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BNT A.D. Agency, LLC v. City of Greensboro

United States District Court, M.D. North Carolina

September 18, 2019

BNT A.D. AGENCY, LLC, Plaintiff,
v.
CITY OF GREENSBORO, Defendant.

          MEMORANDUM OPINION AND ORDER

          OSTEEN, JR., DISTRICT JUDGE

         Plaintiff BNT Ad Agency, LLC, brings a claim for racial discrimination under 42 U.S.C. § 1981 against the City of Greensboro (“the City”). (Doc. 5.) Defendant has moved for summary judgment pursuant to Fed.R.Civ.P. 56(a). (Doc. 71.) Because this court finds that Plaintiff has failed to raise any genuine issue of material fact regarding whether the City discriminated against Plaintiff, as a minority-owned business, based on race, the City’s motion for summary judgment will be granted.

         I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND

         Plaintiff is owned by Michael and Ramona Woods (“the Woods”), who are both African-Americans. Plaintiff sought a $300, 000 economic development loan from the City’s Office of Economic Development and Business Support (“EDBS”) in 2013 to produce a sitcom, “Whatcha Cookin’.” (Amended Complaint (“Am. Compl.”) (Doc. 5) ¶¶ 16–18; Def.’s Brief in Support of Motion for Summary Judgment (“Def.’s Br.”) (Doc. 72), Ex. B, Andrew S. Scott, III Affidavit (“Scott Aff.”) (Doc. 72-2) ¶ 11.) EDBS staff assisted Plaintiff in applying for the loan. (Scott Aff. (Doc. 72-2) ¶ 11.) Plaintiff was originally going to pledge commercial property as collateral, on which the City would have taken a third position lien. (Michael Woods Affidavit (“Woods Aff.” (Doc. 77) ¶ 13.) EDBS determined that the commercial property would be insufficient collateral, due to the amount of debt on the property, as well as the tax value of the property. (Scott Aff. (Doc. 72-2) ¶ 14.) The parties therefore agreed that the Woods’ personal residence would secure the loan. (Id. ¶¶ 15– 16.) The Woods provided a financial statement to EDBS, which listed assets and liabilities. (Scott Aff. Ex. A (Doc. 72-2) at 25.) The financial statement included a “Personal Residence” valued at $1, 100, 000 as an asset. (Id.) On the same financial statement, the Woods responded to the question “Mortgages on Real Estate” with “Personal Residence $509, 000, ” indicating one lien on the property (Id.) The conditions pertaining to the collateral were as follows: (1) the City would have no worse than a second position lien on the Woods’ personal residence; and (2) the amount of outstanding mortgage debt on the residence was $509, 000. (Scott Aff. (Doc. 72-2) ¶ 26). The house was independently appraised at a value of $975, 000. (Id. ¶ 16.) EDBS staff and Plaintiff agreed to these terms and, as a result, the proposed loan agreement was presented to the Greensboro City Council. (Id. ¶ 17.) The City Council considered Plaintiff’s loan request on June 18, 2013, for a hearing and vote on a proposed resolution (the “Resolution”), to authorize the $300, 000 loan. (Am. Compl. (Doc. 5) ¶ 22; Def.’s Br. Ex. F, S. Mujeeb Shah-Khan Affidavit (“Shah-Khan Aff.”) (Doc. 72-6) ¶ 7.) The loan conditions included proof of Plaintiff’s investment in the sitcom and a pledge of the Woods’ residence as collateral, on which the City would take a second position lien as agreed. (Scott Aff. (Doc. 72-2) ¶¶ 21, 25.) The City Council voted in favor of authorizing the loan on those conditions at the June 18, 2013 meeting. (Am. Compl. (Doc. 5) ¶ 22.)

         Several days later, Plaintiff asked to close the loan as soon as possible in order to make payroll disbursements. (Scott Aff. (Doc. 72-2) ¶ 26.) The City, however, became aware that Plaintiff had provided inaccurate information about the proposed collateral. (Id.) In particular, there was $71, 000 more debt on the collateral than the Woods had represented to the City Council, and there were two liens, not one, on the residence. (Am. Compl. (Doc. 5) ¶ 25; Scott Aff. (Doc. 72-2) ¶ 26.) The Woods and Plaintiff could not provide a second lien position as agreed upon and approved; instead the City would receive a third lien position. (Am. Compl. (Doc. 5) ¶ 25; Scott Aff. (Doc. 72-2) ¶ 26.)

         In light of these developments, Plaintiff requested that the City Council adopt a proposed Amended Resolution (the “Amended Resolution”) to modify the loan in several ways: (1) the City would take a third, instead of a second, lien position on the personal residence; and (2) the debt amount on the collateral would be corrected to reflect the additional $71, 000. (Am. Compl. (Doc. 5) ¶¶ 25–26; Scott Aff. (Doc. 72-2) ¶¶ 32–33.)

         The City Council considered the Amended Resolution at a public meeting on July 16, 2013. (Am. Compl. (Doc. 5) ¶ 29; Scott Aff. (Doc. 72-2) ¶ 34.) Council members and city staff raised concerns about the new terms. (Scott Aff. (Doc. 72-2) ¶ 35.) The City Council ultimately voted 6-3 against adopting the Amended Resolution, (Def.’s Brief in Support of Motion to Dismiss Ex. C (Doc. 11-3) at 36)[1], but left the original Resolution in place until February 18, 2014, (Shah-Khan Aff. (Doc. 72-6) ¶ 27). Plaintiff could have chosen to proceed with the loan under the original Resolution terms until that point. (Id.) The City’s attorney made Plaintiff aware of the continued availability of the original loan in November 2013. (Id. ¶ 30.)

         Plaintiff filed suit against the City and six Greensboro City Councilmembers in Guilford County Superior Court in August 2014, asserting several claims, including a claim for racial discrimination under 42 U.S.C. § 1981, arising from the City Council’s decision not to adopt the Amended Resolution. (Complaint (Doc. 2) ¶¶ 30–61.) Defendant removed the case to federal court on the grounds that the complaint involved a federal question. (Petition for Removal (Doc. 1) at 3.) Defendants moved to dismiss Plaintiff’s claims for failure to state a claim under Fed.R.Civ.P. 12(b)(6), (Defs.’ Motions to Dismiss (Docs. 10, 12)), and this court granted those motions, (Memorandum Opinion & Order (Doc. 29)). Plaintiff appealed the dismissal of its Section 1981 race discrimination claim against the City to the Fourth Circuit Court of Appeals. (Notice of Appeal (Doc. 34).) The Fourth Circuit reversed the order dismissing the Section 1981 claim and remanded the case back to this court for further proceedings. Woods v. City of Greensboro, 855 F.3d 639, 642 (4th Cir. 2017).[2] Only the Section 1981 claim against the City remains. Id. at 653.

         On remand, following discovery, the City moved for summary judgment, (Def.’s Motion for Summary Judgment (Doc. 71)), and submitted a memorandum in support of that motion, (Doc. 72)). Plaintiff responded to the motion, (Pl.’s Brief in Response to Motion for Summary Judgment (“Pl.’s Br.”) (Doc. 76)), to which the City replied, (Defendant’s Reply Brief (Doc. 84)). Plaintiff’s attorney has also moved to withdraw from the case and strike the Reply to Defendant’s Motion for Summary Judgment based on a lack of good faith support for the arguments in that motion. (Motion by Norman B. Smith, Attorney for Plaintiff, to Withdraw from Further Representation and to have Stricken Two Briefs (Doc. 80); Brief in Support of Motions by Norman B. Smith to Withdraw from Further Representation of Plaintiffs and to have Stricken Briefs (Doc. 81).) This court held a hearing on Attorney Smith’s motions and denied both the motion to withdraw and the motion to strike. (Transcript of Motion Hearing 04/04/2019 (Doc. 85) 15:8–16.)

         II. STANDARD OF REVIEW

         Summary judgment is appropriate when “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986). This court must look to substantive law to determine which facts are material - only those facts “that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “On summary judgment the inferences to be drawn from the underlying facts . . . must be viewed in the light most favorable to the party opposing the motion.” United States v. Diebold, Inc., 369 U.S. 654, 655 (1962) (per curiam).

         This court therefore must determine whether the evidence “is so one-sided that one party must prevail as a matter of law.” Anderson, 477 U.S. at 252. The moving party bears the initial burden of demonstrating “that there is an absence of evidence to support the nonmoving party’s case.” Celotex Corp., 477 U.S. at 325. If the “moving party discharges its burden . . ., the nonmoving party then must come forward with specific facts showing that there is a genuine issue for trial.” McLean v. Patten Cmtys., Inc., 332 F.3d 714, 718–19 (4th Cir. 2003). Ultimately, summary judgment should be granted “unless a reasonable jury could return a verdict for the nonmoving party on the evidence presented.” Id. at 719.

         III. LEGAL FRAMEWORK

         Plaintiff claims Defendant violated Section 1981 by refusing to adopt the Amended Resolution authorizing a loan to Plaintiff. Section 1981 gives “[a]ll persons . . . the same rights . . . to make and enforce contracts . . . as is enjoyed by white citizens.” 42 U.S.C. § 1981(a) (2012). A plaintiff may prove a Section 1981 violation by either direct evidence of discrimination or through circumstantial evidence. Moore v. City of Charlotte, 754 F.2d 1100, 1105 (4th Cir. 1985).

         To prove a case of discrimination by direct evidence, a plaintiff must “produce direct evidence of a stated purpose to discriminate . . . of sufficient probative force to reflect a genuine issue of material fact.” Johnson v. Toys “R” Us-Delaware, Inc., 95 Fed.Appx. 1, 6 (4th Cir. 2004) (quoting Goldberg v. B. Green & Co., 836 F.2d 845, 848 (4th Cir. 1988)) (applying the standard for direct evidence from Goldberg to a Section 1981 claim).

         In the absence of any evidence of direct discrimination, the Fourth Circuit has imported the McDonnell Douglas analytical framework from the Title VII context into the analysis for racial discrimination claims under Section 1981. See Guessous v. Fairview Prop. Invs., LLC, 828 F.3d 208, 216 (4th Cir. 2016) (explaining that the McDonnell Douglas framework was “developed for Title VII discrimination cases, ” but “has since been held to apply in discrimination cases arising under § 1981”). Under the McDonnell Douglas framework, the plaintiff must first “proffer sufficient circumstantial evidence” to “establish a prima facie case of discrimination.” Williams v. Staples, Inc., 372 F.3d 662, 667 (4th Cir. 2004).

         The Fourth Circuit has not considered a claim alleging discrimination in the terms and conditions in lending under Section 1981; Williams v. Staples, Inc., a Fourth Circuit case dealing with Section 1981 racial discrimination, applies to all Section 1981 cases relating to “the purchase of goods or services.” Williams, 372 F.3d at 667. To establish a traditional prima facie case of discrimination under Williams, a plaintiff must

establish that: (1) [they are] a member of a protected class; (2) [they] sought to enter into a contractual relationship with the defendant; (3) [they] met the defendant’s ordinary requirements to pay for and to receive goods or services ordinarily provided by the defendant to other similarly situated customers; and (4) [they were] denied the opportunity to contract for goods or services that [were] otherwise afforded to white customers.”

Id. After the plaintiff successfully makes out a prima facie case of discrimination, “the defendant may respond by producing evidence that it acted with a legitimate, nondiscriminatory reason, ” at which point the “plaintiff may adduce evidence showing that the defendant’s proffered reason was mere pretext and that race was the real reason for the defendant’s less favorable treatment of the plaintiff.” Id. While the burden shifts back and forth between the plaintiff and defendant, “[t]he ultimate burden of persuading the trier of fact that the defendant intentionally discriminated against the plaintiff remains at all time with the plaintiff.” Texas Dep’t of Cmty. Affairs v. Burdine, 450 U.S. 248, 253 (1981).

         However, Williams did not specifically address discrimination in lending; it instead applies to “purchases of goods or services.” Williams, 372 F.3d at 667. Plaintiff urges the court to depart from the Williams/McDonnell Douglas framework when considering alleged lending discrimination under Section 1981; in Plaintiff’s view, “the inquiry in the context of lending should extend to an examination of how plaintiff was treated overall in comparison to how non-minorities were treated.” (Pl.’s Br. (Doc. 76) at 6.) Plaintiff provides no authority for such a test, and this court could not find any. Such a test is not persuasive here, as there is no dispute that Plaintiff was considered for this loan and did in fact receive the loan as requested initially. Instead, Plaintiff’s claims must be considered within the context of a requested modification of a loan having been agreed to by Plaintiff in the first instance.

         Various courts have taken different approaches to analyzing discriminatory lending cases. The Seventh Circuit declined to apply the McDonnell Douglas burden-shifting framework in “usual” credit discrimination cases. Latimore v. Citibank Fed. Sav. Bank, 151 F.3d 712, 714 (7th Cir. 1998). That court reasoned that lending does not present a “comparable competitive situation” to discriminatory hiring cases, such as McDonnell Douglas, in which a minority candidate and a white candidate vie for the same job. Id. Rarely, the court noted, will there be a situation in which a minority loan candidate and a white loan candidate be in competition for a loan; though “when we have an approximation to such a situation, a variant of the McDonnell Douglas standard may apply.”[3] Id. Instead, “[i]t is always open to a plaintiff in a discrimination case to try to show in a conventional way, without relying on any special doctrines of burden-shifting, that there is enough evidence, direct or circumstantial, of discrimination to create a triable issue.” Id. at 715.

         The Third Circuit applied an adapted version of the McDonnell Douglas framework when plaintiffs plead Section 1981 racial discrimination in lending claims. Anderson v. Wachovia Mortg. Corp., 621 F.3d 261, 273–75 (3d Cir. 2010). Plaintiffs under the Third Circuit’s test must show

(1) that [they] belong[] to a protected class, (2) that [they] applied [for] and [were] qualified for credit that was available from the defendant, (3) that [their] application was denied or that its approval was made subject to unreasonable or overly burdensome conditions, and (4) that some additional evidence exists that establishes a causal nexus between the harm suffered and the plaintiff’s membership in a protected class, from which a ...

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