Charlotte Mays v. Buckeye Rural Electric Cooperative, Inc. and Frederick B. Parker

Plaintiff, Charlotte Mays, appeals from the district court's
order dismissing Plaintiff's
claims of discrimination on the basis of marital status, pursuant
to the Equal Credit Opportunity Act, 15 U.S.C. § 1691(a)(1), and
provisions of Regulation B of the Equal Credit Opportunity Act,
12 C.F.R. Part 202; deprivation of "due process and natural
justice;" and violations of Ohio statutes and common law. For the
reasons set forth below, we AFFIRM IN PART, VACATE IN PART, AND
REMAND with instructions to dismiss without prejudice
Plaintiff's claim of a deprivation of due process and natural
justice.

BACKGROUND

Defendant Buckeye Rural Electric Cooperative, Inc. ("Buckeye"),
a non-profit cooperative electrical utility, is the exclusive
provider of electricity in nine counties in southeastern Ohio.
Defendant Buckeye's electricity customers are members of the
corporation and elect Buckeye's governing board of trustees.
Defendant Frederick B. Parker is Buckeye's vice president of
finance.

In 1987, while Plaintiff was married to Larry Mays ("Mays"),
Mays sought electricity service from Defendants. Defendants
supplied Plaintiff and Mays with a membership application form.
Describing itself as a "joint use application," the form required
"husband and wife" to complete it and provided separate lines for
the signatures and social security numbers of "Applicant" and
"Spouse." Mays signed as "Applicant" and Plaintiff signed as
"Spouse." After accepting the application for service, Defendants
addressed electricity bills to "LARRY E. MAYS."

In October of 1997, Plaintiff filed for divorce from Mays. Mays
then moved out of the couple's home and into a camper located on
the jointly-owned real estate. Mays supplied electricity to the
camper via extension cords connecting the camper with the home.
While living in the camper, Mays began neglecting work and
failing to pay bills. By January of 1998, the account serving the
home and camper was in arrears and Defendants disconnected
electricity service. Within a month, Plaintiff secured a
restraining order against Mays and forced him to leave the
property. Plaintiff, who had never worked outside the home, then
obtained gainful employment.

On March 10 or 11, 1998, about two months after Defendants
disconnected service, Plaintiff sought to establish an individual
account with Defendants and restore electricity to the home.
Plaintiff telephoned Defendants and learned she could not restore
service to the home until the entire outstanding balance on the
disconnected account was satisfied. Defendants later informed
Plaintiff she could obtain an individual account without
satisfying the outstanding balance if she documented her
separation or divorce from Mays and documented Mays' individual
responsibility for the disconnected account.

On September 2, 1998, Plaintiff filed suit against Defendants
for discrimination on the basis of marital status in violation of
the Equal Credit Opportunity Act ("ECOA"),
15 U.S.C. § 1691(a)(1), and provisions of Regulation B of the ECOA,
12 C.F.R. §§ 202.5(c) and (d); 202.9(a), (b), and (c); and 202.7(a), (b),
and (d).[fn1] Plaintiff also asserted a due process
deprivation claim and claims arising under Ohio statutes and
common law, and sought certification
of the litigation as a class action pursuant to Fed.R.Civ.P.
23(a) and 23(b)(2).

On November 5, 1998, Defendants moved to dismiss all of
Plaintiff's claims pursuant to Fed.R.Civ.P. 12(b)(1) and
12(b)(6). On January 6, 2000, Magistrate Judge Timothy S. Hogan
issued a Report and Recommendation regarding Defendants'
dispositive motion. Because Plaintiff and Defendants had filed
evidentiary materials outside the pleadings, the magistrate judge
treated the motion to dismiss as a motion for summary judgment
pursuant to Fed.R.Civ.P. 56. The magistrate judge recommended
granting summary judgment in favor of Defendants on Plaintiff's
ECOA and due process claims, and declining to exercise subject
matter jurisdiction over Plaintiff's claims under Ohio law
pursuant to 28 U.S.C. § 1367. The magistrate judge reasoned
summary judgment was proper because: (1) the regulations
Plaintiff relied upon for the ECOA claims exempted Defendants
from compliance; (2) Plaintiff could not assert claims arising
out of signing an electricity service application in 1987 because
the two-year statute of limitations of 15 U.S.C. § 1691e(f) had
run; and (3) Defendants' actions did not constitute "state
action" for due process purposes. The magistrate judge did not
address Plaintiff's motion for class certification.

On June 20, 2000, the district court issued an order adopting
the recommendations of the magistrate judge. The district court
granted Defendants' motion to dismiss as to Plaintiff's claims
arising under the ECOA, Federal Reserve Board regulations, and
due process, and dismissing without prejudice Plaintiff's claims
arising under Ohio statutes and common law. The district court
did not rule on Plaintiff's motion for class certification.

DISCUSSION

I. ECOA CLAIMS

The ECOA prohibits creditors from discriminating against any
credit applicant "with respect to any aspect of a credit
transaction . . . on the basis of race, color, religion, national
origin, sex, or marital status." 15 U.S.C. § 1691(a)(1). As an
entity granting members the ability "to defer payment of a debt
or to incur debts and defer its payment or to purchase property
or services and defer payment therefor," Defendant Buckeye is a
"creditor" within the meaning of the ECOA. 15 U.S.C. § 1691a(d);
Barney v. Holzer Clinic, Ltd., 110 F.3d 1207, 1209 (6th Cir.
1997) (quoting statutory definition of credit); see also
Shaumyan v. Sidetex Co., Inc., 900 F.2d 16, 18 (2d Cir. 1990)
("Absent a right to defer payment for a monetary debt, property
or services, the ECOA is inapplicable."). "The purpose of the
ECOA is to eradicate credit discrimination waged against women,
especially married women whom creditors traditionally refused to
consider for individual credit." Anderson v. United Fin. Co.,
666 F.2d 1274, 1277 (9th Cir. 1982) (citing Markham v. Colonial
Mortgage Serv. Co., Assocs., Inc., 605 F.2d 566, 569 (D.C. Cir.
1979)).

Given the similar purposes of the ECOA and Title VII, the
burden-allocation system of federal employment discrimination law
provides an analytical framework for claims of credit
discrimination. See Lewis v. ACB Bus. Servs., Inc.,
135 F.3d 389, 406 (6th Cir. 1998); see also Rosa v. Park West Bank &
Trust Co., 214 F.3d 213, 215 (1st Cir. 2000) (looking to Title
VII in construing the ECOA). But see Latimore v. Citibank Fed.
Sav. Bank, 151 F.3d 712, 715 (7th Cir. 1998) (refusing to apply
Burdine/McDonnell Douglas[fn2] burden-shifting
framework to ECOA cases). Under this analytical framework,
Plaintiff can establish a prima facie case of credit
discrimination by showing: (1) Plaintiff was a member of a
protected class; (2) Plaintiff applied for credit from
Defendants; (3) Plaintiff was qualified for the credit; and (4)
despite Plaintiff's qualification, Defendants denied her credit
application. See, e.g., Matthiesen v. Banc One Mortgage Corp.,
173 F.3d 1242, 1246 (10th Cir. 1999).

In concluding Plaintiff could not establish a prima facie
case of credit discrimination on the basis of marital status
pursuant to this framework, the magistrate judge effectively
focused on the absence of the first element: Plaintiff's
membership in a protected class. Rather than directly stating
Plaintiff had failed to satisfy this element, however, the
magistrate judge concluded that many of the Federal Reserve Board
regulations named in Plaintiff's complaint exempted Defendants
from compliance. In other words, Plaintiff could not show she was
a member of a protected class because the Federal Reserve Board
regulations establishing certain of her claims did not apply to
Defendants. Specifically, the magistrate judge determined that
Defendants provide "incidental credit" as defined in
12 C.F.R. § 202.3(c)(1), and were therefore entitled to exemptions listed in
§ 202.3(c)(2). Summary judgment, the magistrate judge
recommended, would be appropriate on Plaintiff's claims brought
pursuant to regulations for which § 202.3(c)(2) provided
compliance exemptions. The magistrate judge also recommended
summary judgment on Plaintiff's statutory and regulatory claims
outside the exemption provisions, concluding that the two-year
statute of limitations of 15 U.S.C. § 1691e(f) barred those
claims.

Although the magistrate judge addressed Defendants' motion to
dismiss Plaintiff's claims in summary judgment terms, the
district court, in adopting the magistrate judge's
recommendations, did not specifically grant summary judgment.
Instead, the district court characterized its order as granting
Defendants' motion to dismiss as to Plaintiff's claims arising
under federal law, and dismissing without prejudice Plaintiff's
claims arising under state law. Because the district court and
the magistrate judge looked to materials beyond Plaintiff's
complaint in ruling on Defendant's motion to dismiss, the
district court's dismissal of Plaintiff's federal-law claims
amounted to granting summary judgment. See Fed.R.Civ.P. 12(b)
(where district court considers matters outside the pleadings in
ruling on a motion to dismiss, the district court should treat
the motion as one for summary judgment). We shall therefore
construe the district court's order as granting summary judgment
in Defendants' favor on Plaintiff's federal law claims. See,
e.g., Talley-Bey v. Knebl, 168 F.3d 884, 885 (6th Cir. 1999);
Fugarino v. Hartford Life & Accident Ins. Co., 969 F.2d 178,
182-83 (6th Cir. 1992).

We review the district court's decision to grant summary
judgment de novo. White Consol. Indus., Inc. v. Westinghouse
Elec. Corp., 179 F.3d 403, 407 (6th Cir. 1999). The district
court should grant summary judgment "if the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law." Fed.R.Civ.P.
56(c).

A. Exemptions for Incidental Credit

Three of the claims for relief in Plaintiff's complaint allege
violations of provisions of Regulation B, the series of Federal
Reserve Board regulations implementing the ECOA. Section 202.4 of
Regulation B provides the general rule against credit
discrimination "against an applicant on a prohibited basis."
12 C.F.R. § 202.4. Subsequent sections of Regulation B prohibit
specific acts or omissions by creditors in relation to extensions
or denials of credit.

Plaintiff claims that Defendants violated 12 C.F.R. § 202.5(c)
and (d) by using information about Mays and his individual
credit-worthiness to evaluate Plaintiff's credit-worthiness and
eligibility for her own utilities account. Plaintiff next claims
that Defendants violated 12 C.F.R. § 202.9(a), (b), and (c) by
failing to provide her with notice of adverse credit action.
Plaintiff also claims that Defendants' actions violated three
portions of 12 C.F.R. § 202.7: § 202.7(a)'s prohibiting creditors
from denying individual credit accounts on the basis of marital
status; § 202.7(b)'s prohibiting creditors from refusing to allow
a credit applicant to designate the name to be placed on an
account (such as a prior surname); and § 202.7(d)'s prohibiting
creditors from requiring another person's signature on a credit
application, except in the case of joint application.

Section 202.3 of Regulation B renders certain regulatory
provisions inapplicable to several types of credit transactions.
Extensions of one of these transaction types, incidental credit,
need not comply with the following provisions of Regulation B,
most of which are implicated in Plaintiff's complaint:

(i) Section 202.5(c) concerning information about a
spouse or former spouse;

(ii) Section 202.5(d)(1) concerning information about
marital status;

(iii) Section 202.5(d)(2) concerning information
about income derived from alimony, child support, or
separate maintenance payments;

(iv) Section 202.5(d)(3) concerning information about
the sex of an applicant, but only to the extent
necessary for medical records or similar purposes;

(v) Section 202.7(d) relating to the signature of a
spouse or other person;

(vi) Section 202.9 relating to notifications. . . .

12 C.F.R. § 202.3(c)(2). Extensions of incidental credit are
extensions other than for "public utilities credit" and
"securities credit,"[fn3] and are: (1) not made pursuant to
terms of a credit card account; (2) not subject to a finance
charge, as defined in § 226.4; and (3) not payable in more than
four installments by agreement. § 202.3(c)(2). According to an
affidavit provided by Defendant Parker, Defendant Buckeye has no
credit card accounts, does not permit installment payments for
electrical service, and does not impose finance charges.
Plaintiff offers little probative evidence disputing Defendants'
satisfaction of the three elements for incidental credit, and we
conclude that Defendants' extensions
of credit are within the terms of § 202.3(c)(1).

To the extent that Plaintiff suggests Defendants impose a
"finance charge" by assessing a ten percent penalty on past-due
bills, this late penalty is expressly excluded from the
regulatory definition of "finance charge." Among the types of
charges excluded from the "finance charge" definition in
12 C.F.R. § 226.4(c), the section to which § 202.3(c)(1) refers, are
"[c]harges for actual unanticipated late payment, for exceeding a
credit limit, or for delinquency, default, or a similar
occurrence." § 226.4(c)(2). Defendants' ten percent late penalty
falls within this exclusion, rendering the penalty outside the
meaning of "finance charge."

In Williams v. AT & T Wireless Servs., Inc., 5 F.Supp.2d 1142
(W.D.Wash. 1998), the Western District of Washington reached a
similar conclusion when it analyzed a cellular telephone
company's compliance obligations under the ECOA. The court
likened the provision of cellular telephone service to the
provision of gas, electricity, and water, noting that consumers
in all four cases incur debt as they use the services and receive
periodic bills for the services used. Williams,
5 F.Supp.2d at 1145. The court concluded that cellular telephone companies, like
utility companies, provide credit to their customers within the
meaning of the ECOA. Id. The court distinguished the
defendant's activities from public utility credit because its
rates were not subject to government regulation, but concluded
that the defendant satisfied the three essential elements for
incidental credit. Id. at 1145-47 & n. 1. According to the
Williams court, the cellular telephone company qualified as an
incidental creditor under 12 C.F.R. § 202.3(c) because its credit
transactions did not involve credit card accounts, finance
charges, or installment payments. Id. at 1147. As an incidental
creditor, the defendant cellular phone company was due the
compliance exemptions of § 202.3(c)(2).

We agree with the analysis of the Williams court, the same
analysis applied by the magistrate judge and advanced by
Defendants in the instant case. Defendants' credit extensions
satisfy the three elements for "incidental credit," and
Defendants are therefore exempt from compliance with the
following provisions, undergirding all or part of several of
Plaintiff's claims: 12 C.F.R. §§ 202.5(c) and (d); 202.7(d); and
202.9(a), (b), and (c). We conclude that the district court
properly granted summary judgment for Defendants on Plaintiff's
claims, or the portions of those claims, brought pursuant to
these sections of Regulation B.

B. Two-Year Statute of Limitations

Claims under the ECOA and its implementing regulations are
subject to a two-year statute of limitations.
15 U.S.C. § 1691e(f). Courts construing the ECOA's limitations period have
concentrated their attention on the discriminatory conduct giving
rise to a statutory or regulatory claim. See, e.g., Ramsdell v.
Bowles, 64 F.3d 5, 9 (1st Cir. 1995); Farrell v. Bank of
N.H.-Portsmouth, 929 F.2d 871, 873-74 (1st Cir. 1991); Riggs
Nat'l Bank of Wash., D.C. v. Webster, 832 F.Supp. 147, 151
(D.Md. 1993); Stern v. Espirito Santo Bank of Fla.,
791 F.Supp. 865, 868-69 (S.D.Fla. 1992). The general thrust of these cases,
as stated by the Supreme Court of Iowa, is: "The statute's focus
is upon the time of discriminatory actions, not at the time at
which the consequences of the action become painful." Marine Am.
State Bank of Bloomington, Ill. v. Lincoln, 433 N.W.2d 709, 712
(Iowa 1988) (citing cases interpreting federal employment
discrimination laws). To determine
the effect of the limitations period on Plaintiff's claims, we
will therefore look to the specific ECOA and regulatory
violations (for which an exemption does not apply) that Plaintiff
alleges caused her injury.

Plaintiff alleges that Defendants took adverse credit action
against her in 1998 by refusing to open an individual account for
her, in violation of 12 C.F.R. § 202.7(a), and by refusing to
allow her to open or maintain an account under a different
surname, in violation of § 202.7(b). Plaintiff's complaint
alleges that Defendants refused to take these actions because of
the outstanding debt existing on the account Mays and Plaintiff
opened in 1987. The magistrate judge viewed these actions as the
continuing effects of Defendants' obligating Plaintiff to sign
the account application eleven years earlier.

A "denial or revocation of credit" is one type of adverse
action pursuant to the ECOA. 15 U.S.C. § 1691(d)(6); Lewis,
135 F.3d at 406 (quoting statutory language). 12 C.F.R. § 202.2(c)
defines "adverse action" for purposes of Regulation B, and
includes a creditor's refusal to extend credit as one of several
manifestations of adverse action. 12 C.F.R. § 202.2(c)(1)(i). The
allegations of Plaintiff's complaint, Plaintiff's representations
in an affidavit, and the affidavit testimony of Defendant Parker
all demonstrate that Defendants refused to open an individual
account for Plaintiff because of the arrearage on the existing
account. Plaintiff joined Mays in signing the application for
electrical service in 1987. Plaintiff's failed attempts in early
1998 to establish an electrical service account arose out of her
owing money from the prior account, a result of the allegedly
discriminatory requirement that she sign the credit application
in 1987.

This case does not present, for instance, the situation where a
utilities creditor denied an individual account because a spouse
or former spouse was merely living in a home served by a
delinquent former account opened by the other spouse. This case
also does not present the situation where a utilities creditor
denied an account for service to a spouse or former spouse
because of an outstanding debt incurred by the other spouse
without any prior, contemporaneous, or subsequent indication of
the spouse's assent to the debt. By fundamental contrast, the
facts of this case, as alleged in Plaintiff's complaint and
substantiated in the record, concern denial of individual credit
based on an existing debt for which, as a signatory on the
account application, Plaintiff had objectively demonstrated
acceptance of some degree of financial responsibility.

Under the specific facts of this litigation, resolution of
Plaintiff's ECOA claims would inextricably turn on an evaluation
of Defendants' requiring Plaintiff to sign the membership
application in 1987. Plaintiff therefore had until 1989 to bring
her ECOA claims against Defendants. Plaintiffs claims under
15 U.S.C. § 1691(a)(1), and 12 C.F.R. § 202.7(a) and (b), brought in
a complaint filed in 1998, are time-barred.

II. DUE PROCESS DEPRIVATION

In the absence of state action, a plaintiff may not assert a
due process claim under the Fourteenth Amendment. See Am. Mfrs.
Mut. Ins. Co. v. Sullivan, 526 U.S. 40, 50, 119 S.Ct. 977,
143 L.Ed.2d 130 (1999); see also Blackard v. Memphis Area Med.
Center for Women, Inc., 262 F.3d 568, 579 (6th Cir. 2001) ("The
requirement that there be state action in the context of
constitutional violations refers to government action - state or
federal - as opposed to private action."). A private utility
company such as Defendant Buckeye does not amount to a state
actor, even if the utility possesses a monopoly over the
provision of a service, for Fourteenth Amendment purposes.
Jackson v. Metro. Edison Co., 419 U.S. 345, 358, 95 S.Ct. 449,
42 L.Ed.2d 477 (1974). The district court applied these
principles in granting summary judgment in favor of Defendants on
Plaintiff's due process claim.

We do not quarrel with the district court's substantive legal
conclusion that Plaintiff cannot maintain a federal
constitutional due process deprivation claim in the absence of
state action. Our examination of Plaintiff's complaint and
arguments in the district court, however, reveals that this legal
conclusion does not warrant summary judgment on Plaintiff's claim
arising out of "due process and natural justice."

As a threshold matter, Plaintiff did not plead her due process
claim pursuant to 42 U.S.C. § 1983, the statutory authorization
for claims of deprivations of federal constitutional rights. At
no point in her complaint does Plaintiff mention § 1983, which is
noteworthy when compared to her extensive and meticulous citation
of provisions of the ECOA and implementing regulations.
Plaintiff's failure to raise § 1983 explicitly in her complaint
might not necessarily preclude a federal constitutional claim in
all circumstances, but in this case it is clear that Plaintiff
did not intend to assert a claim under the federal Constitution.

Although Plaintiff's utilizing the term "due process" would
appear to implicate federal constitutional rights, Plaintiff has
consistently attempted to clarify that her claim of a deprivation
of "due process and natural justice" is derived from the common
law of Ohio and other states. Plaintiff's initial response in
opposition to Defendants' motion to dismiss discusses her "due
process and natural justice" claim entirely in the context of
common law rights and interests incident to the receipt or denial
of utility services. After the magistrate judge issued his
summary judgment recommendation, one of Plaintiff's grounds for
objection was that the magistrate judge had misconstrued her due
process claim as arising under the Constitution. Plaintiff
explained that her "due process and natural justice" claim
involved not constitutional rights but a duty imposed on utility
companies under the common law. She stated that she had "never
asserted that defendants were state actors, or that the
Fourteenth Amendment was the source of this duty, or even that
the duty was the equivalent to constitutional due process." (J.A.
at 137.) In arguments to this Court, Plaintiff continues to
characterize her theory of deprivation of due process as arising
out of the common law, rather than the federal Constitution.

At no point did the magistrate judge or the district court
address Plaintiff's advanced (and perhaps novel) due process
deprivation theory. Plaintiff clearly had no intention to invoke
federal constitutional rights, and the district court erred in
granting summary judgment on Plaintiff's "due process and natural
justice" claim solely pursuant to a Fourteenth Amendment
analysis.

Because we have concluded that the district court properly
granted summary judgment on Plaintiff's claims arising under
federal statutes and regulations, there remains no independent
basis for federal subject matter jurisdiction over this
litigation. In dismissing without prejudice four other claims
Plaintiff had asserted under Ohio statutes and common law, the
district court recognized the absence of federal claims and
declined to exercise supplemental jurisdiction for this reason
pursuant to 28 U.S.C. § 1367(c)(3). We do not believe the
district court abused its discretion in declining supplemental
jurisdiction over Plaintiff's state law claims, and we have no
reason to believe the district court would choose to exercise
jurisdiction over Plaintiff's "due process and natural justice"
deprivation claim alone. Cf. Brandenburg v. Housing Auth. of
Irvine, 253 F.3d 891, 900 (6th Cir. 2001) ("In fact, the usual
course is for the district court to dismiss the state-law claims
without prejudice if all federal claims are disposed of on
summary judgment."). We will therefore remand Plaintiff's "due
process and natural justice" claim (Count VIII of Plaintiff's
complaint) to the district court with instructions to dismiss it
without prejudice.

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