Thursday, March 27, 2008

Circuit clarifies pleading standards for housing discrimination

Today's offering from the Second Circuit involves an allegation of racial discrimination under the Fair Housing Act. The Court clarifies what it takes under recent Supreme Court pleading requirements to make out a case of housing discrimination. In doing so, the Second Circuit reinstates a Complaint under that statute because the plaintiff sufficiently alleged facts in support of her claim.

The case is Boykin v. Keycorp, decided on March 27. The plaintiff asked the defendant bank for a loan in connection with her property in a predominantly African-American neighborhood in upstate New York. Although Boykin satified the bank's credit requirements, the bank turned her down, claiming that it did not make loans to out-of-state applicants. She further alleged that the bank did not offer her post-rejection guidance and counseling under bank policy, alternatives that it offered to non-minority applicants. Her pro se complaint alleged that the bank's justification for denying the loan was false and that this really happened because of her race, gender and location of her property.

The district court dismissed the Complaint as insufficient to state a claim under Federal Rule of Civil Procedure 8(a). The problem is that, in Swierkiewicz v. Sorema N.A., 534 U.S. 506 (2002), the Supreme Court recently ruled that civil rights cases do not have to set forth every factual allegation in support of the claim, and that the plaintiff need only place the defendant on "fair notice" of the basis for the claim. No one can accurately pronounce the name of that case, but every civil rights lawyer knows what it stands for: civil rights complaints should not be dismissed unless the defendant knows enough from reading it to properly prepare for pre-trial investigation and discovery.

The Second Circuit (Sotomayor, Winter and Calabresi) applied Swierkiewicz to this Fair Housing Act case. It also applied another important Supreme Court case on the adequacy of a Federal complaint, Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955 (2007), which makes it a little harder to draft a Complaint in Federal court. Replacing a more lenient standard, Twombly says that a Complaint "requires factual allegations sufficient 'to raise a right to relief above the speculative level.'" Under these dueling legal standards, Boykin's Complaint was enough to survive dismissal. The Second Circuit reasoned:

In short, Boykin identified the particular events giving rise to her claim and alleged that she was treated less favorably than other loan applicants because of her race, her gender and location of her property, just as the [employment discrimination] complaint in Swierkiewicz provided the date and circumstances of the plaintiff’s termination and alleged that employees of other nationalities were treated differently than the plaintiff.

The Second Circuit also answered a question that I had always wondered about: can a plaintiff in Federal court allege facts "on information and belief"? The answer is yes, particularly if the relevant factual allegations for the moment are within the defendant's control. Boykin alleged "on information and belief" that the bank more favorably treated non-minority loan candiates. This issue does not arise too often because, rather than rely on case law, the Court of Appeals cited the definitive guide to Federal court practice for the proposition that "Pleading on information and belief is a desirable and essential expedient when matters that are necessary to complete the statement of a claim are not within the knowledge of the plaintiff."

Finally, the Court of Appeals ruled that Boykin did not have to affirmatively allege that the bank was motivated by racial discrimination. Although it doesn't hurt to throw in that allegation to be on the safe side, it is enough for the Complaint to support that inference without the plaintiff explicitly alleging ill-motive. Reading the Complaint in the light most favorably to Boykin's position, the court can infer discriminatory intent in denying her the loan.

In ruling in Boykin's favor, the Court of Appeals articulates a lenient standard: "In sum, Boykin’s allegations, taken as true, indicate the possibility of discrimination and thus present a plausible claim of disparate treatment." But the Court also notes that there are other ways to get at the truth in the event the case is doomed to failure. The defendant can always move for a more definite statement if the Complaint is vague, and the plaintiff is also required under Rule 11 to file pleadings in good faith. Of course, as every lawyer knows, the ultimate means for dismissal is a motion for summary judgment, filed when the parties are finished with pre-trial discovery.


jbernstein said...

I've long thought that the authority for information and belief pleading is Rule 11(b)(3). I have no idea what it was before the 1990 Amendments to Rule 11.

Jonathan Bernstein

Second Circuit Civil Rights Blog said...

True, but for some reason, while citing Rule 11(b)(3) in a footnote, the Court in this case did not cite it for that purpose. I guess citing the practice treatise puts the question of "information and belief" to bed once and for all.