Brown v. City National Bank

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4 UNITED STATES DISTRICT COURT

5 NORTHERN DISTRICT OF CALIFORNIA

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7 ELAINE BROWN, Case No. 23-cv-03195-AMO

8 Plaintiff,

ORDER GRANTING MOTION TO

9 v. DISMISS

10 CITY NATIONAL BANK, Re: Dkt. No. 9

Defendant.

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13 This is a mortgage discrimination case. Before the Court is Defendant City National

14 Bank’s (“CNB”) motion to dismiss. The matter is fully briefed and suitable for decision without

15 oral argument. See Civil L.R. 7-6. Having read the parties’ papers and carefully considered their

16 arguments and the relevant legal authority, the Court hereby GRANTS the motion to dismiss for

17 the following reasons.

18 I. BACKGROUND

19 On July 23, 2018, Plaintiff Elaine Brown opened an account with City National Bank.

20 ECF 1 (“Compl.”) ¶ 28.1 On June 10, 2019, Brown sought a $335,000 home loan from CNB to

21 purchase a condominium in Emeryville, California. Id. ¶¶ 4, 31-32. The following day, CNB

22 provided her with loan rates for the condominium and Brown provided CNB with the requested

23 documents. Id. ¶¶ 34-36. On June 24, 2019, CNB determined that Brown’s application was

24 “incomplete,” and requested additional documents, which Brown submitted on July 9, 2019. Id.

25 ¶¶ 40-42. As of July 3, 2019, Brown had $137,715.42 in her account, an amount that did not

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1 For the purposes of this motion to dismiss, the Court accepts all factual allegations in the

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Complaint as true and construes the pleadings in the light most favorable to the Plaintiffs.

1 fluctuate significantly throughout the rest of July. ECF 17-1 (“RJN Ex. 3”)2 at 4. By letter, dated

2 July 11, 2019, CNB notified Brown that it denied the home loan because of her “excessive

3 obligations in relation to income” and “insufficient funds to close the loan.” Compl. ¶¶ 5-6, Ex.

4 16 at 79.

5 In January of 2023, Brown discovered that the United States Department of Justice

6 (“DOJ”) had filed a complaint in United States District Court for the Central District of California

7 against CNB, and that the parties agreed to a Consent Order. Id. ¶¶ 7-8. The DOJ lawsuit alleged

8 that CNB engaged in discriminatory lending practices by failing to provide equal access to credit

9 to residents in majority-Black and Hispanic neighborhoods in Los Angeles and by discouraging

10 those residents from applying for home loans, resulting in a disproportionately low number of loan

11 applications and home loans from those neighborhoods. Id., Ex. C at 148-49.

12 Brown filed a complaint against CNB on June 27, 2023. She alleges that CNB denied her

13 home loan pursuant to its “admitted illegal pattern and practice of redlining” and that it had no

14 legitimate business reason for denying her loan. Id. ¶ 9. She further avers that CNB admitted to

15 redlining in Los Angeles in the Consent Order and that such redlining occurs with the same

16 frequency in the Oakland metropolitan area. Id. ¶ 10.3 Brown asserts claims under the Fair

17 Housing Act (“FHA), 42 U.S.C. §§ 3601-3619, Equal Credit Opportunity Act (“ECOA”), 15

18 U.S.C. § 1691 et seq., and civil rights violations under 42 U.S.C. §§ 1981 and 1982, as well as

19 state law claims for fraud, intentional and negligent misrepresentation, intentional infliction of

20 emotional distress, violation of the Unruh Act, Cal. Civ. Code § 51, and the Unfair Competition

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22 2 The Court may take judicial notice of matters that “can be accurately and readily determined

23 from sources whose accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b). Courts

may consider materials referenced in the complaint under the incorporation by reference doctrine,

24 even if a plaintiff failed to attach those materials to the complaint. Knievel v. ESPN, 393 F.3d

1068, 1076 (9th Cir. 2005). CNB seeks judicial notice of Brown’s July 31, 2019, bank account

25 statement and Brown does not oppose this request or question the document’s authenticity.

Brown’s CNB bank account is incorporated by reference in the complaint. See id.; Compl. ¶¶ 2, 5,

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30, 38, 120, 126. Therefore, the Court takes judicial notice of the bank account statement.

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3 The Consent Order states that CNB “denies the allegations in the Complaint.” Compl., Ex. B at

1 Law (“UCL”), California Business and Professions Code §§ 17200-17500. CNB filed the instant

2 motion to dismiss on August 11, 2023, alleging that Brown’s claims are time-barred and that she

3 fails to state a claim. ECF 9 (“Motion”).

4 II. LEGAL STANDARD

5 Federal Rule of Civil Procedure 8 requires a complaint to include “a short and plain

6 statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). A

7 complaint that fails to meet this standard may be dismissed pursuant to Fed. R. Civ. P. 12(b)(6).

8 Somers v. Apple, Inc., 729 F.3d 953, 959 (9th Cir. 2013).

9 To overcome a Rule 12(b)(6) motion to dismiss, the factual allegations in the plaintiff’s

10 complaint “‘must . . . suggest that the claim has at least a plausible chance of success.’” Levitt v.

11 Yelp! Inc., 765 F.3d 1123, 1135 (9th Cir. 2014) (quoting In re Century Aluminum Co. Sec. Litig.,

12 729 F.3d 1104, 1107 (9th Cir. 2013) (alterations in original)). “[A]llegations in a complaint . . .

13 may not simply recite the elements of a cause of action [and] must contain sufficient allegations of

14 underlying facts to give fair notice and to enable the opposing party to defend itself effectively.”

15 Levitt, 765 F.3d at 1135 (quoting Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011)). The court

16 may dismiss a claim “where there is either a lack of a cognizable legal theory or the absence of

17 sufficient facts alleged under a cognizable legal claim.” Hinds Invs., L.P. v. Angioli, 654 F.3d

18 846, 850 (9th Cir. 2011) (citing Johnson v. Riverside Healthcare Sys., LP, 534 F.3d 1116, 1121

19 (9th Cir. 2008)). “[T]he non-conclusory ‘factual content’ and reasonable inferences from that

20 content must be plausibly suggestive of a claim entitling the plaintiff to relief.” Moss v. U.S.

21 Secret Service, 572 F.3d 962, 969 (9th Cir. 2009).

22 Review is generally limited to the contents of the complaint, although the court can also

23 consider a document on which the complaint relies if the document is central to the claims asserted

24 in the complaint, and no party questions the authenticity of the document. See Sanders v. Brown,

25 504 F.3d 903, 910 (9th Cir. 2007). The court may consider matters that are properly the subject of

26 judicial notice, Knievel, 393 F.3d at 1076; Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th

27 Cir. 2001), and may also consider documents referenced in the complaint and documents that form

1 Am. W. Holding Corp., 320 F.3d 920, 925 n.2 (9th Cir. 2003). If dismissal is warranted, it is

2 generally without prejudice, unless it is clear that the complaint cannot be saved by any

3 amendment. In re Daou Syst., Inc., 411 F.3d 1006, 1013 (9th Cir. 2005).

4 III. ANALYSIS

5 CNB moves to dismiss Brown’s complaint in its entirety. It argues that all of Brown’s

6 claims, except the cause of action under the Equal Credit Opportunity Act (“ECOA”), are time-

7 barred. CNB moves to dismiss the ECOA claim for failure to state a claim. The Court considers

8 these arguments in turn.

9 A. Time-Barred Claims

10 CNB contends that a two-year statute of limitation applies to all of Brown’s federal claims,

11 other than the ECOA claim, and that they should be dismissed as time barred. Motion at 14-15.

12 Brown argues that the discovery rule tolls her claims until January 2023, when she learned that the

13 DOJ accused CNB of discriminatory lending practices in Los Angeles, and CNB entered into a

14 Consent Order in the U.S. District Court for the Central District of California. ECF 15

15 (“Response”) at 15-18.

16 Brown alleges discrimination claims under the Fair Housing Act (“FHA”), and sections

17 1981 and 1982 of the Civil Rights Act of 1866. Each of these causes of action are subject to a

18 two-year statute of limitations. See 42 U.S.C. § 3613(a)(1)(A) (FHA statute of limitations); Cal.

19 Civ. Proc. § 335.1 (two-year California statute of limits for personal injury claims); Lukovsky v.

20 City & Cnty. of San Francisco, 535 F.3d 1044, 1048 (9th Cir. 2008) (“When, as here, a federal

21 civil rights statute does not include its own statute of limitations, federal courts borrow the forum

22 state’s limitations period for personal injury torts”); see, e.g., Bonelli v. Grand Canyon Univ., 28

23 F.4th 948, 951 (9th Cir. 2022) (citation omitted) (“The statute of limitations for federal civil rights

24 claims under sections 1981 . . . is ‘governed by the forum state’s statute of limitations for personal

25 injury actions.’”); Klein v. City of Beverly Hills, 865 F.3d 1276, 1278 (9th Cir. 2017) (applying

26 California’s two-year statute of limitations to a section 1983 action).

27 While state law sets the statute of limitations period, federal law determines when a claim

1 typically accrues on the date of the plaintiff’s injury, however the discovery rule postpones the

2 accrual of a cause of action until the plaintiff “knows or has reason to know of the actual injury.”

3 Lukovsky, 535 F.3d at 1051; see Coppinger-Martin v. Solis, 627 F.3d 745, 749 (9th Cir. 2010) (a

4 claim accrues when the plaintiff “learns of the ‘actual injury’ . . . and not when the plaintiff

5 suspects a ‘legal wrong’”); see Bonelli, 28 F.4th at 952.

6 The parties agree that Brown’s federal causes of action are premised on CNB’s denial of

7 Brown’s loan application. Motion at 15; Response at 15; see Compl. ¶¶ 104, 117, 130, 134, 138,

8 142. However, Brown argues that because she only learned of CNB’s discriminatory lending

9 practices on January 12, 2023, when she learned of the DOJ’s complaint in federal district court,

10 the discovery rule tolls the accrual of her claims. Response at 15. The Court cannot agree.

11 Under the unambiguous text of the FHA, the statute of limitations “begins to run when the

12 discriminatory act occurs—not when it is encountered or discovered.” Garcia v. Brockway, 526

13 F.3d 456, 465 (9th Cir. 2008); see 42 U.S.C. § 3613(a)(1)(A) (“An aggrieved person may

14 commence a civil action . . . not later than 2 years after the occurrence or the termination of an

15 alleged discriminatory housing practice . . .”). In Rotkiske v. Klemm, 140 S. Ct. 355, 360-61

16 (2019), the Supreme Court affirmed this general principle, declining to interpret the Fair Debt

17 Collection Practices Act’s “violation occurs” language to allow for the limitations period to begin

18 to run on the date that the alleged violation is discovered. The Court reasoned that because

19 Congress has set limitations periods to run from the date of violation or the date of discovery in

20 other statutes, the Court would not “second-guess Congress’ decision to include a ‘violation

21 occurs’ provision, rather than a discovery provision” in the relevant statute. Id. at 361. The FHA

22 similarly includes language that the statute of limitations begins to run from “the occurrence” of a

23 discriminatory housing practice. 42 U.S.C. § 3613(a)(1)(A); see Garcia, 526 F.3d at 465

24 (“Holding that each individual plaintiff has a claim until two years after he discovers the failure to

25 design and construct would contradict the text of the FHA, as the statute of limitations for private

26 civil actions begins to run when the discriminatory act occurs—not when it’s encountered or

27 discovered.”).

1 loan application in July of 2019. Accordingly, the statute of limitations expired in July of 2021.

2 Brown’s later discovery of allegations against CNB for discriminatory lending practices cannot

3 toll her claim and the Court DISMISSES this claim with prejudice.

4 As for the Civil Rights Act claims (counts three and four), the Ninth Circuit has clarified

5 that a claim accrues “upon awareness of the actual injury . . . and not when the plaintiff suspects a

6 legal wrong.” Lukovsky, 535 F.3d at 1049-50.4 In Lukovsky, the Ninth Circuit affirmed the

7 district court’s ruling in an employment case that a claim accrued “when the plaintiffs received

8 notice that they would not be hired . . . even if at that point in time, the plaintiffs did not know of

9 the legal injury, i.e., that there was an allegedly discriminatory motive underlying the failure to

10 hire.” Id. at 1051; see also Davis v. United States, 642 F.2d 328, 331 (9th Cir. 1981) (holding that

11 a Federal Tort Claims Act claim accrues when the plaintiff knew or in the exercise of reasonable

12 diligence should have known the injury and its cause, but does not “defer accrual until fault . . .

13 had been discovered”). Here, Brown was aware that CNB denied her loan application on July 11,

14 2019. At that point, she knew that she had been injured and by whom, even if she did not suspect

15 discriminatory motive underlying the loan denial. See Lukovsky, 535 F.3d at 1051. As such, her

16 civil rights claims accrued on July 11, 2019, and expired in July of 2021, well before Brown filed

17 her suit. Accordingly, these claims are time barred and the Court therefore DISMISSES counts

18 three and four with prejudice.

19 B. Equal Credit Opportunity Act Claim

20 CNB moves to dismiss Brown’s Equal Credit Opportunity Act (“ECOA”) cause of action

21 for failure to state a claim. Brown’s argument in opposition focuses on her allegations in support

22 of the FHA claim. See Response at 18-23. Because FHA and EOCA claims are analyzed

23 similarly, the Court assesses Brown’s ECOA claims through her FHA arguments. See, e.g.,

24 Merritt v. Countrywide Fin. Corp., No. 09-CV-01179-BLF, 2016 WL 6573989, at *9-12 (N.D.

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26 4 The Ninth Circuit frequently looks to Title VII employment discrimination cases in examining

discrimination issues under the Fair Housing Act. See Cmty. House, Inc. v. City of Boise, 490

27 F.3d 1041, 1048 n.3 (9th Cir. 2007); Gamble v. City of Escondido, 104 F.3d 300, 304 (9th Cir.

1 Cal. June 29, 2016), aff’d, 783 F. App’x 717 (9th Cir. 2019); Canatella v. Reverse Mortg. Sols.

2 Inc, No. 13-CV-05937-HSG, 2016 WL 6070508, at *2-5 (N.D. Cal. Oct. 17, 2016); Ramirez v.

3 GreenPoint Mortg. Funding, Inc., 633 F. Supp. 2d 922, 927 (N.D. Cal. 2008).

4 The ECOA makes it unlawful “for any creditor to discriminate against any applicant, with

5 respect to any aspect of a credit transaction [] on the basis of race, color, religion, national origin,

6 sex or marital status, or age (provided the applicant has the capacity to contract).” 15 U.S.C. §

7 1691(a); see Schlegel v. Wells Fargo Bank, NA, 720 F.3d 1204, 1210 (9th Cir. 2013).5 To state a

8 claim under the ECOA, the complaint must plausibly allege that (1) the plaintiff was an

9 “applicant”; (2) the defendant was a “creditor”; and (3) the defendant discriminated against the

10 plaintiff with respect to any aspect of a credit transaction on the basis of the plaintiff's membership

11 in a protected class. See 15 U.S.C. §§ 1691(a), 1691e(a); Harrison v. Wells Fargo Bank, N.A., No.

12 C 18-07824 WHA, 2019 WL 2515582, at *3 (N.D. Cal. June 18, 2019) (citing Hafiz v. Greenpoint

13 Mortg. Funding, Inc., 652 F. Supp. 2d 1039, 1045 (N.D. Cal. 2009)). ECOA claims may be

14 alleged under either a disparate treatment theory of discrimination or through evidence of

15 disparate impact. See Texas Dep’t of Hous. & Cmty. Affairs v. Inclusive Communities Project,

16 Inc., 135 S. Ct. 2507, 2525 (2015) (“Inclusive Communities”); Pfaff v. U.S. Dep’t of Rous. &

17 Urban Dev., 88 F.3d 739, 745 (9th Cir. 1996); Miller v. Am. Exp. Co., 688 F.2d 1235, 1240 (9th

18 Cir. 1982).

19 Under a disparate treatment theory, a plaintiff must plead that she: belongs to a “protected

20 class”; (b) “applied for credit with defendants”; (c) was “qualified for credit”; and (d) “was denied

21 credit despite being qualified.” Canatella, 2016 WL 6070508, at *4; see Green v. Cent. Mortg.

22 Co., 148 F. Supp. 3d 852, 879 (N.D. Cal. 2015) (quoting Hafiz v. Greenpoint Mortg. Funding,

23 Inc., 652 F.Supp.2d 1039, 1045 (N.D. Cal. 2009)). Discriminatory intent or motive is a necessary

24 element of any disparate treatment claim under the ECOA. See Wood v. City of San Diego, 678

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5 The FHA makes it unlawful “[t]o discriminate against any person in the terms, conditions, or

privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection

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therewith, because of race, color, religion, sex, familial status, or national origin.” 42 U.S.C. §

1 F.3d 1075, 1081 (9th Cir. 2012) (requiring allegations of discriminatory intent in a disparate

2 treatment claim under Title VII); Gamble, 104 F.3d at 304-05 (holding that the elements of Title

3 VII discrimination claims, including allegations of disparate treatment, are the same as the

4 elements for FHA discrimination claims).

5 CNB argues that Brown cannot make out a disparate treatment claim because she has

6 failed to allege that CNB intentionally denied her loan application based on race. Brown argues

7 that she alleges that CNB’s actions had a “significant adverse effect on would-be loan applicants

8 situated in Ms. Brown’s position [and] [a]s such, Ms. Brown has alleged that City National’s

9 discriminatory motive caused [its] actions . . .” Response at 20. However, she fails to point to any

10 allegations in the complaint of CNB’s discriminatory motive. Instead, she references allegations

11 of the effects of CNB’s actions or inactions, which may relate to a theory of disparate impact but

12 do not suffice to state a disparate treatment theory.

13 Brown also asserts a disparate impact theory. “[A] plaintiff bringing a disparate-impact

14 claim challenges practices that have a disproportionately adverse effect on minorities and are

15 otherwise unjustified by a legitimate rationale.” Inclusive Communities, 135 S. Ct. at 2513

16 (internal citations and quotation marks omitted). To make out a disparate impact claim, plaintiffs

17 must allege “a significant disparate impact on a protected class caused by a specific, identified . . .

18 practice or selection criterion.” Stout v. Potter, 276 F.3d 1118, 1121 (9th Cir. 2002). Although

19 statistical data may be used to show disparate impact, “a disparate-impact claim that relies on a

20 statistical disparity must fail if the plaintiff cannot point to a defendant’s policy or policies causing

21 that disparity.” Inclusive Communities, 135 S. Ct. at 2523.

22 Brown alleges that CNB had only one branch in Oakland, marketed products to existing

23 customers, disproportionately generated fewer loan applications and loans in majority-Black and

24 Hispanic neighborhoods in Oakland, Compl. ¶¶ 15-19, 57-58, 63-66, 73, and that CNB’s “policies

25 of inaction [] intentionally excluded African American and Hispanic borrowers from accessing

26 their loan services.” Response at 20. However, Brown’s injury does not follow from these

27 allegations. Brown admits that she was an existing customer of CNB and received a loan

1 systematically denying loan applications to qualified individuals in majority Black or Hispanic

2 neighborhoods. Nor does she connect CNB’s alleged “policy of inaction” in certain

3 neighborhoods to her specific injury.6 Ultimately, Brown fails to connect the allegations in her

4 complaint to her injury – the denial of her loan. Accordingly, the Court DISMISSES the ECOA

5 claim with leave to amend.

6 C. State Law Claims

7 A district court may “decline to exercise supplemental jurisdiction” if it has “dismissed all

8 claims over which it has original jurisdiction.” 28 U.S.C. § 1367(c)(3). “Where a district court

9 dismisses a federal claim, leaving only state claims for resolution, it should decline jurisdiction

10 over the state claims and dismiss them without prejudice.” Wade v. Reg’l Credit Ass’n, 87 F.3d

11 1098, 1101 (9th Cir. 1996). Having dismissed Brown’s FHA, ECOA, section 1981, and 1982

12 claims, the Court declines to exercise jurisdiction over Brown’s remaining state claims and does

13 not address CNB’s arguments regarding dismissal of these claims.

14 II. CONCLUSION

15 For the foregoing reasons, the Court DISMISSES with prejudice counts one, three, and

16 four under the FHA and Civil Rights Act as time barred. The Court DISMISSES the second

17 cause of action under the Equal Credit Opportunity Act with leave to amend. The Court also

18 DISMISSES the remaining state law claims without prejudice. If Brown can allege facts to

19 plausibly state an ECOA claim, the Court will reconsider exercising supplement jurisdiction over

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6 This may be symptomatic of the Complaint borrowing heavily from the allegations in the DOJ

complaint. The Court also notes that in support of this Court’s subject matter jurisdiction, Brown

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improperly cites to statutes providing jurisdiction where the United States is plaintiff, or the

Attorney General brings a civil action. Compl. ¶ 20 (citing 28 U.S.C. § 1345, 42 U.S.C. §

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3614(a), and 15 U.S.C.§ 1691e(h)). Should Brown opt to amend her complaint, the Court urges

1 her state law claims. Plaintiff may amend her complaint by no later than February 19, 2024. No

2 additional parties or claims may be added without leave of court or stipulation of Defendant.

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4 IT IS SO ORDERED.

5 Dated: January 18, 2024

6 Weck □

8 ARACELI MARTINEZ-OLGUIN

United States District Judge

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