Plaintiffs Valerie Hawkins and Janice Patterson brought suit against the Community Bank of Raymore, in the U.S. District Court for the Western District of Missouri. Both women were married to members of PHC Development, LLC, and they each were required to sign as personal guarantors in order for their husbands’ business to obtain approximately $2 million in commercial loans. PHC defaulted under the loans, and Community Bank of Raymore sought to enforce the terms of the agreements, including seeking remedies against the spousal guarantors. Hawkins and Patterson filed suit, alleging that the bank violated the Equal Credit Opportunity Act (ECOA), which makes it unlawful for a creditor to discriminate against a credit applicant, with respect to any aspect of a credit transaction, on the basis of race, color, religion, national origin, gender, age, or marital status.

The bank required Hawkins and Patterson to sign as guarantors in order for PHC to obtain the loans. For that reason, Hawkins and Patterson claimed that the bank discriminated against them based upon their marital status, as they would not have been required to sign as guarantors had they not been married. The bank argued that the ECOA only protects credit applicants, and since the guarantors had not applied for credit in their individual capacities, they were not protected under the Act. The federal district court agreed with the Bank’s rationale, granting summary judgment in its favor. The 8th Circuit Court of Appeals upheld that decision, and the U.S. Supreme Court granted review.

Court observers expecting a definitive ruling on whether a spousal guarantor has standing to sue under the ECOA, and whether the definition of “applicant” under the ECOA should be broadened to include non-borrowing guarantors, were disappointed. With Justice Antonin Scalia’s chair still vacant, the even-numbered Supreme Court issued a concise, 4-4 split Opinion, thus affirming the Court of Appeals decision in favor of Community Bank of Raymore. Had the decision been reversed, Missouri lenders could have expected increased litigation under the ECOA, and credit may have become less accessible to small business owners without the lenders’ added protection and security through obtaining spousal guarantors for loans.

The decision issued by the Supreme Court may be found here.