The Sixth Circuit has affirmed a trial court denial of class status in a disparate impact fair lending suit on commonality grounds. Miller v. Countrywide Bank, N.A., Docket No. 12-5250 (6th Cir. Jan. 15, 2013).

Plaintiffs claimed that Countrywide Bank’s loan-pricing policy for home mortgages created a disparate impact on minority borrowers. Countrywide had established a “par rate” for determining loan-pricing, but allowed local agents to exercise discretion in deviating from par rates in certain circumstances. The plaintiffs argued the subjective component of granting discretion disparately impacted minority borrowers. The district court judge found that the proposed class could not satisfy commonality requirements in light of the 2011 Supreme Court decision in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011).

The Sixth Circuit, in affirming the lower court’s decision, noted (in some cases, quoting the Supreme Court’s decision in Dukes) that a suit seeking to address “millions of . . . decisions at once” required a demonstration that “some glue hold[s] the alleged reasons for all those decisions together,” and that while a companywide policy could sometimes serve as “glue,” a “broad delegation of decisionmaking to the discretion of local managers” is, on its face, the opposite of a uniform practice. In such circumstances, there must be some “common mode of exercising discretion that pervades the entire company.”

In reviewing Countrywide’s policies, the Sixth Circuit found that the exercise of discretion given to local agents was “cabined inside clear boundaries” and that plaintiffs had not alleged that local actors exceeded those boundaries or that a uniform policy or practice guided how local actors exercised their discretion. The plaintiffs argued that the discretion given to Countrywide’s sale force was exercised in a common way by limited variation of the par rate, but the Sixth Circuit rejected this argument, finding that “class members must unite acts of discretion under a single policy or practice, or through a single mode of exercising discretion,” and that the “mere presence of a range within which acts of discretion take place will not suffice to establish commonality.”

The Sixth Circuit also distinguished a 2012 case from the Seventh Circuit in which commonality was found (McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 672 F.3d 482 (7th Cir. 2012)). This was based on the court’s opinion that, unlike in McReynolds, there was no companywide policy that “contributed to the alleged disparate impact that arose from the delegation of discretion.”

Although recognizing that giving discretion to lower-level supervisors could form the basis of a disparate-impact theory and that statistical correlation could help prove this theory, the court found that “statistical correlation, no matter how robust, cannot substitute for a specific finding of class-action commonality” and that the plaintiffs had failed to establish “either a uniform policy or practice, or a common mode amidst the various acts of discretion, beyond the mere act of delegating discretion.”

A copy of the Miller v. Countrywide Bank decision is available here:

http://www.ca6.uscourts.gov/opinions.pdf/13a0018p-06.pdf.