sought to establish commonality between the huge number of 

individual decisions at issue (there, decisions affecting pay and promotions; here, decisions as to 
5 

loan terms) by means of statistical evidence showing that the class members fared worse than 

others. But the Court rejected the notion that statistical analysis could suffice as evidence that 

class members were, in common, treated in a discriminatory fashion, holding that “merely 

proving that the discretionary system has produced a racial or sexual disparity is not enough” to 

establish discrimination. Id. at 2555 (emphasis in original) (citing Watson v. Fort Worth Bank & 

Trust, 497 U.S. 977, 994 (1988)). 

Though it did not use the term, the Dukes Court identified “the fallacy of division”—the 

deductive error inherent in substituting evidence of the general for evidence of the particular—to 

explain the flaw in the plaintiffs’ reasoning. See THE NEW ENCYCLOPAEDIA BRITANNICA, vol. 23 

p. 252 (15th ed.) (stating that the fallacy of division “occurs when the premise that a collective 

whole has a certain nature is improperly used to infer that a part of this whole must also be of 

this nature”); Adrian Vermeule, Foreword: System Effects and the Constitution, 123 Harv. L. 

Rev. 4, 8 (2009) (defining fallacy of division as “the assumption that what is true of the 

aggregate must be true of the members”); Rosen v. Unilever U.S., Inc., No. 09 C 2563, 2010 WL 

4807100, *6 (N.D. Cal. May 3, 2010) (providing example of the fallacy of division: “since a 

blend of oils is represented as being nutritious, if partially hydrogenated oil is part of the blend, it 

must also be nutritious”). In the context of Dukes, that meant that a general disparity between 

pay and promotion opportunities in one region could not be taken as evidence that all store 

managers within that region exercised their discretion uniformly in a manner that disadvantaged 

female employees; as the Court noted, a regional pay disparity “may be attributable to only a 

small set of Wal-Mart stores, and cannot by itself establish the uniform, store-by-store disparity 

upon which the plaintiffs’ theory of commonality depends.” 131 S. Ct. at 2555. Similarly here, 

higher average loan prices for the putative class members may reflect only that some brokers 
6 

charge higher prices, not necessarily that all do. Indeed, if only one broker charged substantially 

higher prices based on race, that would raise the average price charged by all brokers (though the 

marginal increase would of course be a function of the size of the price differential and the 

number of brokers). See also Bolden, 688 F.3d at 896-97 (making the same point in reversing 

class certification orders predicated on statistical evidence of commonality). 

More fundamentally, as the Court further explained in Dukes, higher average loan prices 

for putative class members would do nothing to establish that any of the brokers who did charge 

putative class members more did so because of the borrowers’ race or gender, rather than lawful 

factors that otherwise distinguish reverse mortgage customers (for example, the myriad factors 

that can affect the value of a home, such as its age, condition, location, and size, or factors that 

would effectively determine the length of the loan, such as the age of the borrowers). Rather, 

there must be a common policy or practice that supports an inference that the statistical disparity 

is the product of discrimination and, as the Court noted, a policy that vests managers (or, here, 

brokers) with pricing discretion is the antithesis of a common policy or practice; “it is a policy 

against having uniform . . . practices.” 131 S. Ct. at 2554 (emphasis in original). 

The plaintiffs attempt to avoid the import of Dukes by arguing that Generation cabins the 

discretion it affords brokers by allowing the brokers to exercise their discretion in only one 

way—to increase, rather than reduce, prices charged for mortgages. That argument is a 

makeweight, as it in no way implies that the company requires, or even encourages, brokers to 

charge higher rates to African-Americans or single women. Presumably every company would 

like to charge as much as it can for its products, but a policy to that effect says nothing about 

whether the company discriminates among its customers on the basis of race or gender. 
7 

The plaintiffs’ argument for resisting bifurcation, then, is not compelling: the statistical 

evidence that they hope to develop during the course of merits discovery will not—even if it 

shows, as plaintiffs expect, that African-Americans and single women paid more for their loans 

with Generation than did others—suffice to “glue” their claims together in a way that satisfies 

Rule 23(a)(2)’s commonality requirement. And if the plaintiffs’ prospects for obtaining class 

certification are dim, regardless of the scope of discovery, that is plainly a factor that supports 

bifurcation—it would be utterly inefficient and unjust to subject a defendant to months, if not 

years, of onerous and expensive discovery so that the plaintiffs may continue a quixotic 

undertaking destined to fail.2

 Bifurcation is warranted where it promises to promote efficiency 

and economy without working substantial prejudice. See Harris v. comScore, Inc., No. 11 C 

5807, 2012 WL 686709, *3 (N.D. Ill. Mar. 2, 2012); Fed. R. Civ. P. 23, 2003 Advisory 

Committee Notes (stating that bifurcated discovery may be appropriate where it enables a court 

to efficiently rule on class certification). Cf. Houseman v. U.S. Aviation Underwriters, 171 F.3d 

1117, 1121 (7th Cir. 1999) (addressing bifurcation in the context of Rule 42(b)). And while the 

plaintiffs claim that bifurcation will prejudice them—indeed, they maintain that bifurcating class 

and merits discovery “would, in effect, unfairly end the entire case”—there is no prejudice in 

accelerating that outcome if it is indeed inevitable. If the only evidence that the plaintiffs can 

offer to prove that the putative class members each suffered discrimination is statistical evidence 

of a disparity between the loan terms that the class obtained collectively, then their claim is 

destined to fail in the wake of Dukes. 

 

2

 The plaintiffs claim that Generation’s estimate that responding to the discovery requested will 

take a year or more and involve the collection and review of between four and six million pages 

of documents is exaggerated, and maintain that their requests are not likely to require more than 

six months and approximately half a million pages. Even if the plaintiffs are right, it is clear that 

the broad discovery they seek will impose substantial burdens on the defendants. 
8 

For now, though, the Court rules only on what is before it—namely, Generation’s 

bifurcation motion. That motion is granted; discovery may proceed at this point only as to 

evidence pertinent to the question of whether Generation’s brokers exercised their pricing 

discretion in a common manner (or other issues relevant to class certification). Statistical 

evidence of disparate pricing is not relevant to the commonality inquiry, but it remains open to 

the plaintiffs and their counsel to assess whether they can establish by other means that 

Generation’s brokers exercised their pricing discretion in a common manner. 

Entered: May 16, 2013 

John J. Tharp, Jr. 

United States District Judge