Chiang v. Secretary Agri

Opinions of the United

2004 Decisions States Court of Appeals

for the Third Circuit

9-20-2004

Chiang v. Secretary Agri

Precedential or Non-Precedential: Precedential

Docket No. 03-3488

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v.

PRECEDENTIAL

ANN M. VENEMAN, In her Official

IN THE UNITED STATES COURT OF Capacity as Secretary of

APPEALS The United States Department of

FOR THE THIRD CIRCUIT Agriculture,

_______________

Appellant

NO. 03-3488

______________

*Amended pursuant to Clerk's Order

GAIL WATSON CHIANG; *LYNDA dated 11/24/03

ALEXANDER MUHAMMAD; _________________

JACQUELINE CARR; DENISE

PITTMAN; CARMEN MCALPIN-

CLARKE; KAREN HUNT; On Appeal From The District Court of

THERESA COLLINGWOOD- the Virgin Islands

MORRIS; DAVID C. NICHOLAS; (No. 00-cv-00004)

PRECIOUS YEARWOOD; District Judge: Honorable Thomas K.

FREDERICK FREEMAN; BEVERLY Moore

RAWLINS; ANDREA CARROLL; _______________

RONALD J. MITCHELL; JACK

DANIEL; CHRISTINE DANIEL; Argued December 10, 2003

ANESTA E. GORE; VANETA Before: NYGAARD, BECKER, and

MARTIN; CARMEN GONZALEZ; STAPLETON, Circuit Judges.

M. NARTEL GREEN; SHIRLEY

WILLIAMS; MARIA BLYDEN; (Filed September 20, 2004)

GONZALO RIVERA; BLANCHE R.

RAWLINS; RHEA L. JOHNSON;

MARILYN RIVERA; KEITH R. DOUGLAS B. INMAN, ESQ.

WILLIAMS; AL BRUNN; EMERYL (ARGUED)

CHRISTOPHER; CHARLES G. Sayre & Chavez

JOHNSON; VELSINA L. GEORGE; 7 Church Street

KALEEN CLOUDEN; EUNICE Christiansted, St. Croix

GOMES; RUTH DUBLIN; USVI 00820

KIMBERLEY L. OLIVER; ELENA

HERBERT; LAWRENCE CHRISTIAN; Attorney for Appellees

MARJORIE JOHN; LAVERNE

WILLIAMS; REVEREND JAMES PETER D. KEISLER, ESQUIRE

CHRISTIAN, on behalf of themselves Assistant Attorney General

and all others similarly situated DAVID M. NISSMAN, ESQUIRE

1

United States Attorney Credit Opportunity Act, 15 U.S.C. § 1691

ERNEST BATEGNA, ESQUIRE et seq. (“ECOA”), which makes it

Assistant United States Attorney “unlawful for any creditor to discriminate

ROBERT M. LOEB, ESQUIRE against any applicant, with respect to any

CHARLES W. SCARBOROUGH, aspect of a credit transaction . . . on the

ESQUIRE, COLETTE G. MATZZIE, basis of race, color, religion, national

ESQUIRE (ARGUED) origin, sex or marital status, or age.” 15

Attorneys, Appellate Staff U.S.C. § 1691(a). To establish a prima

Civil Division, PHB Room 9149 facie case under ECOA the class members

U.S. Department of Justice must show that (1) plaintiff was a member

601 D. Street, NW of a protected class; (2) plaintiff applied

Washington, DC 20530-0001 for credit from defendants; (3) plaintiff

was qualified for the credit; and (4) despite

Attorneys for Appellant qualification, plaintiff was denied credit.

See Matthiesen v. Banc One Mortgage

______________________ Corp., 173 F.3d 1242, 1246 (10th Cir.

1999).

OPINION OF THE COURT

According to Chiang, the regional

_______________________

USDA office in Vermont, which had

jurisdiction over the U.S. Virgin Islands,

BECKER, Circuit Judge. kept Virgin Islanders “out of the system”

by implementing a “phony,” illegal

This is an interlocutory appeal by the

waiting list on which thousands of Virgin

defendant, United States Secretary of

Islanders, almost all of whom were Black,

A g r i c u l tu r e , A n n M . V en e m an

Hispanic, or female, had their names

(“Veneman”) pursuant to Fed. R. Civ. P.

placed instead of being given an actual

23(f), in which she challenges a class

loan application in violation of USDA

certification granted by the District Court

policy, instructions, and regulations, .

in a civil rights case brought against her in

These applicants were told that they would

her official capacity. The lead plaintiff is

receive applications when they became

Gail Watson Chiang (“Chiang”), the

available but, even after years of waiting,

representative of the putative class, who,

most never did. According to Chiang, not

along with thirty-eight other plaintiffs,

only were applications available, but the

alleges systematic discrimination against

Virgin Islands was the only locality in the

persons who are “Black, Hispanic, women,

United States where this type of waiting

and/or Virgin Islanders,” over a period of

list was implemented. Thus, Chiang

nineteen years, in the administration of

submits, the so-called “waiting list” was

loan programs intended to help low

not a true waiting list at all, but was rather

income rural families obtain homes and

a device used to deny class members loan

make repairs to existing homes. The

applications altogether.

claims are made primarily under the Equal

2

Chiang also alleges that the USDA female and /or Virgin Islanders who

administrators in Vermont further applied or attempted to apply for,

instructed Virgin Islands officials to give and/or received, housing credit,

applications only to those class members services, home ownership, assistance,

on the waiting list who became a t r a in i n g , a n d / o r e d u c a t io n a l

“problem,” and then told local employees opportunities from the USDA through

“you know what to do with it.” This its Rural Development offices (and

message was uniformly understood by predecessor designations) located in

local USDA officials to mean that the the U.S. Virgin Islands at anytime

applications were not to be processed, but between January 1, 1981 and January

rather that actions were to be taken to 10, 2000, and who believe they were

make it difficult or impossible for the discriminated against on the basis of

inquiring parties to meet qualifications and race, gender or national origin.

deadlines, the intention being that the

In Veneman’s submission, the District

applicants would become so frustrated that

Court abused its discretion when it

they wou ld withdra w th eir loan

certified what she describes as a sprawling

applications, or that delays would result in

and unmanageable class action seeking

disqualification or other justification for

$2.8 billion in damages from the USDA.

denial of the applications. In Chiang’s

She complains that the class definition is

submission, this became known in the

overbroad, and that it is internally

local USDA office as the “Impossible

inconsistent insofar as it encompasses

Yes”: an application would be given out,

every Virgin Islander who applied or

but the USDA would make it impossible

attempted to apply for any of the different

for the putative applicant to have the

Rural Housing Service (“RHS”) 1 credit

application fairly processed.

Furthermore, Chiang alleges corruption

in the administration of the loan program 1

The Rural Housing Service is an

in the Virgin Islands—in the rare instances agency of the USDA. Formerly known

in which loans were approved—through as the Rural Housing and Community

favoritism to local contractors who were Development Service, “RHS” is a

not building homes in a safe and successor agency to the Farmers Home

workmanlike manner. This resulted, it is Administration, which ceased to exist in

said, in placing Virgin Islanders into 1994. RHS operates a broad range of

i n a d e q u ate a n d u n s a f e h o u s in g , programs to address rural America’s

r e pr e se n ting a fu rt he r f o rm o f need for single-family and multi-family

discrimination against Virgin Islanders. housing as well as health facilities, fire

At the behest of Chiang, the District and police stations, and other community

Court granted a Rule 23(b)(3) certification structures. To promote its goals, RHS

to a class of administers direct loan guarantees and

grants through state and local offices

All persons who are Black, Hispanic, located throughout the nation.

3

and benefit programs during a nineteen- chart for our consideration which she

year period (from 1981 to 2000), including claims was the primary document used by

those with non-credit claims, those with USDA employees to determine eligibility,

untimely claims, and Caucasian loan contending that those employees did not

applicants who the complaint alleges have any particular knowledge or skill, but

benefitted from the discrimination. rather, were mere clerks charged with

matching income to columns on the chart.

In Veneman’s view, not only is the

According to Chiang, the evaluations of

class so sweeping that the threshold

eligibility constituted neither in-depth nor

requirements of Rule 23(a) likely are not

discre tionary assess men ts of th e

satisfied, but even if the class definition

circumstances of each applicant, and hence

were deemed to meet Rule 23(a)’s

are subject to common proof.

standards, the class fails Rule 23(b)(3)’s

more stringent requirements because Veneman is surely correct that the

common issues do not predominate over plaintiff in an ECOA case must establish

individual ones and class treatment would that he or she was qualified for loan

not be superior to individual adjudications. eligibility as part of the prima facie case.

Central to Veneman’s contention is the The record developed thus far leaves us in

argument that to prevail on his or her some doubt as to the validity of Chiang’s

individual claims under ECOA, each class contentions about the susceptibility of

member would need to demonstrate that eligibility determinations to common

the USDA’s proffered reason for denial of proof. Nevertheless, we believe that this

credit (or loan for defective property) was question will be best resolved by the

a pretext for discrimination on the basis of District Court in the first instance. We

race, gender or national origin. According have no doubt, however, that the question

to Veneman, liability on these claims can of the existence vel non of the “phony”

only be determined through case-by-case waiting list—and associated techniques

inquiries into the specifics of each used to prevent Virgin Islanders from

transaction, and most particularly, the loan gaining access to loan applications and

eligibility of each putative class member. loans—is a matter appropriate for class

If the class member could not have determination. We will therefore affirm

obtained the loan, then he or she cannot that portion of the District Court order

succeed in his or her claim of certifying the class pursuant to Rule

discrimination, regardless of the existence 23(c)(4), which allows a class action to be

of the alleged waiting list. maintained with respect to particular

issues— in this case the waiting list— while

Chiang counters this with the

simultaneously reserving for the District

contention that determination of loan

Court the authority to determine whether

eligibility would, in fact, be susceptible to

eligibility for loans can be certified as a

class proof because those determinations

question suitable for class adjudication.

were purely ministerial in nature. In her

supplemental exhibit 1, Chiang submits a We are not troubled by the seeming

4

internal contradiction in the class the eligibility facet of liability, we will

definition because, inasmuch as the vacate the District Court’s order in all

plaintiffs’ primary claim is that they were other respects.

discriminated against for being Virgin

I. Facts and Procedural History

Islanders, a cognizable class, we will treat

the claim as such and modify the District We begin with a recitation of the

Court’s certification order accordingly. allegations supporting class certification,

While some claims allege individual derived both from the first amended

gender and race discrimination, the complaint and from extensive informal

number of such complaints appears to be class action discovery (largely exchange of

small, and we think that certifying a class documents). We note that it is not

of Virgin Islanders best captures the necessary for the plaintiffs to establish the

plaintiffs’ arguments. Since 76% of the merits of their case at the class

population of the U.S. Virgin Islands is certification stage, and that, in determining

black and 14% is Hispanic, it is possible whether a class will be certified, the

that the claims of racial and national origin substantive allegations of the complaint

discrimination may overlap. We therefore must be taken as true. See Eisen v.

leave to the plaintiffs the option to seek to Carlisle & Jacquelin, 417 U.S. 156, 177-

amend the class definition to allege racial 78 (1974).

and gender, rather than national origin,

Between January 1, 1981 and January

discrimination; any decision on such

10, 2000, thousands of Virgin Islanders

amendment will be for the District Court

requested loan applications from the

in the first instance. Additionally, for

USDA in order to purchase or make

reasons explained infra, we will further

repairs on homes. As noted above, Chiang

modify the certification order to eliminate

alleges that all class members who

the reference to the class members’

requested home loan applications were

“belief” in discrimination, thereby

forced to put their names on an illegal

removing such a subjective criterion from

waiting list instead of actually being given

the class definition.

an application.2 Chiang contends that the

As the foregoing suggests, the issues to

be dealt with on a class basis do not 2

From 1995 to 1999, Chiang worked

present predominance, superiority, or as a special assistant to the Governor of

manageability problems. See Fed. R. Civ. the Virgin Islands. Although she filed

P. 23(b)(3). Neither do we find any merit this suit as a private citizen, she explains

in Veneman’s untimeliness claims, which that she first became aware of the extent

are not properly before us at this stage of of the discrimination problem due to her

the case. Finally, because the other governmental position which led her to

aspects of the case are not suitable for receive “hundreds, if not thousands, of

class determination, i.e., inclusion of the oral complaints from Virgin Islanders

c l a ss - b a s e d c l a im s o f c o r r u pt regarding what was perceived as a

administration, and, on the present record, longstanding and widespread systematic

5

existence of this list, generated in the According to Chiang, each named

USDA regional office in Vermont which plaintiff in this law suit filed a

had jurisdiction over the Virgin Islands, discrimination complaint with the USDA

was in direct contravention of USDA prior to this action, or authorized one to be

instructions and regulations, and that no filed on his or her behalf.4 In March 1997,

equivalent list existed anywhere else in the

United States. Chiang represents that the record to support the contention that the

justification USDA gave for placing class amount of funding is tied to the number

members on the waiting list was that (1) of persons who seek loans. The

the USDA did not have any applications methodology for allocation of housing

and (2) applications were not being given funds can be found in 7 C.F.R. §§

out because the USDA had no money 1940.552 and 1940.565. The formula is

available for loans. However, Chiang based on (1) the State’s percentage of the

contends that applications were, in fact, National number of rural occupied

available, and that a certain low level of substandard units; (2) the State’s

funding was also available despite her percentage of the N ational rural

allegation that the USDA failed to seek or population; (3) the State’s percentage of

obtain proper levels of funding for rural the National rural population in places of

housing loans for each of the 19 years at less than 2,500 population; (4) the State’s

issue.3 percentage of the National number of

rural households between 50 and 80

discrimination” and that she was percent of the area median income; and

“inundated with complaints of USDA (5) the State’s percentage of the National

discrimination from all quarters.” number of rural households below 50

percent of the area median income. On

this record, it appears that none of these

3

Chiang also contends that because factors are derived from the USDA’s

class members were placed on the application database.

alleged waiting list, they were never To the extent that Chiang alleges an

entered into the official USDA database unfair allocation of funds to the Virgin

which tracks the number of loan Islands, as opposed to discriminatory

applications in each jurisdiction. She behavior on the part of the USDA in

further submits that due to that lack of administering those funds, she seeks

data entry, the level of need for funding relief in the wrong forum and would be

was never properly assessed and so was better served directing her complaint

never allocated to the Virgin Islands. elsewhere.

The lack of funding, she maintains, was

4

then used as a reason for putting class Those authorizations were apparently

members on the waiting list, thereby directed to Chiang in the course of her

keeping them out of the database and employment in the Governor’s office.

creating a vicious circle. When she fielded complaints about the

There is, however, no basis in the USDA’s alleged discriminatory behavior,

6

Chiang and 48 other named plaintiffs filed requirements of Fed. R. Civ. P. 23(a) had

an administrative class program complaint not been met. Veneman also argued that

of discrimination with the USDA’s Office the class definition was fatally overbroad

of Civil Rights in Washington, D.C. The because it failed to define the class by

named plaintiffs claim never to have reference to any discriminatory practice,

received any type of acknowledgment of included untimely claims and claims

their complaints from the USDA. arising out of RHS’s non-credit benefit

However, in response to mounting programs, and was not limited by race or

discrimination complaints, the USDA sent gender as it included all Virgin Islanders.

an investigative team to the Virgin Islands.

On February 28, 2003, the District

T h e U S DA team conducted a n

Court filed its decision certifying the class

investigation and documented what

under Rule 23(b)(3).6 The Court found

Chiang styles the “Highway to Nowhere”

that the FAC alleged “a pattern and

in an internal USDA report entitled “Civil

practice of discrimination against each

Rights Compliance Review for the U.S.

class member.” It concluded that the

Virgin Islands, October 19-29, 1997.” The

pattern and practice manifested itself in

report—which was never officially

three ways: (1) some members were

adopted by the USDA—identified two

denied an application package and told to

specific techniques used to deny class

put their names on an unlawful waiting

members access to the loans.5 Those

list; (2) RHS provided other members with

techniques were (1) creating the phony,

applications, but then made it impossible

illegal “waiting list,” and (2) implementing

for them to obtain credit by deliberately

the “impossible yes” scheme. (See JA

delaying and frustrating the process so that

384-411). This lawsuit followed.

the program would run out of funds, the

The plaintiffs filed their initial

complaint on January 11, 2000 and filed

their first amended complaint (“FAC”) on 6

The District Court explicitly chose

March 23, 2001. The FAC named 39 “not to certify this class under (b)(2)”

plaintiffs and sought class certification. because even though “Rule 23(b)(2)

Veneman opposed class certification on certification can be particularly well-suited

t h e grou nds th at the thre shold to civil rights actions charging class

discrimination . . . certification is not

she would ask the complainant to give her proper where ‘the appropriate final relief

p ermission to lodge an officia l relates exclusively or predominantly to

discrimination complaint with the USDA. money damages.’” (Op. 14, note 4)

(quoting Advisory Committee Notes to

5

Veneman refuses to be bound by the Rule 23 (b) (2)). The District Court

contents of the report, calling it an concluded that, although some measures of

“unofficial and preliminary draft” filled injunctive relief were sought, “the

with “hearsay and baseless innuendo.” equitable remedies probably do not

(Reply Brief, P.7, note1). predominate.” (Op. 14, note 4).

7

applicant would become ineligible or the requisites of Rule 23(a) and at least one

applicant would give up; and (3) even part of Rule 23(b) are met. See Baby Neal

plaintiffs who did obtain loans were v. Casey, 43 F.3d 48, 55 (3d Cir. 1994)

denied services such as loan workouts and (citing Wetzel v. Liberty Mutual Ins. Co.,

payment moratoria because of their race, 508 F.2d 239 (3d Cir. 1975)). We review

gender, or national origin. the District Court’s decisions on class

certification for abuse of discretion. See In

In making these findings, the District

re LifeUSA Holding Inc., 242 F.3d 136,

Court rejected Veneman’s argument that

143 (3d Cir. 2001). The District Court

the class definition improperly turned on a

abuses its discretion only if its decision

class members’ state of mind—i.e.,

“rests upon a clearly erroneous finding of

whether they “believed” themselves to

fact, an errant conclusion of law or an

have suffered discrimination. It rejected

improper application of law to fact.” In re

Veneman’s argument that Rule 23(a)’s

Gen. Motors Corp. Pick-Up Truck Fuel

requirements were not met. The Court

Tank Prods. Liab. Litig., 55 F.3d 768, 783

also found that the class was sufficiently

(3d Cir. 1995).

cohesive to warrant adjudication by class

action given that the common question in B. Rule 23(a)

each count was whether the USDA’s

In any class certification, the threshold

practice and policy discriminated against

issue is whether the four requisites of Rule

Blacks, Hispanics, women, and/or Virgin

2 3 ( a ) , nu m er os ity, com mo nality,

Islanders as a class, and that this common

typicality, and adequacy, are met. Rule

question predominated over differences in

23(a) states:

the factual circumstances of the individual

plaintiffs. The Court additionally held that One or more members of a class

adjudicating this case as a class action was m a y s u e o r b e s u e d as

superior to having numerous individual representative parties on behalf of

lawsuits brought against the USDA. all only if (1) the class is so

numerous that joinder of all

On July 22, 2003, a motions panel of

members is impracticable, (2) there

this Court granted Veneman’s petition for

are questions of law or fact

permission to take an interlocutory appeal

common to the class, (3) the claims

under Fed. R. Civ. P. 23(f). The District

or defenses of the representative

Court had jurisdiction pursuant to 28

parties are typical of the claims or

U.S.C. § 1331. We have jurisdiction over

defenses of the class, and (4) the

this appeal pursuant to 28 U.S.C. §

representative parties will fairly

1292(e).

and adequately protect the interests

II. Class Certification of the class.

A. Standard of Review Fed. R. Civ. P. 23(a).

In order to obtain class certification, Veneman does not now contest

plaintiffs must establish that all four numerosity, typicality, or adequacy of

8

representation. Rather, she focuses on the revocation, alteration, or termination of

commonality prong, arguing that the credit; and collection procedures).” 12

eligibility determinations for loans are not C.F.R. § 202.2(m) (emphasis added). A

susceptible to common proof. She also potential creditor’s refusal to provide an

argues that the definition contains an application form is also part of a “credit

internal contradiction, and that the class as transaction” within the meaning of the

certified is fatally overbroad. statute, see Rosa v. Park West Bank &

Trust Co., 214 F.3d 213 (1st Cir. 2000).

1. Commonality

Indeed, a refusal to provide a loan

Veneman’s first objection to the class application “on the basis of race, color,

certification is that there are not sufficient religion, national origin, sex or marital

“questions of law or fact common to the status, or age” would be a prototypical

class.” See Fed. R. Civ. P. 23(a)(2). But ECOA violation, as it would deny

the commonality standard of Rule 23(a)(2) members of a protected class any access to

is not a high bar: it does not require credit.

identical claims or facts among class

Plaintiffs here allege discrimination at

member, as “the commonality requirement

several different points in the credit

will be satisfied if the named plaintiffs

application process, from refusal to

share at least one question of law or fact

provide application forms when requested,

with the grievances of the prospective

through delaying tactics in the processing

class.” Johnston v. HBO Film Mgmt., 265

of applications, to discrimination in

F.3d 178, 184 (3d Cir. 2001). We find that

administration of loan proceeds. Given the

Chiang’s allegations of discriminatory

broad language of 12 C.F.R. § 202.2(m),

conduct directed at the entire class do

we think that all of these forms of

present a common question of law.

discrimination fall under the purview of a

As noted above, ECOA makes it “credit transaction,” and so constitute

“unlawful for any creditor to discriminate ECOA violations. Thus, even though

against any applicant, with respect to any many putative class members never even

aspect of a credit transaction . . . on the made it to the official application process

basis of race, color, religion, national because they were denied applications in

origin, sex or marital status, or age.” 15 the first instance, their requests for—and

U.S.C. § 1691(a). The regulations denial of—applications are nevertheless

governing ECOA define a “credit cognizable under ECOA.

transaction” as “every aspect of an

As presented by Chiang, and as

applicant’s dealings with a creditor

certified by the District Court, the heart of

regarding an application for credit or an

the complaint alleges discriminatory

existing extension of credit (including, but

attempts to keep class members from

not limited to, information requirements;

having access to rural housing loan

investigation procedures; standards of

programs in the Virgin Islands. Chiang

creditworthiness; terms of credit;

submits that the so-called “phony” waiting

furn ishing of credit information;

9

list and the other practices that allegedly denial of access to housing programs; and

contributed to prevent Virgin Islanders the unlawful discouragement and refusal to

from having access to loans are all process applications by way of the

susceptible to common proof. Those “impossible yes.”

multifarious practices include the

following: the refusal to accept In our view, these claims allege a

submission of loan applications from class uniform course of conduct common to all

members; the refusal to issue loan class members subject to common proof in

applications; the refusal to process loan a single trial. In Hoxworth v. Blinder,

applications; the refusal to provide reasons Robinson & Co., 980 F.2d 912, 924 (3d

for failing to process the loan applications; Cir. 1992), we held that a “uniform

the unlawful denial of access to scheme” or “uniform course of conduct”

established procedures and national would support a finding of predominance

funding computer systems; the refusal to even where injuries resulting from a

notify class members of eligibility for fraudulent securities scheme were different

loans and assistance; the refusal to employ for each class member; while imposing a

mandated priority funding system; the h i g h e r s t a n d a r d , p re p o n d e r a n c e

refusal to engage in mandated processing presupposes commonality. See also Int’l

procedures to determine eligibility; the Brotherhood of Teamsters v. United States,

concealment of discriminatory acts by 431 U.S. 324, 336 (1977) (holding that a

refusal to issue notification stating reasons pattern or practice would be present “only

for failure to process; the failure to issue where the denial of rights consists of

notices of available funding and requests something more than an isolated, sporadic

for information needed to process a loan; incident, but is repeated, routine, or of a

the refusal to notify class members of next generalized nature”). Chiang has alleged

q u a r t e r funding availability; the such a practice here. We will therefore

concealment of class members’ attempts to affirm the class certification insofar as it

access programs by refusal to enter their deals with the waiting list and associated

information in national database; the techniques.

failure to advise class members about

requirements for keeping loan applications If the waiting list and associated

active; the unlawful denial of access to techniques claims are resolved in

non-program loans; the refusal to advise plaintiffs’ favor, they will have satisfied

class members of their right to review and the first two prongs of the ECOA prima

appeal; the unlawful refusal to provide for facie case: membership in a protected

administrative review of non-appealable class (viz., Virgin Islanders: see infra Part

decisions; the failure to investigate and II.B.2) and application (or, here, attempted

process discrimination complaints; the application) for credit. The third and

denial of acces s to non-pro gram fourth prongs, however—that the applicant

procedures for assumption of existing was qualified for the credit and that,

USDA loans and properties; the systematic despite that qualification, defendant denied

10

the credit— may prove harder to calculation is far from easy to perform,

adjudicate on a class-wide basis. especially when applicants may have

unstable work histories, the work in

Chiang contends that the issues are question may be seasonal, or continued

appropriate for class certification because employment may be questionable—to

determinations of loan eligibility are a name just a few of the possible variables.

purely ministerial matter. At oral Veneman also submits that class members

argument before this Court, counsel for would need to show that the property for

Chiang submitted a chart concerning which they sought a loan met the criteria

income limit qualifications for certain for collateral on the loan. See 7 C.F.R. §§

RHS loans. Counsel argued that the one- 3550.56-57. In short, she disputes the

page document demonstrated that notion that loan eligibility could be a

qualification for the loans at issue was a mechanical question proper for class

mechanical function that could be adjudication.

undertaken by any low-level clerk simply

by read ing the c har t. See Federal Rule of Civil Procedure

http://www.rurdev.usda.gov; see also 7 23(c)(4) provides that “[w]hen appropriate

C.F.R. § 3550. (A) an action may be brought or

maintained as a class action with respect to

Veneman, on the other hand, submits particular issues . . . .” Rule 23(c)(4) both

that determining eligibility for loans is imposes a duty on the court to insure that

quite complex and involves the exercise of only those questions which are appropriate

discretion. She contends that in order to for class adjudication be certified, and

show that he or she was qualified for a gives it ample power to “treat common

loan, each applicant would need to things in common and to distinguish the

demonstrate that he or she met each of the distinguishable.” Jenkins v. United Gas

regulatory requirements including income Corp., 400 F.2d 28, 35 (5th Cir. 1968).

limitations and ability to repay the loan. Because we believe that the two

See 7 C.F.R. § 3550.53. According to questions—the existence of the phony

these regulations, two different kinds of waiting list and associated techniques on

income must be considered: repayment the one hand, and the feasibility of class-

income and eligibility income. See 7 wide determinations of loan eligibility on

C.F.R. § 3550.54. Repayment income the other—are easily distinguishable, we

measures the income which the applicants will affirm certification on the former and

have available to repay the loan, while leave it to the district court to determine

eligibility income is based on the income whether class certification might be

of all members of the household. appropriate on the latter. We note in this

Veneman submits that although it may regard that courts commonly use Rule

seem mechanical to take an applicant’s 23(c)(4) to certify some elements of

hourly income and multiply it by the liability for class determination, while

number of yearly working hours, such a leaving other elements to individual

11

a d j u d i ca t i o n — o r , p e r h a p s m o r e

realistically, settlement. See, e.g.,

Carnegie v. Household Int’l, Inc., 376 F.3d Similarly, we need not decide what the

656, 661 (7th Cir. 2004) (Posner, J.) (“[I]t applicable test would be to rebut the prima

may be that if and when the defendants are facie case. Veneman would have us hold

determined to have violated the law that a “but for” test applies, and that

separate proceedings of some character putative class members would have to

will be required to determine the show that but for the discrimination, a loan

entitlements of the individual class would have been granted in each particular

members to relief.”); Mullen v. Treasure case. Chiang, on the other hand, argues

Chest Casino, LLC, 186 F.3d 620, 623 (5th that the burden-shifting framework set

Cir. 1999).7 forth in McDonnell Douglas Corp. v.

Green, 411 U.S. 792 (1973), applies

because ECOA should be construed in

7

B e c a u s e w e a r e n o t decid ing th e accordance with the law of Title VII

question of appropriateness of class discrimination cases.

certifica tion for loan e ligibilit y We have not yet had occasion to decide

determinations, we need not rule on whether it is appropriate to shift the burden

Chiang’s “Motion to Correct the Record to a defendant to rebut a prima facie claim

and Reply” in which she wishes to of discrimination under ECOA. Several of

introduce two exhibits. The first document our sister Courts of Appeals have so held,

was presented to us only during the course but one Court of Appeals has questioned

of oral argument and consists of the one whether the McDonell Douglas model can

page income qualification chart. Since the be imported from the field of employment

District Court will be called upon to make discrim ina tion to that of credit

the determination as to whether class discrimination. See Lewis v. ACB Bus.

certification is appropriate for determining Servs., Inc., 135 F.3d 389, 406 (6th Cir.

the question of loan eligibility, that Court 1998) (holding that ECOA’s legislative

should decide how to proceed with the history suggests reviewing claims of

request. The second document relates to discrimination using the same burden

evidence (past loan applications) allegedly allocation system found in Title VII);

destroyed by the USDA (willfully Moore v. United States Dept. of

according to Chiang; in the process of Agriculture, 55 F.3d 991, 995 (4th Cir.

routine destruction of records, according to 1995) (noting that the McDonnell Douglas

Veneman). To the extent that the alleged test would apply to ECOA case but for the

intentional destruction of this evidence fact that plaintiffs had direct evidence of

would have bearing on class certification discrimination); Mercado-Garcia v. Ponce

by making it impossible for the USDA to Fed. Bank, 979 F.2d 890, 893 (1st Cir.

undertake the individual review of all class 1992) (noting that the language of ECOA

members’ application files that it and EEOA is “nearly identical”); Bhandari

advocates, the District Court will again be v. First Nat’l Bank of Commerce, 808 F.2d

in a better position to evaluate that request. 1082, 1100-01 (5th Cir. 1987) (explaining

12

2. Internal Contradiction Islanders who applied or attempted to

apply for . . . and . . . were discriminated

The USDA highlights an internal against on the basis of national origin.”

contradiction in the class definition, and

argues that this contradiction is so We modify the class definition to

egregious that it renders the class, if not include all “Virgin Islanders,” rather than

fatally overbroad, then at least logically to include only “persons who are Black,

impossible. In certifying the class, the Hispanic, [and/or] female,” because we

District Court defined its members as “all understand Chiang to be alleging mainly

persons who are Black, Hispanic, female discrimination against all Virgin Islanders,

and/or Virgin Islanders.” The USDA rather than racial discrimination among

argues that a class consisting of Blacks, Virgin Islanders. However, at various

Hispanics, women, and/or Virgin Islanders points in her submissions, Chiang does in

is inherently contradictory as it would fact appear to be alleging individual racial

necessarily both include and exclude white and gender discrimination against Black,

males. We agree. However, rather than Hispanic, and female Virgin Islanders (and

decertify the class, as the USDA urges us in favor of white male Virgin Islanders).

to do, we prefer to take a less drastic The number of specific complaints in these

course and simply modify the class areas appears to be small in comparison to

definition to remove the ambiguity. See the claims of discrimination against all

28 U.S.C. § 2106 (entitling us to “affirm, Virgin Islanders. We note that 76% of the

modify, vacate, set aside or reverse any population of the U.S. Virgin Islands is

judgment, decree, or order”). Pursuant to Black, and 14% is Hispanic, see U.S.

the modification, the class definition in Census Bureau, Population and Housing

relevant part will now read “[a]ll Virgin P r o f i l e : 2 0 0 0 , a t

http://www.census.gov/Press-Release/w

ww/2002/usvistatelevel.pdf; thus, it is

that language of ECOA is “closely related” quite possible that claims of racial and

to that of EEOA and “was intended to be national-origin discrimination might

interpreted similarly”); Williams v. First overlap here. At all events, we reform the

Fed. Sav. & Loan Ass’n, 554 F. Supp. 447, c la s s d e f i n it i o n b a s e d o n o u r

448-49 (N.D.N.Y. 1981) (“Protections understanding of the main thrust of

afforded by the ECOA should be applied Chiang’s claims, but we leave it open to

in the same manner as those created by” the plaintiffs to seek to amend the class

the EEOC), aff’d, 697 F.2d 302 (2d Cir. definition should they actually want to

1982). But see Latimore v. Citibank Fed. allege racial and gender, rather than

Sav. Bank, 151 F.3d 712, 713-15 (7th Cir. national origin, discrimination. We agree

1998) (holding that lack of direct with Veneman, however, that plaintiffs’

competition between applicants in credit current allegations of both kinds of

context renders analogy to Title VII cases discrimination prese nt an in ternal

flawed). contradiction.

13

Although we have not previously held certification without fitting neatly into any

that “Virgin Islanders” is a legitimate other category. While we note that many

designation of national origin for purposes of these issues seem to relate at least in

of a federal discrimination claim, we have part to the commonality prong of Rule

certainly implied it. See Moravian Sch. 23(a)(2), we will nonetheless analyze them

Advisory Bd. of St. Thomas v. Rawlins, 70 under Veneman’s convenient heading of

F.3d 270, 278 (3d Cir. 1995) (Becker, J. “overbreadth.”

concurring) (tacitly assuming that “Virgin a.

Islander” is an acceptable designation of

national origin in a federal discrimination First, Veneman argues that the class

suit). To the extent that the USDA objects definition includes untimely claims. She

to the inclusion of the term Virgin submits that, by attempting to encompass

Islanders in the class definition, we credit discrimination claims dating back to

understand the objection to be based on the January 1, 1981, Chiang’s definition

confusion it creates when contrasted to ignores ECOA’s two-year statute of

persons who are “Black, Hispanic, [or] limitations. Veneman contends that

female,” rather than on the ground that having brought suit on January 11, 2000,

“Virgin Islander” cannot be a legitimate the class may not sue based on acts of

national origin designation. We have held, discrimination predating January 11, 1998,

for example, that the term Puerto Rican with the only exception being for those

can designate national origin for purposes individuals who filed an “eligible

of a federal discrimination suit, see, e.g., complaint” about such an act with the

DiMarco-Zappa v. Cabanillas, 238 F.3d USDA by July 1, 1997.8 However, we

25, 36 (1st Cir. 2001); c.f. Fuentes v. believe that the issue of timeliness goes to

Perskie, 32 F.3d 759, 763 (3d Cir. 1994) the merits of the case, not to the definition

(accepting the District Court’s conclusion of the class. The claims therefore can not

that the plaintiff made out a prima facie be prejudged to deny certification. See

case of employment discrimination based Huff v. ND Cass Co., 485 F.2d 710, 714

on his Puerto Rican heritage), and see no (5th Cir. 1973) (en banc) (holding that

reason to distinguish the cases as to the requiring a class representative to prove

national origin designations. the merits of his or her claim before being

able to represent a class is reversible

3. Overbreadth error); see also Eisen v. Carlisle &

Jaquelin, 417 U.S. 156, 178 (1974) (“In

Veneman also contends that class determining the propriety of a class action,

certification should be set aside on the

ground that the certified class is

8

“overbroad.” In Veneman’s universe, it See Omnibus Consolidated & Emergency

seems that overbreadth is being used as a Supplemental Appropriations Acts, 1999,

catch-all to address a number of issues that Pub. L. No. 105-277, § 741, 112 Stat. 2681-30

do seem potentially to bear on class (Oct. 21, 1998) (codified at 7 U.S.C. § 2279

note).

14

the question is not whether the plaintiff or FmHA.” Williams, at *14 (emphasis

plaintiffs have stated a cause of action or added). The USDA argues that Chiang’s

will prevail on the merits, but rather proposed class is an exact parallel to that

whether the requirements of Rule 23 are rejected in Williams. We disagree.

met.”) (citation omitted); Gruber v. Price Besides the fact that both putative

Waterhouse, 117 F.R.D. 75, 80 (E.D. Pa. classes share references to Blacks,

1987) (holding that a statute of limitations Hispanics, and loan discrimination, they

defense goes to the merits and hence is not actually have little in common. In

an appropriate objection in the context of Williams, plaintiff farmers filed suit

class certification). against defendant the USDA claiming that

the Farmers Hom e Administration

b. (FmHA) discriminated against them based

Second, Veneman argues that in this on race or national origin. Like the

case the District Court approved a class putative class here, the farmers sought

definition that was explicitly rejected in recovery under the Equal Credit

Williams v. Glickman, Civ. No. 95-1149, Opportunity Act. However, in Williams,

1997 U.S. Dist. LEXIS 1683 (D.D.C. Feb. the Court ruled that the farmers’ bare

14, 1997), a case in which the plaintiffs allegation of a “common thread of

defined their class as: discrimination” did not satisfy the

requirement that potential class plaintiffs

All African American or Hispanic make a “specific presentation” identifying

American persons who, between the common questions of law or fact.

1981 and the present, have suffered Chiang’s class, on the other hand, did just

from racial or national origin that in alleging the existence of a uniform

discrimination in the application for scheme aimed at preventing class members

or the servicing of loans or credit from gaining access to loans. We

from the FmHA (now Farm therefore find Williams distinguishable.

Services Agency) of the USDA,

which has caused them to sustain It is no objection to Chiang’s class that

economic loss and/or mental the allegations of a uniform scheme are not

anguish/emotion [sic] distress contained in the class definition itself: we

damages. read Williams to hold that the proposed

Williams, at *10. class was “overly broad” because of the

plaintiffs’ varied factual allegations of

In Williams, the Court rejected this

discrimination, lacking Rule 23(a)(2)

definition as overbroad, finding that “[I]t is

commonality, rather than because of any

not limited to any specific policy or

lack of specificity in the class definition

practice which is alleged to be

itself. In fact, Judge Flannery objected to

discriminatory; instead, the class purports

the inc lusion o f all egations of

to include those blacks and Hispanic

discrimination in the class definition,

farmers who have suffered any type of

holding that “[b]ecause the Court must

discrimination in their dealings with the

15

answer numerous fact-intensive questions access to the USDA’s Rural Housing

before determining if an individual may program in the Virgin Islands and were

join the class, the proposed class is not systematically denied that access. The fact

clearly defined.” Williams, 1997 U.S. that some class members were able to

Dist. LEXIS 1683, at *13. Thus Williams make more progress than others does not

cannot stand for the proposition that all translate into intra-class conflict, nor does

allegations of a uniform scheme of it mean that the class as defined is fatally

discrimination must be included in the overbroad.

class definition— rather, it stands for the d.

opposite proposition, that class definitions Finally, Veneman argues that defining

must be free of merits allegations that a class by reference to those who “believe”

require extensive factual findings.9 t h e y w e r e disc r iminate d a gai n st

undermines the validity of the class by

c. introducing a subjective criterion into what

should be an objective evaluation. We

Veneman also argues that the class is agree.10 See, e.g., NOW v. Scheidler, 172

overbroad because it consists of two F.R.D. 351, 357, 1997 U.S. Dist. LEXIS

groups with conflicting interests. See 4036, at *9 (N.D. Ill. Mar. 28, 1997)

Penn. Dental Ass’n v. Medical Serv. Ass’n (explaining that an identifiable class exists

of Penn., 745 F.2d 248, 263 (3d Cir. 1984) if its members can be ascertained by

(upholding District Court’s refusal to reference to objective criteria and that

certify class where proposed class when membership in a class is defined

consisted of two groups with inherently solely by state of mind, the class is

conflicting interests). More specifically,

Veneman urges us to decertify the class on 10

the basis that there is a significant risk of Chiang argues that class certification

intra-class conflicts between those class based on a “belief in discrimination” was

members who received loans and those already stipulated to by the USDA in a

who did not, as well as between those who previous class action for discrimination.

have claims concerning their properties In Pigford v. Glickman, where a class of

and those who do not. African American applicants for loans

filed racial discrimination complaints

We do not see any of the purported against the USDA, the final consent decree

conflicts of interests that Veneman claims included the phrase “All African American

are present here. Rather, we believe that farmers … [who] believed that they were

the class definition properly identifies a discriminated against on the basis of race.”

group of people who attempted to gain Pigford v. Glickman, 185 F.R.D. 82, 92

(D.D.C. 1999). While this is true, we fail

to see how the USDA’s prior stipulation to

9

For further discussion of merits language in a consent decree before a

allegations in class definitions, see infra, different court affects the class definition

Part II.B.3.d. in this case.

16

generally deemed unascertainable); Zapka relief. The putative class members’ belief

v. Coca-Cola Co., No. 99 CV 8238, 2000 that they were discriminated against is

U.S. Dist. LEXIS 16552, at *7 (N.D. Ill. irrelevant at the class certification stage.

Oct. 26, 2000) (noting that an identifiable

class does not exist if membership in the For similar reasons, we decline to

class is contingent on the state of mind of modify the class definition to include

the prospective members); Fears v. Virgin Islanders who “claim that they were

Wilhelmina Model Agency, Inc., No. 02 discriminated against,” or those who “were

Civ. 4911, 2003 U.S. Dist. LEXIS 11897, discriminated against.” “Claim” seems to

at *6-*7 (S.D.N .Y. July 15, 2003) be a mere substitute for “believe” and “a

(explaining that membership in a class class defined with reference to the state of

should rest on objective criteria that are mind of its members will not be allowed to

administratively feasible for the court to proceed under Rule 23.” 7A Wright,

rely on to determine whether a particular Miller & Kane, Federal Practice &

individual is a member of the class). Procedure § 1760, at 124-26. Moreover,

the Manual for Complex Litigation

While Veneman is technically correct, (Second) has recommended that courts

we think the issue to be a red herring, for should “avoid class definitions that depend

“belief” seems to us to be mere surplusage. on . . . the seeking of relief (for example,

It is clear enough that Chiang and the other persons claiming injury or seeking

named plaintiffs believe that they were damages from some stated practice),”

discriminated against. See, e.g., Fed. R. Manual for Complex Litigation (Second) §

Civ. P. 11(b) (requiring that pleadings 30.14 (1985), though we note that later

represent a reasonable belief that claims editions of the MCL have eliminated that

are warranted by law and have evidentiary stricture, see Manual for Complex

support). Such belief in discrimination, Litigation (Fourth) § 21.222 (2004).

however, is not a prerequisite for inclusion Limiting the class to those who were in

in the putative class. Our earlier fact discriminated against would seem to

modification to the class definition, see prejudge the merits of the case, contrary to

supra Part II.B.2, makes clear that we are the teaching of Eisen v. Carlisle &

certifying a class to try an issue common Jacquelin, 417 U.S. 156, 177 (1974); see

to all Virgin Islander loan applicants: also 5 James Wm. M oore et al., Moore’s

whether USDA engaged in a pattern of Federal Practice ¶ 23.21[3][c] (3d ed.

discrimination via phony waiting lists and 1999) (“A class definition is inadequate if

delaying tactics. This issue is properly a court must make a determination of the

adjudicated on behalf of a class consisting merits of the individual claims to

of all Virgin Islander applicants during the determine whether a particular person is a

relevant period; if it is adjudicated against member of the class.”).

Veneman, then further proceedings will be

appropriate to determine which, if any, We will therefore modify the class

class members are actually entitled to definition to eliminate the notion of

17

“belief.” In combination with our first incorporate the commonality requirement

modification, see supra Part II.B.2. the of 23(a), it is possible that “even if Rule

class will now be defined as: 23(a)’s commonality requirement is

satisfied . . . the predominance criterion is

All Virgin Islanders who applied or far more demanding..” Amchem Prods. v.

attempted to apply for, and/or Windsor, 521 U.S. 591, 623-24 (1997).

received, housing credit, services,

h o m e ownership, assistance, The District Court certified this class

training, and/or educational pursuant to Fed. R. Civ. P. 23(b)(3). In

opportunities from the USDA relevant part, the Rule reads:

through its Rural Development

offices (and predecessor An action may be maintained as a

designations) located in the U.S. class action if the prerequisites of

Virgin Islands at any time between subdivision (a) are satisfied, and in

January 1, 1981 and January 10, addition:

2000. ...

(3) the court finds that the

Thus, with the modifications we have questions of law or fact common to

made to the class definition, and keeping the members of the class

in mind the caveats about loan eligibility predominate over any questions

we have set forth, we are confident that the affecting only individual members,

waiting list question satisfies all four and that a class action is superior to

requisites of Rule 23(a). other available methods for the fair

and efficient adjudication of the

C. Rule 23(b) controversy.

In addition to meeting the prerequisites Veneman argues that, in this case,

of Rule 23(a), the plaintiffs must common issues do not predominate over

demonstrate that the class would satisfy individual ones.

any one of the three subsections under

Rule 23(b). Rule 23 addresses the In order to predominate, the common

commonality required to demonstrate issues must constitute a “significant part”

cohesiveness for class certification in two of the individual cases. Jenkins v. Raymark

subsections, (a)(2) and (b)(3). Rule Industries, Inc., 782 F.2d 468, 472 (5th

23(a)(2) requires that plaintiffs prove that Cir. 1986); see also Watson v. Shell Oil,

“there are questions of law or fact common 979 F.2d 1014, 1022 (5th Cir. 1992).

to the class.” As explained in Part II.B.1, Veneman contends that because the

supra, the relatively low Rule 23(a)(2) damages sought, on the order of 2.8 billion

commonality requirement is easily dollars, are so high, and will require such

satisfied here. However, because the Rule exacting, specific, individual proof, that

23(b)(3) predominance requirements those individual questions are, in reality,

18

the predominant issues in the case. analysis set forth earlier in this opinion,

that both the predominance and the

Chiang concedes that the eventual superiority requirements of Rule 23(b) are

calculations of damages will require easily met with respect to the issues

individual proof. However, she points out certified under Rule 23(c)(4)(A). 11

that it is settled law that the necessity for

proving damages individually does not III. Conclusion

defeat class predominance or class

certification. “The presence of individual For the foregoing reasons, we will

questions as to [each class member] does affirm the class certification pursuant to

not mean that the common questions of Rule 23(c)(4)(A) only insofar as it relates

law and fact do not predominate over

questions affecting individual members as 11

required by Rule 23(b)(3).” Eisenberg v. We note that the relief sought is

Gagnon, 766 F.2d 770, 786 (3d Cir. 1985). primarily for monetary damages and not

for injunctive relief. Perhaps anticipating

To be sure, there are cases where the the potentially problematic aspect of this

question of damages is so central that it posture in a case where— were liability

can, in some sense, overtake the question established—damages calculations would

of liability. But as noted in Bogosian v. probably be extremely individualized,

Gulf Oil Corp., 561 F.2d 434, 456 (3d Cir. Chiang acknowledges that “it may come to

1977): pass that the trial court deems injunctive

relief the better remedy and finds that

[I]t has been commonly recognized damages are minimal.” (Chiang Brief,

that the necessity for calculation of p.38). Whether that would be the more

damages on an individual basis should logical path we do not say, but we do note

not preclude class determination when that unlike in cases where the primary

the common issues which determine relief sought is injunctive in nature, see

liability predominate. If for any reason Baby Neal v. Casey, 43 F.3d 48 (3d Cir.

the district court were to conclude that 1994), Chiang seeks only ancillary

there would be problems involved in injunctive relief: the primary relief she

proving damages which would seeks is 2.8 billion dollars in damages.

outweigh the advantages of class Given that each class member will likely

certification, it should give appropriate find him- or herself in very different

consideration to certification of a class circumstances in terms of establishing

limited to the determination of liability. damages, we think it unlikely that the

calculation of damages will be suitable for

(citations omitted). class determination. However, should

Chiang make it to that stage, we once

That does not seem to be the case here, again defer to the District Court in the first

and we are satisfied, based upon the instance to evaluate whether damages can

be adjudicated on a class wide basis.

19

to the question of the alleged waiting list

and related techniques, and will modify the

class definition to provide for a class of:

All Virgin Islanders who applied or

attempted to apply for, and/or

received, housing credit, services,

h o m e ownership, assistance,

training, and/or educational

opportunities from the USDA

through its Rural Development

offices (and predecessor

designations) located in the U.S.

Virgin Islands at any time between

January 1, 1981 and January 10,

2000.

The certification will be vacated in all

other respects. The District Court should

reevaluate the appropriateness of class

certification on certain discrete issues such

as the eligibility facet of liability and the

calculation of damages, and may entertain

any applications for revision of the class

definition in accordance with this opinion.

20