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Rodriguez v. National City Bank

United States Court of Appeals, Third Circuit

August 12, 2013


Argued November 13, 2012

On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 2-08-cv-02059) District Judge: Honorable Eduardo C. Robreno

Edward W. Ciolko Joseph H. Meltzer Donna S. Moffa Peter A. Muhic (ARGUED) Amanda R. Trask Kessler, Topaz, Meltzer & Check

Kevin M. Costello Roddy Klein & Ryan Andrew S. Friedman Wendy J. Harrison Bonnett, Fairbourn, Friedman & Balint Jeffrey L. Taren Kinoy Taren & Geraghty Counsel for Petitioners

Sarah R. Breitlander Hinshaw & Culbertson Martin C. Bryce, Jr. Ballard Spahr Diane M. Kehl Chad A. Schiefelbein Vedder Price Counsel for Respondents, National City Bank and National City Corp.

David H. Pittinsky (ARGUED) Ballard Spahr Counsel for Respondents, National City Bank, National City Corp., and The PNC Financial Services Group, Inc.

Before: SCIRICA, FISHER and JORDAN, Circuit Judges.


JORDAN, Circuit Judge.

In this mortgage loan discrimination case, a putative class of minority borrowers seeks permission under Rule 23(f) of the Federal Rules of Civil Procedure to appeal the denial of final approval by the United States District Court for the Eastern District of Pennsylvania of the parties' proposed settlement and certification of the settlement class. We will grant the petition for permission to appeal and, for the reasons that follow, will affirm the order of the District Court.

I. Background

Named plaintiffs John Rodriguez, Jennifer Worthington, Bobby Crouther, Jesus Conchas, and Rosa Maria Conchas (collectively, "Plaintiffs") are African-American and Hispanic borrowers who obtained mortgage loans from Defendant National City Bank in 2006 or 2007. On May 1, 2008, they filed a class action complaint against National City Bank and its parent company, National City Corporation (collectively, "National City"), [1] alleging that National City had an established pattern or practice of racial discrimination in the financing of residential home purchases, in violation of the Fair Housing Act, 42 U.S.C. § 3605, and the Equal Credit Opportunity Act, 15 U.S.C. § 1691. Specifically, Plaintiffs asserted that National City issued them loans pursuant to a "Discretionary Pricing Policy" that allowed individual brokers and loan officers to add a subjective surcharge of additional points, fees, and credit costs to an otherwise objective, risk-based financing rate. According to Plaintiffs, as a result of that policy, minority applicants for home mortgage loans were "charged a disproportionately greater amount in non-risk-related charges than similarly-situated Caucasian persons." (J.A. at 117.) In other words, the policy allegedly produced a discriminatory disparate impact.

After the District Court denied National City's motion to dismiss, [2] the parties engaged in extensive discovery. National City provided Plaintiffs with data on each of the more than two million loans it issued from 2001 to 2008. That data included, among other things, the annual percentage rate, the term of the loan, the interest rate, the prepayment terms, the origination fee, and the amortization type, as well as information about the borrower, including income, ethnicity, race, and debt-to-income ratio. While discovery was still proceeding, the parties met to explore the possibility of a negotiated settlement. Plaintiffs presented National City with preliminary statistical analyses of the loan data they had received. Although those analyses were shared confidentially and are thus not in the record, the parties agree that they included regression analyses of National City's loan data.[3]Plaintiffs say that those regression analyses revealed that, overall, "Blacks and Hispanics paid more for their loans than similarly situated Caucasians (a 'disparate impact') that amounted to damages … of at least $350 and up to $1, 100 per loan." (Petitioners' Opening Br. at 5.) Plaintiffs further contend that, because they controlled for "all objective credit and risk factors impacting loan pricing" (Id. at 12), those analyses prove that National City's Discretionary Pricing Policy produced the disparate impact.

After participating in two days of mediation, the parties arrived at a proposed settlement agreement. Under its terms, the class would include "[a]ll African-American and Hispanic persons who obtained a Mortgage Loan" from National City, its affiliates, or its successor-in-interest, PNC, from January 1, 2004, through the date of the settlement's preliminary approval. (J.A. at 250.) National City did not concede any wrongdoing, but it agreed to pay $7, 000, 000 for the benefit of the settlement class in exchange for a release of claims. Specifically, the agreement provided a service award of $7, 500 to each of the named plaintiffs, $200 to each class payee, $75, 000 to two organizations that would provide counseling and other services to the settlement class, and $2, 100, 000 in attorneys' fees. The agreement also included a provision barring either party from attempting to void the agreement, except in the event of an appeal.

On July 21, 2010, the District Court granted preliminary approval of the settlement and preliminarily certified the proposed class under Federal Rule of Civil Procedure 23(b)(3). Notice was then sent to the more than 153, 000 members of the putative class. In response to that notice, six people objected to the proposed agreement, 66 opted out of the settlement, and 24, 631 sought to take part in it by submitting claim forms. On December 9, 2010, Plaintiffs filed an unopposed motion requesting final approval of the settlement agreement, final certification of the settlement class, and attorneys' fees. In January 2011, after holding an initial fairness hearing, the District Court ordered additional briefing regarding certain aspects of the settlement agreement. Before the Court reached a final determination in light of that briefing, the Supreme Court issued its now well-known opinion in Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011). The District Court ordered ...

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