Connolly v. Lanham

685 F.Supp.3d 312

Nathan CONNOLLY & Shani Mott, Plaintiffs, v. Shane LANHAM, et al., Defendants.

Civil Case No.: SAG-22-02048

United States District Court, D. Maryland

Signed August 2, 2023

John Peter Relman, David DePriest, Pro Hac Vice, Gabriel Diaz, Pro Hac Vice, Soohyun Choi, Pro Hac Vice, Relman Dane and Colfax PLLC, Washington, DC, for Plaintiffs.

Mark Patrick Johnson, Gregg Edward Viola, Eccleston and Wolf PC, Hanover, MD, for Defendants Shane Lanham, 20/20 Valuations, LLC.

David Edward Mills, Katherine L. Halliday, Michelle L. Rogers, Pro Hac Vice, Cooley LLP, Washington, DC, Jorge Sarmiento, Pro Hac Vice, Cooley LLP, New York, NY, for Defendant Loandepot.com, LLC.

Brian D. Frey, Alston & Bird LLP, Washington, DC, for Amicus Mortgage Bankers Association.

MEMORANDUM OPINION

Stephanie A. Gallagher, United States District Judge

In their First Amended Complaint, Plaintiffs Dr. Nathan Connolly and Dr. Shani Mott brought this action against Defendant Shane Lanham and his company, 20/20 Valuations, LLC (collectively "Lanham") as well as loanDepot.com, LLC ("loanDepot") for an allegedly discriminatory appraisal of their home in conjunction with an application to refinance their home mortgage. See ECF 25. Plaintiffs assert violations of the Fair Housing Act ("FHA"), 42 U.S.C. § 3601 et seq. (Count I); the Equal Credit Opportunity Act ("ECOA"), 15 U.S.C. §§ 1691 et seq. (Count II); the Civil Rights Act of 1866 ("CRA"), 42 U.S.C. §§ 1981, 1982 (Counts III-IV); and Maryland Fair Housing Laws ("MFH"), MD. CODE ANN., State Government ("SG") §§ 20-702 et seq. (Count V). ECF 25. Lanham filed counterclaims against Plaintiffs for defamation (Count I) and false light invasion of privacy (Count II). ECF 36.

Currently pending are Defendants' motions to dismiss for failure to state a claim, ECF 31 (Lanham); ECF 32 (loanDepot), and Plaintiffs' motion to dismiss Lanham's counterclaims, ECF 44. This Court has reviewed those motions and the related briefing, ECF 42, 43, 50, 51, 55, 56, including the Attorney General's "Statement of Interest" on behalf of the United States. See ECF 47. No hearing is necessary. See Loc. R. 105.6 (D. Md. 2023). For the reasons explained below, Defendant Lanham's motion to dismiss, ECF 31, will be GRANTED IN PART and DENIED IN PART; Defendant loanDepot's motion to dismiss, ECF 32, will be GRANTED IN PART and DENIED IN PART; and Plaintiffs' motion to dismiss counterclaims, ECF 44, will be DENIED.

I. BACKGROUND

The following facts are derived from Plaintiffs' First Amended Complaint, ECF 25, and Defendant Lanham's Counterclaim, ECF 36, and are taken as true for purposes of evaluating the parties' motions.

Dr. Connolly and Dr. Mott are a married Black couple living at 209 Churchwardens Road (hereinafter referred to as the "Churchwardens Home") in the historic Homeland neighborhood of Baltimore, Maryland with their three children. ECF 25 ¶ 15. Homeland was planned and designed by the Roland Park Company with the help of the Olmstead Company. Id. ¶ 30. The neighborhood is on the National Park Service's National Register of Historic Places. Id. According to 2020 census data, Homeland's population is 77.5% white and 9.6% Black. Id. ¶ 31. Of the 82 census blocks in Homeland, only two have significant Black populations. Id. ¶ 32.

Plaintiffs purchased the Churchwardens Home in March of 2017 for $450,000. Id. ¶ 35. Plaintiffs financed the purchase with a 30-year mortgage with a fixed interest rate of 4.65%. Id. In April 2020, Plaintiffs took out a $30,000 home equity loan and invested it, along with money from their savings, into their home. Id. ¶ 36. Specifically, Plaintiffs invested $35,000 in remodeling their club room, $5,000 on a tankless water heater, $5,000 on window well repair and waterproofing, $8,000 on recessed lighting, and $5,000 in landscaping.

By the spring of 2021, the average sale price of homes in Baltimore had increased approximately 25% since Plaintiffs had purchased the Churchwardens Home in 2017. Id. ¶ 42. In May 2021, Dr. Connolly and Dr. Mott sought to refinance their loans "to take advantage of historically low interest rates." Id. ¶ 37. They submitted an application to loanDepot. Id. loanDepot approved Plaintiffs for a refinance loan at a 2.25% interest rate, pending an appraisal of their home supportive of an estimated value of $550,000. Id. ¶ 41. loanDepot hired Defendant Lanham via Defendant 20/20 Valuations to conduct the appraisal of Plaintiffs' home. Id. ¶ 43.

On June 14, 2021, Defendant Lanham visited the Churchwardens Home for the appraisal. Id. ¶ 44. Dr. Connolly, Dr. Mott, and their children—all of whom are Black—were home during the visit. Id. Plaintiffs had decorated their home with "proud markers of the family's Black identity, including family photos, art that the children drew of the family and with other Black subjects, children's books featuring Black characters and addressing themes relating to the Black experience in America, African art, a print of The Library by Jacob Lawrence, a poster for the movie Black Panther, and more." Id.

On or about June 19, 2021, loanDepot informed Plaintiffs that Defendant Lanham appraised their home for $472,000, and that loanDepot would therefore not extend the loan. Id. ¶ 50. Plaintiffs were "shocked" by this low appraisal and informed loanDepot that "there is a long and well-documented history of devaluing Black homes, and that the valuation was impossibly low given the characteristics of their neighborhood and their home." Id. ¶ 51. loanDepot's loan officer, Christian Jorgensen, informed Plaintiffs that they had ten days to submit a letter explaining why they believed the appraisal was flawed. Id. ¶ 52. Thereafter, Jorgensen stopped returning Plaintiffs' calls. Id. ¶¶ 89-91. Months later, Plaintiffs were able to connect with Jorgensen to request copies of their documents and upon answering, Jorgensen "immediately told Plaintiffs that their sixty-day window for filing an appraisal appeal had passed," which was the first time he informed them of their right to appeal. Id. ¶ 102.

In December 2021, Plaintiffs received a Maryland Department of Assessments and Taxation Notification assessing the value of the Churchwardens Home at $622,000. Id. ¶ 115. Given this higher estimate, in January 2022, Plaintiffs decided to try again and applied for a loan with Swift Home Loans. Id. ¶ 116. Plaintiffs were again approved for a refinance loan, pending appraisal by Daniel Ray Dodd of Associate Appraisers. Id.

Prior to the next appraisal inspection, Plaintiffs conducted a "whitewashing" of their home, where they "remove[d] markers of Black identity, such as family photographs, from their home and enlist[ed] a white [colleague] to stand in as the homeowner" during the appraisal. Id. ¶¶ 119, 122. Mr. Dodd conducted the appraisal on January 18, 2022. Id. Plaintiffs were not home, and their white colleague greeted Mr. Dodd. Id. ¶ 122. On January 21, 2022, Mr. Dodd appraised the value of Plaintiffs' home at $750,000—a value nearly 60% greater than that of Defendant Lanham seven months earlier.

Plaintiffs filed this lawsuit in August, 2022, and filed the First Amended Complaint two months later. ECF 1, 25. On January 24, 2023, Lanham filed an answer along with a two-count Counterclaim alleging defamation and false light invasion of privacy stemming from two interviews Plaintiffs conducted with the New York Times and ABC News, respectively, after filing their lawsuit. ECF 36. In the interviews, Plaintiffs accused Lanham of engaging in racial discrimination and undervaluing the Churchwardens Home based on their race. Id. ¶¶ 70-74. The Counterclaim alleges that these accusations were false, that Lanham's appraisal was not based on race, and that his appraisal appropriately relied on lower-priced comparable homes in the area. Id. ¶¶ 6-8, 40-46. The Counterclaim further asserts that Plaintiffs knew that their accusations of racism against Lanham were false, because they were aware of lower-priced home sales and market conditions that supported Lanham's appraisal. See, e.g., id. ¶¶ 5, 32, 45. For example, Lanham alleges that, at the time of the New York Times and ABC News interviews, Plaintiffs knew but failed to disclose that shortly after loanDepot denied their refinance application, the home next to theirs sold for $465,000—or $7,000 less than the appraised value determined by Lanham for the Churchwardens Home. Id. ¶¶ 9, 57-59. The Counterclaim also asserts that Plaintiffs' whitewashing experiment was unreliable because it "occurred seven months after [Lanham's] appraisal and relied on home sales that had not even occurred at the time of [Lanham's] appraisal." Id. ¶¶ 10-12 (emphasis in original).

II. LEGAL STANDARD

Under Federal Rule of Civil Procedure 12(b)(6), a defendant may test the legal sufficiency of a complaint by way of a motion to dismiss. See In re Birmingham, 846 F.3d 88, 92 (4th Cir. 2017); Goines v. Valley Cmty. Servs. Bd., 822 F.3d 159, 165-66 (4th Cir. 2016); McBurney v. Cuccinelli, 616 F.3d 393, 408 (4th Cir. 2010), aff'd sub nom., McBurney v. Young, 569 U.S. 221, 133 S.Ct. 1709, 185 L.Ed.2d 758 (2013); Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999). A Rule 12(b)(6) motion constitutes an assertion by a defendant that, even if the facts alleged by a plaintiff are true, the complaint fails as a matter of law "to state a claim upon which relief can be granted."

Whether a complaint states a claim for relief is assessed by reference to the pleading requirements of Federal Rule of Civil Procedure 8(a)(2). That rule provides that a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." The purpose of the rule is to provide the defendants with "fair notice" of the claims and the "grounds" for entitlement to relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).

To survive a motion under Rule 12(b)(6), a complaint must contain facts...