Bare-Bone Pleadings Sufficiently Allege Fair Housing Act Discrimination
SWANSON v. CITIBANK (July 30, 2010)
Gloria Swanson, an African-American, brought suit against Citibank and its appraiser alleging violations of the Fair Housing Act and common law fraud. She alleged the following facts: She applied for a home equity loan at a local Citibank branch. She became suspicious that the bank was trying to discourage African-American applications when a bank representative told her she had to be accompanied by her husband (a joint owner of the property). She was also told that Citibank's loan standards were stricter than those of a competing bank which had already denied her a loan. Nevertheless, she returned the following day and completed the application process. Based in large part on Swanson's statement that the home was worth $270,000, Citibank conditionally approved a $50,000 loan. However, when an independent appraiser retained by Citibank appraised the home at only $170,000, Citibank rejected the application. Swanson later ordered her own appraisal, which came in at $240,000. Judge Zagel (N.D. Ill.) granted defendants' motions to dismiss. Swanson appeals.
In their opinion, Chief Judge Easterbrook and Judges Posner (dissenting in part) and Wood affirmed in part and reversed in part. The dismissal gave the Court the opportunity to review the pleading standards in light of the recent Supreme Court decisions in Twombly, Erickson, and Iqbal. First, the Court noted that none of the decisions questioned the validity of Rule 8's requirement of a "short and plain statement of the claim." Nevertheless, Twombly and Iqbal referred to a "plausibility" requirement. The Court viewed that requirement as one in which a court asks if whether it could happen, not whether it did happen. Applying those principles to Swanson's allegations against Citibank, the Court concluded that her bare-bone allegations of the type of discrimination, the discriminator, and the setting of the discrimination were sufficient to state a Fair Housing Act claim. Her fraud claim, however, implicated the "state with peculiarity" requirement of Rule 9(b) and an actual damages pleading requirement. Since Swanson did not plead any damages, her fraud claim was properly dismissed. Applying the principles to Swanson's claims against the appraiser, the Court again concluded that her bare-bone allegations that the appraiser understated the value of her home because of her race stated a claim under the Fair Housing Act. The Court affirmed the dismissal of the fraud claims for the same reason as it did those against Citibank.
Judge Posner agreed with the majority's treatment of the fraud claims but dissented from their treatment of the housing discrimination claims. He believed that the complaint set out an "obvious alternative explanation" for the actions of both the bank and the appraiser. With respect to the bank, Judge Posner cited the economic downturn, the fact that Swanson had already been denied a loan by another bank, and the fact that the appraisal suggested any loan would be undersecured. With respect to the appraiser, he noted the inexact nature of the business and the fact that errors are frequently made. Iqbal teaches us that if there is an "obvious alternative" to the invidious discrimination alleged by the plaintiff, the discrimination alternative is not a plausible one.
Allied Electric Contractors has been a member of the National Electrical Contractors Association (NECA), an association of union employers, since 2002. It has been making employee benefit contributions to Line Construction Benefit Fund since the 1990s. In 2005, NECA entered into a Collective Bargaining Agreement (CBA) with the union. It set forth the terms of employer contributions to the Fund and increased the hourly contribution by a quarter. By its own terms, it bound all employers who signed a letter of consent. Although Allied did not sign a letter of consent until December of 2006, it continued to make the required contributions, including the extra quarter, until July 2006. It failed to make contributions for July, August, and December of 2006 as well as for January and February of 2007. The Fund brought suit under ERISA. The court denied Allied's motion to dismiss and granted summary judgment to the Fund. Allied appeals.
For almost ten years, John Crichton purchased group health insurance from Golden Rule Insurance Co. He did so as a member of the Federation of American Consumers and Travelers ("Federation"). He filed a class action in 2002, alleging violations of the Illinois Consumer Fraud and Deceptive Business Practices Act ("ICFA"), class allegations under other states’ consumer fraud statutes, RICO and common law fraud. The basis of each of the claims was that Golden Rule failed to disclose, when it sold its insurance, that renewal premiums escalated dramatically. The district court dismissed the claims for failure to state a cause of action. Crichton appeals.