Monday, September 2, 2013

FYI: 6th Cir Affirms Dismissal of ECOA Allegations for Failure to Identify Similarly Situated Individuals Whom the Lender Treated Better

The U.S. Court of Appeals for the Sixth Circuit recently affirmed the dismissal of a complaint alleging a violation of the federal Equal Opportunity Credit Act, because the plaintiff failed to allege sufficient facts to support his allegations that similarly-situated Caucasian borrowers had received better treatment than he, in light of the fact that the borrower did "not identif[y] any similarly situated individuals whom [the bank] treated better."


A copy of the opinion is available at


A bank extended a loan to an entity owned by an individual of Iraqi descent (the "borrower").  The borrower guaranteed the loan, and various companies operated by the borrower put up collateral for same. 


The borrower defaulted, but reached an agreement to restructure the loan with the bank.  When the borrower allegedly requested an additional extension of the deadline to repay the loan, the bank allegedly refused, notwithstanding the borrower's alleged offer of additional collateral and the guarantee of the borrower's wife.  The borrower allegedly requested an explanation, which the bank supposedly refused to provide. 


The borrower and the various relevant entities operated by the borrower then sued the bank, alleging violations of the Equal Credit Opportunity Act, 15 U.S.C. Sec. 1691 et seq (the "Act").     


The lower court granted the bank's Rule 12(b)(6) motion to dismiss.  The borrower appealed. 


As you may recall, Federal Rule of Civil Procedure 8(a)(2) provides that a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief."


On appeal, the Sixth Circuit began by surveying two Supreme Court decisions which interpret Rule 8(a)(2).  The Sixth Circuit summarized these decisions as confirming that Rule 8(a)(2) "imposes legal and factual demands on the authors of complaints."  See Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) ("Twombly") and Ashcroft v. Iqbal, 556 U.S. 662 (2009) ("Iqbal").  


After examining these two decisions in depth, the Sixth Circuit noted that in their aftermath, plaintiffs cannot overcome a Rule 12(b)(6) motion to dismiss "simply by referring to conclusory allegations in the complaint that the defendant violated the law."  Instead, the Sixth Circuit stated that plaintiffs must plead "factual matter" sufficient to raise a plausible inference of wrongdoing.  To determine the plausibility of an inference, courts must consider "a host of considerations including common sense and the strength of competing explanations for the defendant's contact".  See Iqbal, 556 U.S. at 682; Twombly, 556 U.S. at 567. 
With that standard in place, the Sixth Circuit had little difficulty in sustaining the lower court's decision to dismiss the complaint.  It observed that the borrower's "Iraqi origin does not by itself establish the requisite inference."  Further, it found a plausible non-discriminatory explanation for the bank's conduct, noting that "a bank, once bitten by the failure to receive repayment of an initial loan on time, may understandably become twice shy about restructuring a loan a second time." 


The Sixth Circuit acknowledged that the borrower's pleadings alleged that similarly-situated Caucasian borrowers had received better treatment than he.  However, the Sixth Circuit determined that this allegation was not enough to survive the bank's motion to dismiss, in light of the fact that the borrower did "not identif[y] any similarly situated individuals whom [the bank] treated better."


Accordingly, the Sixth Circuit determined that "[t]hese are precisely the kinds of conclusory allegations that Iqbal and Twombly condemned and thus told us to ignore when evaluating a complaint's sufficiency," and therefore affirmed the lower court's decision to dismiss the borrower's complaint.    




Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874


Admitted to practice law in Illinois


NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.

Our updates are available on the internet, in searchable format, at: