Opinion ID: 2972296
Heading Depth: 2
Heading Rank: 4

Heading: Amendment of Complaint to Add ECOA Claim

Text: As previously discussed, the District Court did not err in denying the Midkiffs’ motion for leave to amend their complaint to add an agency allegation. In their Proposed Complaint, the Midkiffs also sought to add a claim against the Water District under the Equal Credit Opportunity Act (“ECOA”). The ECOA bars discrimination by creditors against any credit applicant “with respect to any aspect of a credit transaction . . . on the basis of race, color, religion, national origin, sex or marital status.” 15 U.S.C. § 1691(a)(1); see also Mays v. Buckeye Rural Elec. Coop., Inc., 277 F.3d 873, 876 (6th Cir. 2002). The ECOA’s purpose is to “‘eradicate credit discrimination waged against women, especially married women whom creditors traditionally refused to consider for individual credit.’” Mays, 277 F.3d at 876 (quoting Anderson v. United Fin. Co., 666 F.2d 1274, 1277 (9th Cir. 1982)). We have applied the Burdine/McDonnell Douglas burden-shifting framework used in Title VII cases to ECOA claims. Id. at 876-77. Under the ECOA, a creditor is one who grants a right “to defer payment of debt or to incur debts and defer its payment or to purchase property or services and defer payment therefor.” 15 U.S.C. § 1691a(d). The Magistrate Judge denied the motion for leave to amend with regard to the ECOA claim because addition of the ECOA claim would be an act of futility. Although this Court normally reviews denial of a motion for leave to amend a pleading for abuse of discretion, denial on the basis of futility is reviewed de novo. Dubuc v. Green Oak Twp., 312 F.3d 736, 743 (6th Cir. 2002). Plaintiff in Golden also presented a claim under the ECOA. This Court in Golden assumed that the plaintiff was an applicant, that the city was a creditor, and that a transaction for water service is a credit transaction under the ECOA. Golden, 2005 WL 873321, at . Furthermore, this Court assumed that disparate impact claims are permissible under the ECOA. Id. at  & n.11. We make the same assumptions and need not resolve the complex statutory questions that these issues present because the Midkiffs’ proposed ECOA claim contains a fundamental flaw that renders an amendment to add this claim futile. The Proposed Complaint alleges that Mrs. Midkiff, as a married woman, is a member of a protected class under the ECOA, and that both Mr. and Mrs. Midkiff applied for credit from the Water District and both were denied because “she/he” did not own the property for which service No. 04-3508 Midkiff, et al. v. Adams County Regional Page 12 Water District, et al. was requested. Proposed Compl. ¶ 44. The Midkiffs claim that the Water District policy discriminates against women and minorities because such protected groups form a disparately high portion of those non-property owners rejected as customers by the Water District, and that no formal notice of adverse action on a credit application was provided as required under 12 C.F.R. § 202.09, part of the Federal Reserve Board’s Regulation B that implements the ECOA. Proposed Compl. ¶ 45. As noted, the Proposed Complaint states that Mr. and Mrs. Midkiff applied for credit. Therefore, as the Magistrate Judge held, Mrs. Midkiff cannot allege that she and her husband were denied credit because of her marital status or gender and thus cannot make out a prima facie case. See Mays, 277 F.3d at 877 (holding that the first element of a prima facie case of credit discrimination is “Plaintiff was a member of a protected class”). Indeed, the Proposed Complaint does not allege discrimination against Mr. or Mrs. Midkiff on the basis of any protected class of which either of them might be a member. Rather, the Proposed Complaint asserts that the policy has a disparate impact on women and minorities generally, but states that Mr. and Mrs. Midkiff themselves were denied credit because “she/he did not own property where she requested continued water service.” Proposed Compl. ¶ 44. The Magistrate Judge correctly concluded, as alleged in the Proposed Complaint, that the Water District denied credit to the Midkiffs not because of any discrimination on the basis of marital status or gender, but because of the Midkiffs’ status as nonproperty owners. Therefore, the Midkiffs cannot establish a prima facie case under the ECOA, and amendment of their complaint to add an ECOA claim would have been futile. The Midkiffs, in asserting potential claims of women and minorities against the Water District policy barring non-property owners as customers, claim in passing to be asserting a form of third-party standing to bring a disparate impact ECOA claim. As support for this theory however, the Midkiffs cite only a Supreme Court case addressing the limited scope of third-party standing for constitutional claims. Midkiffs’ Br. at 25 n.52 (citing Barrows v. Jackson, 346 U.S. 249 (1953)). The Midkiffs offer no other support for their conclusory assertion in a footnote to their brief that they have third-party standing to challenge the Water District policy’s alleged discriminatory impact against minorities. They provide no argument for the notion that third-party standing, usually found in certain First Amendment cases, may be valid for ECOA claims. Finally, the Midkiffs argue that the Magistrate Judge ignored the fact that this case is a putative class action and that instead of denying leave to amend, he should have allowed amendment by intervention of a named plaintiff with proper standing to assert an ECOA claim. However, the Midkiffs cite only to a Fourth Circuit case and a treatise discussing this case for this proposition. Midkiffs’ Br. at 29 (citing Simmons v. Brown, 611 F.2d 65 (4th Cir. 1979), and Newberg and Conte on Class Actions § 1609 (3d ed. 1992)). In Simmons, the Fourth Circuit concluded that the named plaintiffs failed to show that they belonged to any potential class and affirmed the District Court’s denial of class certification. The Fourth Circuit nonetheless instructed the District Court to retain the case on the docket for a “reasonable time” to allow a proper plaintiff to come forward and prosecute the class action. Simmons, 611 F.2d at 67. Here, the District Court stayed the Midkiffs’ motion for class certification pending resolution of Defendants’ motion to dismiss, the Midkiffs did not oppose this stay of class certification, and the Magistrate Judge and the District Court correctly held that the Midkiffs could not state a claim upon which relief could be granted. Simmons is inapplicable here. Because any ECOA claims by Mr. or Mrs. Midkiff could not withstand a motion to dismiss, the Magistrate Judge did not err in denying the Midkiffs’ motion to amend their complaint to add No. 04-3508 Midkiff, et al. v. Adams County Regional Page 13 Water District, et al. ECOA claims. Furthermore, because no federal claims remained, the District Court correctly declined to exercise supplemental jurisdiction over the Midkiffs’ pendant state law claims.3