2004 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

9-20-2004

Chiang v. Secretary Agri

Precedential or Non-Precedential: Precedential

Docket No. 03-3488

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1

PRECEDENTIAL

IN THE UNITED STATES COURT OF

APPEALS

FOR THE THIRD CIRCUIT

_______________

NO. 03-3488

______________

GAIL WATSON CHIANG; *LYNDA

ALEXANDER MUHAMMAD;

JACQUELINE CARR; DENISE

PITTMAN; CARMEN MCALPINCLARKE; KAREN HUNT;

THERESA COLLINGWOODMORRIS; DAVID C. NICHOLAS;

PRECIOUS YEARWOOD;

FREDERICK FREEMAN; BEVERLY

RAWLINS; ANDREA CARROLL;

RONALD J. MITCHELL; JACK

DANIEL; CHRISTINE DANIEL;

ANESTA E. GORE; VANETA

MARTIN; CARMEN GONZALEZ;

M. NARTEL GREEN; SHIRLEY

WILLIAMS; MARIA BLYDEN;

GONZALO RIVERA; BLANCHE R.

RAWLINS; RHEA L. JOHNSON;

MARILYN RIVERA; KEITH R.

WILLIAMS; AL BRUNN; EMERYL

CHRISTOPHER; CHARLES G.

JOHNSON; VELSINA L. GEORGE;

KALEEN CLOUDEN; EUNICE

GOMES; RUTH DUBLIN;

KIMBERLEY L. OLIVER; ELENA

HERBERT; LAWRENCE CHRISTIAN;

MARJORIE JOHN; LAVERNE

WILLIAMS; REVEREND JAMES

CHRISTIAN, on behalf of themselves

and all others similarly situated

 v.

ANN M. VENEMAN, In her Official

Capacity as Secretary of

The United States Department of

Agriculture,

 Appellant

 *Amended pursuant to Clerk's Order

dated 11/24/03

_________________

On Appeal From The District Court of

the Virgin Islands

(No. 00-cv-00004)

District Judge: Honorable Thomas K.

Moore

 _______________

Argued December 10, 2003

Before: NYGAARD, BECKER, and

STAPLETON, Circuit Judges.

(Filed September 20, 2004)

DOUGLAS B. INMAN, ESQ.

(ARGUED)

Sayre & Chavez

7 Church Street

Christiansted, St. Croix

USVI 00820

Attorney for Appellees

PETER D. KEISLER, ESQUIRE

Assistant Attorney General

DAVID M. NISSMAN, ESQUIRE
2

United States Attorney

ERNEST BATEGNA, ESQUIRE

Assistant United States Attorney

ROBERT M. LOEB, ESQUIRE

CHARLES W. SCARBOROUGH,

ESQUIRE, COLETTE G. MATZZIE,

ESQUIRE (ARGUED)

Attorneys, Appellate Staff

Civil Division, PHB Room 9149

U.S. Department of Justice

601 D. Street, NW

Washington, DC 20530-0001

Attorneys 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 Fed. R. Civ. P.

23(f), in which she challenges a class

certification granted by the District Court

in a civil rights case brought against her in

her official capacity. The lead plaintiff is

Gail Watson Chiang (“Chiang”), the

representative of the putative class, who,

along with thirty-eight other plaintiffs,

alleges systematic discrimination against

persons who are “Black, Hispanic, women,

and/or Virgin Islanders,” over a period of

nineteen years, in the administration of

loan programs intended to help low

income rural families obtain homes and

make repairs to existing homes. The

claims are made primarily under the Equal

Credit Opportunity Act, 15 U.S.C. § 1691

et seq. (“ECOA”), which 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.” 15

U.S.C. § 1691(a). To establish a prima

facie case under ECOA the class members

must show that (1) plaintiff was a member

of a protected class; (2) plaintiff applied

for credit from defendants; (3) plaintiff

was qualified for the credit; and (4) despite

qualification, plaintiff was denied credit.

See Matthiesen v. Banc One Mortgage

Corp., 173 F.3d 1242, 1246 (10th Cir.

1999).

According to Chiang, the regional

USDA office in Vermont, which had

jurisdiction over the U.S. Virgin Islands,

kept Virgin Islanders “out of the system”

by implementing a “phony,” illegal

waiting list on which thousands of Virgin

Islanders, almost all of whom were Black,

Hispanic, or female, had their names

placed instead of being given an actual

loan application in violation of USDA

policy, instructions, and regulations, .

These applicants were told that they would

receive applications when they became

available but, even after years of waiting,

most never did. According to Chiang, not

only were applications available, but the

Virgin Islands was the only locality in the

United States where this type of waiting

list was implemented. Thus, Chiang

submits, the so-called “waiting list” was

not a true waiting list at all, but was rather

a device used to deny class members loan

applications altogether.
3

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 fu rt he r form of

discrimination against Virgin Islanders. 

At the behest of Chiang, the District

Court granted a Rule 23(b)(3) certification

to a class of

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 educatio n a l

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

1 The Rural Housing Service is an

agency of the USDA. Formerly known

as the Rural Housing and Community

Development Service, “RHS” is a

successor agency to the Farmers Home

Administration, which ceased to exist in

1994. RHS operates a broad range of

programs to address rural America’s

need for single-family and multi-family

housing as well as health facilities, fire

and police stations, and other community

structures. To promote its goals, RHS

administers direct loan guarantees and

grants through state and local offices

located throughout the nation.
4

and benefit programs during a nineteenyear 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. 

In Veneman’s view, not only is the

class so sweeping that the threshold

requirements of Rule 23(a) likely are not

satisfied, but even if the class definition

were deemed to meet Rule 23(a)’s

standards, the class fails Rule 23(b)(3)’s

more stringent requirements because

common issues do not predominate over

individual ones and class treatment would

not be superior to individual adjudications.

Central to Veneman’s contention is the

argument that to prevail on his or her

individual claims under ECOA, each class

member would need to demonstrate that

the USDA’s proffered reason for denial of

credit (or loan for defective property) was

a pretext for discrimination on the basis of

race, gender or national origin. According

to Veneman, liability on these claims can

only be determined through case-by-case

inquiries into the specifics of each

transaction, and most particularly, the loan

eligibility of each putative class member.

If the class member could not have

obtained the loan, then he or she cannot

succeed in his or her claim of

discrimination, regardless of the existence

of the alleged waiting list.

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

discre tionary assessmen ts 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 Rule

23(c)(4), which allows a class action to be

maintained with respect to particular

issues—in this case the waiting list—while

simultaneously reserving for the District

Court the authority to determine whether

eligibility for loans can be certified as a

question suitable for class adjudication.

 We are not troubled by the seeming
5

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.

As the foregoing suggests, the issues to

be dealt with on a class basis do not

present predominance, superiority, or

manageability problems. See Fed. R. Civ.

P. 23(b)(3). Neither do we find any merit

in Veneman’s untimeliness claims, which

are not properly before us at this stage of

the case. Finally, because the other

aspects of the case are not suitable for

class determination, i.e., inclusion of the

class-based claims of corrupt

administration, and, on the present record,

the eligibility facet of liability, we will

vacate the District Court’s order in all

other respects. 

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 (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

2

 From 1995 to 1999, Chiang worked

as a special assistant to the Governor of

the Virgin Islands. Although she filed

this suit as a private citizen, she explains

that she first became aware of the extent

of the discrimination problem due to her

governmental position which led her to

receive “hundreds, if not thousands, of

oral complaints from Virgin Islanders

regarding what was perceived as a

longstanding and widespread systematic
6

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

According to Chiang, each named

plaintiff in this lawsuit filed a

discrimination complaint with the USDA

prior to this action, or authorized one to be

filed on his or her behalf.4 In March 1997,

discrimination” and that she was

“inundated with complaints of USDA

discrimination from all quarters.” 

3 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 7 C.F.R. §§

1940.552 and 1940.565. The formula is

based on (1) the State’s percentage of the

National number of rural occupied

substandard units; (2) the State’s

percentage of the National rural

population; (3) the State’s percentage of

the National rural population in places of

less than 2,500 population; (4) the State’s

percentage of the National number of

rural households between 50 and 80

percent of the area median income; and

(5) the State’s percentage of the National

number of rural households below 50

percent of the area median income. On

this record, it appears that none of these 

factors are derived from the USDA’s

application database.

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. 

4 Those authorizations were apparently

directed to Chiang in the course of her

employment in the Governor’s office.

When she fielded complaints about the

USDA’s alleged discriminatory behavior,
7

Chiang and 48 other named plaintiffs filed

an administrative class program complaint

of discrimination with the USDA’s Office

of Civil Rights in Washington, D.C. The

named plaintiffs claim never to have

received any type of acknowledgment of

their complaints from the USDA.

However, in response to mounting

discrimination complaints, the USDA sent

an investigative team to the Virgin Islands.

The USDA team conducted an

investigation and documented what

Chiang styles the “Highway to Nowhere”

in an internal USDA report entitled “Civil

Rights Compliance Review for the U.S.

Virgin Islands, October 19-29, 1997.” The

report—which was never officially

adopted by the USDA—identified two

specific techniques used to deny class

members access to the loans.5 Those

techniques were (1) creating the phony,

illegal “waiting list,” and (2) implementing

the “impossible yes” scheme. (See JA

384-411). This lawsuit followed.

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 grou nds th at the threshold

requirements of Fed. R. Civ. P. 23(a) had

not been met. Veneman also argued that

the class definition was fatally overbroad

because it failed to define the class by

reference to any discriminatory practice,

included untimely claims and claims

arising out of RHS’s non-credit benefit

programs, and was not limited by race or

gender as it included all Virgin Islanders.

On February 28, 2003, the District

Court filed its decision certifying the class

under Rule 23(b)(3).6 The Court found

that the FAC alleged “a pattern and

practice of discrimination against each

class member.” It concluded that the

pattern and practice manifested itself in

three ways: (1) some members were

denied an application package and told to

put their names on an unlawful waiting

list; (2) RHS provided other members with

applications, but then made it impossible

for them to obtain credit by deliberately

delaying and frustrating the process so that

the program would run out of funds, the

she would ask the complainant to give her

permission to lodge an official

discrimination complaint with the USDA.

5

 Veneman refuses to be bound by the

contents of the report, calling it an

“unofficial and preliminary draft” filled

with “hearsay and baseless innuendo.”

(Reply Brief, P.7, note1). 

6

 The District Court explicitly chose

“not to certify this class under (b)(2)”

because even though “Rule 23(b)(2)

certification can be particularly well-suited

to civil rights actions charging class

discrimination . . . certification is not

proper where ‘the appropriate final relief

relates exclusively or predominantly to

money damages.’” (Op. 14, note 4)

(quoting Advisory Committee Notes to

Rule 23 (b) (2)). The District Court

concluded that, although some measures of

injunctive relief were sought, “the

equitable remedies probably do not

predominate.” (Op. 14, note 4).
8

applicant would become ineligible or the

applicant would give up; and (3) even

plaintiffs who did obtain loans were

denied services such as loan workouts and

payment moratoria because of their race,

gender, or national origin. 

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 Rule 23(a)’s

requirements were not met. The Court

also found that the class was sufficiently

cohesive to warrant adjudication by class

action given that the common question in

each count was whether the USDA’s

practice and policy discriminated against

Blacks, Hispanics, women, and/or Virgin

Islanders as a class, and that this common

question predominated over differences in

the factual circumstances of the individual

plaintiffs. The Court additionally held that

adjudicating this case as a class action was

superior to having numerous individual

lawsuits brought against the USDA. 

On July 22, 2003, a motions panel of

this Court granted Veneman’s petition for

permission to take an interlocutory appeal

under Fed. R. Civ. P. 23(f). The District

Court had jurisdiction pursuant to 28

U.S.C. § 1331. We have jurisdiction over

this appeal pursuant to 28 U.S.C. §

1292(e).

II. Class Certification

A. Standard of Review

In order to obtain class certification,

plaintiffs must establish that all four

requisites of Rule 23(a) and at least one

part of Rule 23(b) are met. See Baby Neal

v. Casey, 43 F.3d 48, 55 (3d Cir. 1994)

(citing Wetzel v. Liberty Mutual Ins. Co.,

508 F.2d 239 (3d Cir. 1975)). We review

the District Court’s decisions on class

certification for abuse of discretion. See In

re LifeUSA Holding Inc., 242 F.3d 136,

143 (3d Cir. 2001). The District Court

abuses its discretion only if its decision

“rests upon a clearly erroneous finding of

fact, an errant conclusion of law or an

improper application of law to fact.” In re

Gen. Motors Corp. Pick-Up Truck Fuel

Tank Prods. Liab. Litig., 55 F.3d 768, 783

(3d Cir. 1995).

B. Rule 23(a) 

In any class certification, the threshold

issue is whether the four requisites of Rule

23(a), numer osity, commo nality,

typicality, and adequacy, are met. Rule

23(a) states:

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. 

Fed. R. Civ. P. 23(a).

Veneman does not now contest

numerosity, typicality, or adequacy of
9

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 Fed. R. Civ. P. 23(a)(2). But

the commonality standard of Rule 23(a)(2)

is not a high bar: it does not require

identical claims or facts among class

member, as “the commonality requirement

will be satisfied if the named plaintiffs

share at least one question of law or fact

with the grievances of the prospective

class.” Johnston v. HBO Film Mgmt., 265

F.3d 178, 184 (3d Cir. 2001). We find that

Chiang’s allegations of discriminatory

conduct directed at the entire class do

present a common question of law.

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.” 15

U.S.C. § 1691(a). The regulations

governing ECOA define a “credit

transaction” as “every aspect of an

applicant’s dealings with a creditor

regarding an application for credit or an

existing extension of credit (including, but

not limited to, information requirements;

investigation procedures; standards of

creditworthiness; terms of credit;

furnishing of credit information;

revocation, alteration, or termination of

credit; and collection procedures).” 12

C.F.R. § 202.2(m) (emphasis added). A

potential creditor’s refusal to provide an

application form is also part of a “credit

transaction” within the meaning of the

statute, see Rosa v. Park West Bank &

Trust Co., 214 F.3d 213 (1st Cir. 2000).

Indeed, a refusal to provide a loan

application “on the basis of race, color,

religion, national origin, sex or marital

status, or age” would be a prototypical

ECOA violation, as it would deny

members of a protected class any access to

credit.

Plaintiffs here allege discrimination at

several different points in the credit

application process, from refusal to

provide application forms when requested,

through delaying tactics in the processing

of applications, to discrimination in

administration of loan proceeds. Given the

broad language of 12 C.F.R. § 202.2(m),

we think that all of these forms of

discrimination fall under the purview of a

“credit transaction,” and so constitute

ECOA violations. Thus, even though

many putative class members never even

made it to the official application process

because they were denied applications in

the first instance, their requests for—and

denial of—applications are nevertheless

cognizable under ECOA.

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
10

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

fraudulentsecurities scheme were different

for each class member; while imposing a

higher standard, prepon deranc e

presupposes commonality. See also Int’l

Brotherhood of Teamsters v. United States,

431 U.S. 324, 336 (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. 

If the waiting list and associated

techniques claims are resolved in

plaintiffs’ favor, they will have satisfied

the first two prongs of the ECOA prima

facie case: membership in a protected

class (viz., Virgin Islanders: see infra Part

II.B.2) and application (or, here, attempted

application) for credit. The third and

fourth prongs, however—that the applicant

was qualified for the credit and that,

despite that qualification, defendant denied
11

the credit— may prove harder to

adjudicate on a class-wide basis.

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 onepage document demonstrated that

qualification for the loans at issue was a

mechanical function that could be

undertaken by any low-level clerk simply

b y read ing the c har t. S e e

http://www.rurdev.usda.gov; see also 7

C.F.R. § 3550.

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 7 C.F.R. § 3550.53. According to

these regulations, two different kinds of

income must be considered: repayment

income and eligibility income. See 7

C.F.R. § 3550.54. Repayment income

measures the income which the applicants

have available to repay the loan, while

eligibility income is based on the income

of all members of the household.

Veneman submits that although it may

seem mechanical to take an applicant’s

hourly income and multiply it by the

number of yearly working hours, such a

calculation is far from easy to perform,

especially when applicants may have

unstable work histories, the work in

question may be seasonal, or continued

employment may be questionable—to

name just a few of the possible variables.

 Veneman also submits that class members

would need to show that the property for

which they sought a loan met the criteria

for collateral on the loan. See 7 C.F.R. §§

3550.56-57. In short, she disputes the

notion that loan eligibility could be a

mechanical question proper for class

adjudication.

Federal Rule of Civil Procedure

23(c)(4) provides that “[w]hen appropriate

(A) an action may be brought or

maintained as a class action with respect to

particular issues . . . .” Rule 23(c)(4) both

imposes a duty on the court to insure that

only those questions which are appropriate

for class adjudication be certified, and

gives it ample power to “treat common

things in common and to distinguish the

distinguishable.” Jenkins v. United Gas

Corp., 400 F.2d 28, 35 (5th Cir. 1968).

Because we believe that the two

questions—the existence of the phony

waiting list and associated techniques on

the one hand, and the feasibility of classwide determinations of loan eligibility on

the other—are easily distinguishable, we

will affirm certification on the former and

leave it to the district court to determine

whether class certification might be

appropriate on the latter. We note in this

regard that courts commonly use Rule

23(c)(4) to certify some elements of

liability for class determination, while

leaving other elements to individual
12

adjudication—or, perhaps mor e

realistically, settlement. See, e.g.,

Carnegie v. Household Int’l, Inc., 376 F.3d

656, 661 (7th Cir. 2004) (Posner, J.) (“[I]t

may be that if and when the defendants are

determined to have violated the law

separate proceedings of some character

will be required to determine the

entitlements of the individual class

members to relief.”); Mullen v. Treasure

Chest Casino, LLC, 186 F.3d 620, 623 (5th

Cir. 1999).7 

 

7Because we are not decid ing th e

question of appropriateness of class

certifica tion for loan e ligibility

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 (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 prima 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 McDonell 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
13

2. Internal Contradiction

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

28 U.S.C. § 2106 (entitling us to “affirm,

modify, vacate, set aside or reverse any

judgment, decree, or order”). Pursuant to

the modification, the class definition in

relevant part will now read “[a]ll Virgin

Islanders who applied or attempted to

apply for . . . and . . . were discriminated

against on the basis of national origin.”

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

P r ofile : 2000, a t

http://www.census.gov/Press-Release/w

ww/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.

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).
14

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); c.f. 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.

3. Overbreadth

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 Rule

23(a)(2), we will nonetheless analyze them

under Veneman’s convenient heading of

“overbreadth.”

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. ND 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 &

Jaquelin, 417 U.S. 156, 178 (1974) (“In

determining the propriety of a class action,

 

8

See Omnibus Consolidated & Emergency

Supplemental Appropriations Acts, 1999,

Pub. L. No. 105-277, § 741, 112 Stat. 2681-30

(Oct. 21, 1998) (codified at 7 U.S.C. § 2279

note).
15

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.

Williams, at *10.

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.

It is no objection to Chiang’s class that

the allegations of a uniform scheme are not

contained in the class definition itself: we

read Williams to hold that the proposed

class was “overly broad” because of the

plaintiffs’ varied factual allegations of

discrimination, lacking Rule 23(a)(2)

commonality, rather than because of any

lack of specificity in the class definition

itself. In fact, Judge Flannery objected to

the inclusion o f all egations of

discrimination in the class definition,

holding that “[b]ecause the Court must
16

answer numerous fact-intensive questions

before determining if an individual may

join the class, the proposed class is not

clearly defined.” Williams, 1997 U.S.

Dist. LEXIS 1683, at *13. Thus Williams

cannot stand for the proposition that all

allegations of a uniform scheme of

discrimination must be included in the

class definition—rather, it stands for the

opposite proposition, that class definitions

must be free of merits allegations that

require extensive factual findings.9

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, 1997 U.S. Dist. LEXIS

4036, at *9 (N.D. Ill. Mar. 28, 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

 

9

For further discussion of merits

allegations in class definitions, see infra,

Part II.B.3.d.

 

10Chiang argues that class certification

based on a “belief in discrimination” was

already stipulated to by the USDA in a

previous class action for discrimination.

In Pigford v. Glickman, where a class of

African American applicants for loans

filed racial discrimination complaints

against the USDA, the final consent decree

included the phrase “All African American

farmers ... [who] believed that they were

discriminated against on the basis of race.”

Pigford v. Glickman, 185 F.R.D. 82, 92

(D.D.C. 1999). While this is true, we fail

to see how the USDA’s prior stipulation to

language in a consent decree before a

different court affects the class definition

in this case. 
17

generally deemed unascertainable); Zapka

v. Coca-Cola Co., No. 99 CV 8238, 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 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).

While Veneman is technically correct,

we think the issue to be a red herring, for

“belief” seems to us to be mere surplusage.

It is clear enough that Chiang and the other

named plaintiffs believe that they were

discriminated against. See, e.g., Fed. R.

Civ. P. 11(b) (requiring that pleadings

represent a reasonable belief that claims

are warranted by law and have evidentiary

support). Such belief in discrimination,

however, is not a prerequisite for inclusion

in the putative class. Our earlier

modification to the class definition, see

supra Part II.B.2, makes clear that we are

certifying a class to try an issue common

to all Virgin Islander loan applicants:

whether USDA engaged in a pattern of

discrimination via phony waiting lists and

delaying tactics. This issue is properly

adjudicated on behalf of a class consisting

of all Virgin Islander applicants during the

relevant period; if it is adjudicated against

Veneman, then further proceedings will be

appropriate to determine which, if any,

class members are actually entitled to

relief. The putative class members’ belief

that they were discriminated against is

irrelevant at the class certification stage.

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 Rule 23.” 7A Wright,

Miller & Kane, Federal Practice &

Procedure § 1760, at 124-26. Moreover,

the Manual for Complex Litigation

(Second) has recommended that courts

should “avoid class definitions that depend

on . . . the seeking of relief (for example,

persons claiming injury or seeking

damages from some stated practice),”

Manual for Complex Litigation (Second) §

30.14 (1985), though we note that later

editions of the MCL have eliminated that

stricture, see Manual for Complex

Litigation (Fourth) § 21.222 (2004).

Limiting the class to those who were in

fact discriminated against would seem to

prejudge the merits of the case, contrary to

the teaching of Eisen v. Carlisle &

Jacquelin, 417 U.S. 156, 177 (1974); see

also 5 James Wm. Moore et al., Moore’s

Federal Practice ¶ 23.21[3][c] (3d ed.

1999) (“A class definition is inadequate if

a court must make a determination of the

merits of the individual claims to

determine whether a particular person is a

member of the class.”).

We will therefore modify the class

definition to eliminate the notion of
18

“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 predecess o r

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 Rule 23(a).

C. Rule 23(b)

In addition to meeting the prerequisites

of Rule 23(a), the plaintiffs must

demonstrate that the class would satisfy

any one of the three subsections under

Rule 23(b). Rule 23 addresses the

commonality required to demonstrate

cohesiveness for class certification in two

subsections, (a)(2) and (b)(3). Rule

23(a)(2) requires that plaintiffs prove that

“there are questions of law or fact common

to the class.” As explained in Part II.B.1,

supra, the relatively low Rule 23(a)(2)

commonality requirement is easily

satisfied here. However, because the Rule

23(b)(3) predominance requirements

incorporate the commonality requirement

of 23(a), it is possible that “even if Rule

23(a)’s commonality requirement is

satisfied . . . the predominance criterion is

far more demanding..” Amchem Prods. v.

Windsor, 521 U.S. 591, 623-24 (1997). 

The District Court certified this class

pursuant to Fed. R. Civ. P. 23(b)(3). In

relevant part, the Rule reads: 

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,
19

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 Rule 23(b)(3).” Eisenberg v.

Gagnon, 766 F.2d 770, 786 (3d Cir. 1985).

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 Rule 23(b) are

easily met with respect to the issues

certified under Rule 23(c)(4)(A).11

III. Conclusion

For the foregoing reasons, we will

affirm the class certification pursuant to

Rule 23(c)(4)(A) only insofar as it relates

 

11We note that the relief sought is

primarily for monetary damages and not

for injunctive relief. Perhaps anticipating

the potentially problematic aspect of this

posture in a case where—were liability

established—damages calculations would

probably be extremely individualized,

Chiang acknowledges that “it may come to

pass that the trial court deems injunctive

relief the better remedy and finds that

damages are minimal.” (Chiang Brief,

p.38). Whether that would be the more

logical path we do not say, but we do note

that unlike in cases where the primary

relief sought is injunctive in nature, see

Baby Neal v. Casey, 43 F.3d 48 (3d Cir.

1994), Chiang seeks only ancillary

injunctive relief: the primary relief she

seeks is 2.8 billion dollars in damages.

Given that each class member will likely

find him- or herself in very different

circumstances in terms of establishing

damages, we think it unlikely that the

calculation of damages will be suitable for

class determination. However, should

Chiang make it to that stage, we once

again defer to the District Court in the first

instance to evaluate whether damages can

be adjudicated on a class wide basis.
20

to the question of the alleged waiting list

and related techniques, and will modify the

class definition to provide for a class of:

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 predecess o r

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.