Anderson v. Wachovia Mortgage Corp.

PRECEDENTIAL

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

Nos. 09-2275 and 09-2336
_____________

TOLANO ANDERSON; CATHY ANDERSON;
RICHARD WILKINS; BRENDA WILKINS;
LLOYD WHEATLEY; AUDRIA WHEATLEY,
Appellants No. 09-2275

v.

WACHOVIA MORTGAGE CORPORATION;
WACHOVIA CORPORATION,
Appellants No. 09-2336

Appeals from the United States District Court
for the District of Delaware
(D.C. Civil No. 06-cv-00567)
District Judge: Honorable Sue L. Robinson

Argued January 25, 2010
 Before: RENDELL and JORDAN, Circuit Judges,
and PADOVA, District Judge*.

(Filed: September 13, 2010)

John S. Grady, Esq. [ARGUED]
Grady & Hampton
6 North Bradford Street
Dover, Delaware 19904
Counsel for Appellants
Cross Appellees

Michael J. Barrie, Esq.
Benesch
222 Delaware Avenue
Suite 801
Wilmington, DE 19801

Stephen A. Fogdall, Esq. [ARGUED]
Schnader Harrison Segal & Lewis LLP
1600 Market Street
Suite 3600
Philadelphia, PA 19103
Counsel for Appellees
Cross Appellants
__________________

* Honorable John R. Padova, Senior Judge of the United
States District Court for the Eastern District of
Pennsylvania, sitting by designation.

2
 OPINION OF THE COURT

RENDELL, Circuit Judge.

This case is brought by three African-American couples
who, in 2004, purchased adjacent houses in a Dover, Delaware,
community known as “Silver Lake.” Plaintiffs received
mortgages from Wachovia Mortgage Corporation, but only after
Wachovia imposed several conditions on the approvals of these
mortgages. Plaintiffs allege that these conditions were racially
motivated, and brought suit against Wachovia under 42 U.S.C.
§ 1981 and various state law causes of action.

This appeal requires us to identify, as a matter of first
impression, the elements of a prima facie case of lending
discrimination under § 1981. Whether plaintiffs have made out
a prima facie case of discrimination is a close call, but even if
they have, they have not undermined Wachovia’s legitimate
reasons for imposing the conditions it did. Thus, we conclude
that they have not shown that the mortgage conditions were
imposed for discriminatory reasons. The District Court
therefore properly granted summary judgment to Wachovia on
the § 1981 claim. We also conclude that the District Court
correctly granted summary judgment on plaintiffs’ breach of
contract and tortious interference claims, and that it acted within
its discretion in denying plaintiffs’ motion to compel certain
discovery. Finally, we find that the District Court acted within

3
its discretion in remanding plaintiffs’ good faith and fair dealing
claim to Delaware state court. We will therefore affirm the
District Court’s orders and judgment.

I.

A.

Plaintiffs Tolano and Cathy Anderson, Richard and
Brenda Wilkins, and Lloyd and Audria Wheatley purchased
adjacent houses in the Silver Lake community from an
individual named Peter Aigner. On June 18, 2004, plaintiffs
agreed to go to settlement on August 6, and agreed that if the
houses were not purchased by that date they would forfeit their
joint deposit of $40,000 on the total purchase price for all three
homes of $800,000. After reaching this agreement, plaintiffs
contacted Wachovia to arrange financing.

Several individuals at Wachovia were involved with
plaintiffs’ loans. J.D. Hogsten was assigned as plaintiffs’ loan
officer, and appears to have had the most contact with them.
Colleen Fazzino acted as the underwriter for the Anderson and
Wheatley loans, George Akerley acted as the underwriter for the
Wilkins loan, and Terri Hamm acted as an “exception officer”
to address issues specific to the Wheatley loan.

Each of the couples’ loans was subject to a unique set of
conditions. With respect to the Anderson loan, plaintiffs claim
that Wachovia mandated extensive, pre-sale repairs to the
house’s drywall, insulation, and plumbing, after an independent
appraiser informed Hogsten that the property could not be

4
appraised without such repairs. The Andersons contend that
these repairs were especially challenging both because of the
accelerated timetable and because they needed to obtain
permission from Aigner to make repairs before purchasing the
house. Nonetheless, the repairs were completed, and the sale
closed on schedule.

Wachovia imposed several conditions on the Wheatley
loan. It initially denied his application for a non-income-
verification loan, which would have required a 15% down
payment, because Mr. Wheatley’s credit score was too low for
that type of loan.1 The Wheatleys then changed their application
to a “stated income loan,” JA488, for which the credit score was
sufficient, and which would have required a 10% down
payment. 2 Wachovia, however, then found the property’s
condition to be inadequate and required repairs to the house’s
roof, heating system, pipes, and floors. After those repairs were

1
Non-income-verification loan applicants are not
required to provide certain financial information, such as their
income, as part of the application process. JA488, JA500. Non-
income-verification loans with a loan-to-value ratio over 75%
were only available to applicants with a credit score at a level
that the Wheatleys’ credit score did not reach. JA681.
2
In some instances, a “stated income” loan can be
acquired with a lesser down payment than a non-income-
verification loan, but applicants are required to provide financial
information and show that they have sufficient assets and annual
income for their desired loan. JA308, JA488, JA501-02.

5
completed and an appraiser submitted a completion certificate,
Wachovia required the Wheatleys to submit an additional
completion certificate from a roofing specialist showing that the
necessary repairs to the roof had been completed. The
Wheatleys were not told of this new requirement until the day of
closing, preventing the closing from occurring on schedule.
(Aigner granted an extension of the sale deadline, however, and
the Wheatley sale closed on August 13.) In addition, after
conditionally approving the Wheatleys for the loan requiring
only a 10% down payment, Wachovia reclassified the loan as an
“exception loan” and required them to provide a 20% down
payment. When the Wheatleys attempted to use funds from
their small business toward the down payment, Wachovia
required them to have an accountant verify details of the
business’s tax filings.

Finally, Wachovia challenged the Wilkinses’ use of a
convenience check issued by their credit card company to pay
their earnest money deposit to Aigner. However, once the
underwriter learned that Mr. Wilkins had obtained a secured
loan and used its proceeds to pay the balance due on his credit
card, he determined that this issue had been resolved.

B.

Plaintiffs attempt to support their claims that Wachovia
imposed discriminatory conditions on their loans with the
following three types of evidence.

First, plaintiffs provide anecdotal evidence of the racial
makeup of the Silver Lake community to support their

6
contention that Wachovia imposed the mortgage conditions to
prevent them, as African-Americans, from moving into a
predominantly Caucasian neighborhood. They testified that the
Silver Lake community is “almost exclusively . . . white,” and
that they believed that the community “desired that it remain that
way.” JA369. They also presented an affidavit from a Dover
insurance agent stating that it was common knowledge that the
homes in Silver Lake “were almost all owned by white
families.” JA191. Mr. Anderson testified that Deanne Wicks,
a Wachovia employee who was not involved in these
transactions, told him that “‘[t]here are a lot of people that are
not happy with you all purchasing homes on Silver Lake,’” and
that “‘Silver Lake is an exclusive lily white community and now
here you guys come.’” JA384-85.

Second, plaintiffs offer comparative evidence based on
their experiences. They claim that the banks in their prior real
estate transactions, which involved purchases of property in
minority neighborhoods, did not impose such stringent
conditions. Mr. Anderson testified that Wachovia itself had not
imposed similar requirements when it financed his prior
purchases of several investment properties and an unimproved
lot. Mr. Wheatley testified that he had not experienced
difficulties in real estate transactions involving other banks. Mr.
Wilkins testified that he had never been questioned about the
source of his earnest money deposits in prior real estate
transactions, although he conceded that he had never used a
credit card convenience check for such a purpose before.

Third, plaintiffs testified to a number of comments made
by Hogsten that they believe demonstrated discriminatory

7
animus. According to Mr. Anderson, Hogsten said to him,
“‘you people don’t understand how the process works,’” which
Anderson believed indicated racial prejudice. JA387. Mr.
Wheatley also testified that Hogsten said to him that “you
people don’t understand the loan process”; Wheatley
“infer[red]” that this was a reference to “the Afrocentric race.”
JA448. Mr. Anderson further testified that Hogsten said, “‘I’m
getting a lot of pressure on this transaction’” and “‘a lot of
heat.’” JA398. Although Hogsten did not identify who was
pressuring him, Anderson construed his comments to mean that
“people did not want this deal to go through and he was being
pressured to cause it to collapse.” JA398. Mr. Wheatley also
testified that Hogsten said “that I’m getting a lot of pressure and
there are people who do not want you all to buy these
properties.” JA442. According to Mr. Wilkins, Hogsten had “a
nasty attitude” and was “unprofessional.” JA520-21.3

C.

This case was initially filed in Delaware state court, and
was removed by Wachovia to federal court. Plaintiffs then
amended their complaint, asserting that Wachovia had violated
42 U.S.C. § 1981, had breached a contract with plaintiffs, had
breached the covenant of good faith and fair dealing, and had

3
As noted later in connection with our discussion of
pretext, Hogsten explains that his statements about “pressure”
in the loan process were based on the expedited time frame, the
combined nature of the three sales, and constant calls from
plaintiffs.

8
tortiously interfered with plaintiffs’ contracts with Aigner.
Wachovia moved to dismiss the amended complaint. The
District Court granted the motion with respect to the breach of
contract and tortious interference claims but denied it with
respect to plaintiffs’ § 1981 and good faith and fair dealing
claims. Anderson v. Wachovia Mortg. Corp. (“Anderson I”),
497 F. Supp. 2d 572 (D. Del. 2007).

After discovery was nearly complete, plaintiffs filed a
second amended complaint, which asserted essentially the same
legal claims as in the first amended complaint but slightly
adjusted the supporting factual allegations.4 Wachovia moved
for summary judgment, and the District Court granted summary
judgment on the § 1981, breach of contract, and tortious
interference claims. However, the Court remanded the case to
state court for consideration of the good faith and fair dealing
claim. Anderson v. Wachovia Mortg. Corp. (“Anderson II”),
609 F. Supp. 2d 360 (D. Del. 2009). Plaintiffs now appeal the
grant of summary judgment, as well as an earlier order denying
plaintiffs’ motion to compel certain discovery. Wachovia
cross-appeals the remand of the good faith and fair dealing
claim.

4
Plaintiffs had also asserted a claim in the first amended
complaint under the Equal Credit Opportunity Act (“ECOA”),
15 U.S.C. § 1691, which they voluntarily dismissed with
prejudice prior to the District Court’s decision on the motion to
dismiss. See Anderson I, 497 F. Supp. 2d at 574 n.1. Plaintiffs
omitted this claim from the second amended complaint.

9
 The District Court had jurisdiction over plaintiffs’ claims
under 28 U.S.C. §§ 1331 and 1367. We have jurisdiction over
the appeal and cross-appeal under 28 U.S.C. § 1291.

II.

We exercise plenary review of a District Court’s grant of
summary judgment, using the same standard applied by the
district courts. Fuentes v. Perskie, 32 F.3d 759, 763 (3d Cir.
1994). Under this standard, the movant must demonstrate that
“there is no genuine issue as to any material fact and that [it] is
entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(c)(2). “In reviewing the grant of a motion for summary
judgment, we (i) resolve conflicting evidence in favor of the
nonmovant, (ii) do not engage in credibility determinations, and
(iii) draw all reasonable inferences in favor of the nonmovant.”
Fuentes, 32 F.3d at 762 n.1.

Plaintiffs’ discrimination claims are brought under 42
U.S.C. § 1981, which provides, as relevant here, that “[a]ll
persons . . . shall have the same right in every State and
Territory to make and enforce contracts.” § 1981(a). “The term
‘make and enforce contracts’ includes the making, performance,
modification, and termination of contracts, and the enjoyment of
all benefits, privileges, terms, and conditions of the contractual
relationship.” § 1981(b).

We have previously applied the tests used to evaluate
employment discrimination claims brought under Title VII of
the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., to
employment discrimination claims brought under § 1981, since

10
“the substantive elements of a claim under section 1981 are
generally identical to the elements of an employment
discrimination claim under Title VII.” Brown v. J. Kaz, Inc.,
581 F.3d 175, 181-82 (3d Cir. 2009). Thus, both the direct
evidence test introduced by Price Waterhouse v. Hopkins, 490
U.S. 228 (1989), and the burden-shifting framework introduced
by McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973),
may be used to determine whether an employer has
discriminated against a plaintiff in violation of § 1981. See
Brown, 581 F.3d at 182; Weldon v. Kraft, Inc., 896 F.2d 793,
796-97 (3d Cir. 1990). This too is a case brought under § 1981,
and we deem it best to employ the same frameworks in the
context of claims of discriminatory lending under § 1981. We
thus hold that the direct evidence and McDonnell Douglas tests
should be applied to lending discrimination claims brought
under § 1981.5

5
We note that other courts of appeals have similarly
applied the McDonnell Douglas framework to claims of
discrimination in the extension of credit brought pursuant to the
ECOA. See Mays v. Buckeye Rural Elec. Coop., Inc., 277 F.3d
873, 876 (6th Cir. 2002) (“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.”); Mercado-
Garcia v. Ponce Fed. Bank, 979 F.2d 890, 893 (1st Cir. 1992);
Thompson v. Marine Midland Bank, No. 99-7051, 1999 WL
752961, at *2 (2d Cir. Sept. 16, 1999). In addition, we and the
Court of Appeals for the Eighth Circuit have identified prima
facie tests for ECOA claims that mirror the elements of the

11
 In doing so, we part ways with the Court of Appeals for
the Seventh Circuit, which opined in Latimore v. Citibank
Federal Savings Bank, 151 F.3d 712 (7th Cir. 1998), that
McDonnell Douglas should be applied only where there is a
“basis for comparing the defendant’s treatment of the plaintiff
with the defendant’s treatment of other, similarly situated
persons,” and thus not in lending discrimination cases, which
typically do not involve a “competitive situation” between
different borrowers. Id. at 714. In Latimore, the court indicated
that a plaintiff can still “try to show in a conventional way,
without relying on any special doctrines of burden-shifting, that
there is enough evidence, direct or circumstantial, of
discrimination to create a triable issue.” Id. at 715. We disagree
with this approach, as the McDonnell Douglas burden-shifting
framework has generally been used in § 1981 discrimination
cases and it would be a significant departure, we think, from
litigants’ settled expectations about the applicable law to single

McDonnell Douglas prima facie test. See Chiang v. Veneman,
385 F.3d 256, 259 (3d Cir. 2004) (“To establish a prima facie
case under ECOA [a plaintiff] must show that (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 qualification, plaintiff was denied credit.”); Rowe v.
Union Planters Bank of Se. Mo., 289 F.3d 533, 535 (8th Cir.
2002) (“[Plaintiff] must demonstrate that (1) she was a member
of a protected class, (2) she applied for and was qualified for a
loan with the Bank, (3) the loan was rejected despite her
qualifications, and (4) the Bank continued to approve loans for
applicants with similar qualifications.”).

12
out cases involving alleged discriminatory lending practices for
different treatment. We will apply a variation of the McDonnell
Douglas test that requires plaintiffs to show “additional
evidence” under the fourth prong of the test for establishing a
prima facie case.

As addressed in greater detail below, we do not agree that
McDonnell Douglas is limited to cases where a plaintiff can
produce evidence of a defendant’s treatment of directly
comparable individuals. The burden of a § 1981 plaintiff is to
“prove purposeful discrimination,” and the McDonnell Douglas
framework assists in this endeavor by structuring the evidence
on the issue of “whether the defendant intentionally
discriminated against the plaintiff.” Patterson v. McLean Credit
Union, 491 U.S. 164, 186 (1989), superseded in part by 42
U.S.C. § 1981(b). Although comparative evidence is often
highly probative of discrimination, it is not an essential element
of a plaintiff’s case. Pivirotto v. Innovative Sys., Inc., 191 F.3d
344, 353 (3d Cir. 1999). Instead, the permissible evidence
under this framework “may take a variety of forms,” including,
for example, “evidence of [a defendant’s] past treatment of” a
plaintiff. Patterson, 491 U.S. at 187-88.

A.

Plaintiffs contend that they have direct evidence of
discrimination and thus need not resort to a McDonnell Douglas
analysis. We disagree.

Direct evidence of discrimination must be “so revealing
of [discriminatory] animus that it is unnecessary to rely on the

13
[McDonnell Douglas] burden-shifting framework, under which
the burden of proof remains with the plaintiff.” Walden v.
Georgia-Pacific Corp., 126 F.3d 506, 512 (3d Cir. 1997). Once
a plaintiff produces such evidence, the defendant has the burden
of producing evidence to show that it would have made the same
decision in the absence of discriminatory animus. Id. at 512-13.

To qualify as direct evidence, “the evidence must be such
that it demonstrates that the ‘decisionmakers placed substantial
negative reliance on an illegitimate criterion in reaching their
decision.’” Walden, 126 F.3d at 513 (quoting Price
Waterhouse, 490 U.S. at 277 (O’Connor, J., concurring)). Thus,
direct evidence must satisfy two requirements. First, the
evidence must be strong enough “to permit the factfinder to
infer that a discriminatory attitude was more likely than not a
motivating factor in the [defendant’s] decision.” Id. (internal
quotation marks and alteration omitted). Second, the evidence
must be connected to the decision being challenged by the
plaintiff. Id. at 515-16. Specifically, any statements made by a
defendant’s employees must be made at a time proximate to the
challenged decision and by a person closely linked to that
decision. Id. at 513-16. We have referred to these requirements
as creating a “high hurdle” for plaintiffs. Id. at 513.

Plaintiffs have not cleared this hurdle. For the direct
evidence test they rely exclusively on Hogsten’s alleged
comments that “you people don’t understand how the process
works,” JA387, and that “you people don’t understand the loan

14
process,” JA448.6 We are skeptical that Hogsten’s use of the
phrase “you people” in this context is, alone, so revealing of
discriminatory animus that it would enable a factfinder to
conclude that a discriminatory attitude was, more likely than not,
a motivating factor in the decision to impose the challenged loan
conditions. Although plaintiffs cite various cases in support of
their argument that the phrase “you people” should be
considered direct evidence, none of these cases actually support
their position. See, e.g., Whitley v. Peer Review Sys., Inc., 221
F.3d 1053, 1056 (8th Cir. 2000) (using the phrase “you people”
as evidence in a McDonnell Douglas analysis, and finding its
use “innocuous”); EEOC v. Alton Packaging Corp., 901 F.2d
920, 923, 924 (11th Cir. 1990) (finding that the use of the phrase
“you people” was a “stray remark” that would not satisfy the
direct evidence test). Instead, several courts have determined
that the phrase “you people” is too ambiguous to constitute
direct evidence of discrimination when used in isolation, as it
was here. See, e.g., Estate of Daramola v. Coastal Mart, Inc.,
170 F. App’x 536, 547 (10th Cir. 2006) (“After all, they are your
people.”); Clay v. Interstate Nat’l Corp., No. 95-3430, 1997 WL
452316, at *1, *3 (7th Cir. Aug. 7, 1997) (“You people are
causing problems.”); Steinhauser v. City of St. Paul, 595 F.
Supp. 2d 987, 1004 (D. Minn. 2008) (“I don’t think you people
deserve to be in this country.”); Kishaba v. Hilton Hotels Corp.,
737 F. Supp. 549, 566 (D. Haw. 1990) (“I don’t know how you
people run things down here . . . .” and “Why can’t you people
get things organized?”).

6
Hogsten was not asked about these statements during
his deposition.

15
 Even if we were persuaded that the use of the phrase
“you people” in this context could constitute direct evidence,
however, plaintiffs have not shown that Wachovia’s
decisionmakers—Fazzino, Hamm, and Akerley—relied on
plaintiffs’ race in imposing the challenged loan conditions.
According to the evidence offered by Wachovia, it was not
Hogsten who decided to impose the challenged conditions on
plaintiffs’ loans. Rather, Hogsten denied imposing any of these
conditions. With respect to the Anderson loan, Hogsten testified
that he told Mr. Anderson that “we were going to have problems
getting a sufficient appraisal unless there [were] some . . .
renovations to the property to get a decent appraisal.” JA457.
However, since Hogsten did not underwrite loans, he testified
that “[w]hat I did for Mr. Anderson is tell him what is normally
done, and an underwriter would then make the decision as to
what if anything would be done.” JA460. With respect to the
Wheatley loan, Hogsten testified that after being told by the
underwriter that the appraisal indicated problems with the
habitability of the Wheatley property and that the Wheatleys’
down payment would need to be increased, he communicated
those problems to Mr. Wheatley.

Hogsten’s testimony is corroborated by the testimony of
his supervisor, Joseph Skowronski, who testified that loan
officers like Hogsten do not impose conditions on loans,
although they may discuss with customers the conditions
imposed by others. He described Hogsten’s role as limited to
selling loans and communicating requirements to customers.
According to Skowronski, it is the underwriters, not loan
officers like Hogsten, who impose loan conditions. Fazzino also
testified that Hogsten was not a decisionmaker, and that Hogsten

16
repeatedly urged her to approve the Wheatley loan without the
conditions that she and Hamm had imposed. This indicates that
Hogsten lacked the authority to impose (or remove) the
conditions himself. Fazzino also testified that she and Hamm
imposed the challenged conditions on the Wheatley loan, and
Akerley submitted an affidavit indicating that he flagged the
potential problem with the Wilkins loan.

Plaintiffs have offered no evidence to refute this
testimony. Although they contend that Hogsten acted as if he
were the decisionmaker when communicating Wachovia’s
requirements to them, this contention does not create a genuine
issue of fact regarding the salient question of whether Hogsten
actually was a decisionmaker who imposed the conditions.
Since plaintiffs do not contend that Fazzino, Hamm, or Akerley
harbored discriminatory intent—and there is no evidence that
they did—the District Court properly rejected plaintiffs’ claims
to the extent that they rely on the direct evidence test.

B.

In the absence of direct evidence of discrimination, we
consider a plaintiff’s claims under McDonnell Douglas. This
familiar framework requires the following three-step analysis.

The plaintiff must first establish a prima facie case of
discrimination. In Burdine, the Supreme Court explained that
“[t]he burden of establishing a prima facie case of disparate
treatment is not onerous.” Tex. Dep’t of Cmty. Affairs v.
Burdine, 450 U.S. 248, 253 (1981). The goal at this stage is to
“eliminate[] the most common nondiscriminatory reasons” for

17
the defendant’s actions; by doing so, the prima facie case creates
an inference that the defendant’s actions were discriminatory.
Id. at 254.

If a plaintiff makes out a prima facie case, then the
“burden of production shifts to the defendant to offer evidence
of a legitimate, nondiscriminatory reason for the action.”
Connors v. Chrysler Fin. Corp., 160 F.3d 971, 974 n.2 (3d Cir.
1998). The defendant satisfies its burden at this step “by
introducing evidence which, taken as true, would permit the
conclusion that there was a nondiscriminatory reason for the
unfavorable [action].” Fuentes, 32 F.3d at 763. The defendant
need not even prove that the tendered reason was the actual
reason for its behavior. Id.

At the third step, “the burden of production rebounds to
the plaintiff, who must now show by a preponderance of the
evidence that the [defendant’s] explanation is pretextual.” Id.
At this stage, a plaintiff may defeat a motion for summary
judgment by either discrediting the defendant’s proffered
reasons or adducing evidence that discrimination was “more
likely than not a . . . determinative cause of the adverse . . .
action.” Id. at 764.7 “[T]hroughout this burden-shifting

7
Fuentes speaks of a “motivating or determinative
cause,” but, to be precise, the terminology of “motivating”
causes is inapt when discussing the burden-shifting framework
in a pretext case such as this. See Watson v. SEPTA, 207 F.3d
207, 211 (3d Cir. 2000) (holding that the 1991 Civil Rights Act
did not affect “the distinction between the standards of causation

18
paradigm the ultimate burden of proving intentional
discrimination always rests with the plaintiff.” Id. at 763.

1.

We have not previously identified the elements of a
prima facie case of lending discrimination in a suit brought
under § 1981. The District Court therefore applied a prima facie
test containing the following three elements: “(1) Plaintiffs
were members of a protected class; (2) Plaintiffs applied for and
were extended credit from Defendant; and (3) Defendant treated
Plaintiffs differently than others outside of the protected class
who were otherwise similarly situated.” Anderson II, 609 F.
Supp. 2d at 369.8 The Court determined that plaintiffs satisfied
the first two elements of this test, but not the third. The Court

applicable in, on the one hand, so-called ‘mixed-motive’ cases,
in which . . . a defendant may be held liable upon a showing that
an illegitimate factor was a ‘motivating’ factor in the adverse
action and, on the other hand, so-called ‘pretext’ cases, in which
. . . a defendant may be held liable upon a showing that an
illegitimate factor was a ‘determinative’ factor in the adverse
action”).
8
The District Court borrowed this test from Visconti v.
Veneman, No. 01-cv-5409, 2005 WL 2290295, at *4 (D.N.J.
Sept. 20, 2005), a case brought under the ECOA and “based not
on [the plaintiffs’] application for (and denial of) credit but,
rather, on the [defendant’s] collection efforts regarding credit
that had already been extended.”

19
also found that, even if plaintiffs had made out a prima facie
case, Wachovia had proffered legitimate nondiscriminatory
reasons for its actions, and that plaintiffs had not adequately
rebutted those reasons so as to show them to be pretextual.

Although we agree with the District Court’s ultimate
conclusion that plaintiffs did not carry their burden as to pretext,
we disagree as to the nature of the showing to be made to
establish a prima facie case in a case such as this. The District
Court required plaintiffs to produce evidence that they were
treated differently from similarly situated mortgage applicants.
However, the critical question in this case is not simply whether
plaintiffs were subjected to different conditions than white
mortgage applicants; rather, the allegation is more layered.
Granted, it is, in part, whether they were subjected to more
onerous conditions because of their race—that is, because they
were African-Americans—but, also, because they intended to
move into a “white” community. Notably, plaintiffs had
previous borrowing experience with Wachovia without incident,
so it is this latter aspect that distinguishes this situation, and
calls for an approach to the last prong that is tailored to the
nature of the claim. The issue is, were barriers put in their way
because of their race in order to dissuade them from moving into
a “white” community? Given this, and given the
noncompetitive nature of the lending business—an applicant
does not lose a loan to another applicant—comparisons among
borrowers do not get to the heart of the matter. Moreover,
requiring plaintiffs to ferret out, and the bank to produce,
evidence as to others with myriad different factual situations in
order to find “similar” borrowers, goes beyond what is required
for a prima facie case.

20
 We have repeatedly stated that comparative, or
competitive, evidence is not a necessary component of a
discrimination plaintiff’s prima facie case. As we have said in
the context of employment discrimination, “a plaintiff need not
prove, as part of her prima facie case, that she was replaced by
someone outside of the relevant class,” since an inability to
make this showing “is not necessarily inconsistent with her
demonstrating that the employer treated her less favorably than
others because of her race, color, religion, sex, or national
origin.” Pivirotto, 191 F.3d at 353 (quoting Furnco Constr.
Corp. v. Waters, 438 U.S. 567, 577 (1978) (internal quotation
marks and alteration omitted)); see also Matczak v. Frankford
Candy & Chocolate Co., 136 F.3d 933, 939 (3d Cir. 1997) (“By
holding that favorable treatment outside the protected class is an
‘alternative’ element to a prima facie case, we [have] made clear
that this element can be present but by no means must be
present.”).9 This precedent is controlling.10

9
Indeed, we have traced our suggestions that
comparative evidence might be required to “occasionally
imprecise language in dicta in certain cases.” Pivirotto, 191
F.3d at 357.
10
Wachovia relies in part on our decision in Ezold v.
Wolf, Block, Schorr & Solis-Cohen, 983 F.2d 509, 527 (3d Cir.
1992), in which we considered comparative evidence to evaluate
the plaintiff’s claims. Ezold does not support Wachovia’s
argument. First, we only considered the comparative evidence
proffered by the plaintiff in Ezold at the final stage of the
McDonnell Douglas analysis, in order to determine whether the

21
 As noted above, a plaintiff’s burden at the prima facie
stage is not intended to be “onerous”; rather, the purpose of the
prima facie test is to “eliminate[] the most common
nondiscriminatory reasons” for the defendant’s actions.
Burdine, 450 U.S. at 253-54. Thus, we have stated that the
fourth prong of the prima facie case should be “relaxed in
certain circumstances.” Pivirotto, 191 F.3d at 357 (quoting
Torre v. Casio, Inc., 42 F.3d 825, 831 (3d Cir. 1994)).
Requiring plaintiffs to produce comparative evidence in cases
involving the lending process would not be productive due to
the discrete and varying circumstances inherent in individual
loan applications and approvals.

Indeed, McDonnell Douglas itself did not require a
showing as to “similarly situated” individuals. In McDonnell

defendant’s asserted nondiscriminatory reasons were pretextual.
Second, even at the pretext stage of the analysis, we did not
require comparative evidence. To the contrary, we recognized,
for instance, that “sufficiently strong evidence of an employer’s
past treatment of a plaintiff may prove pretext.” 983 F.2d at
539. This is consistent with the Supreme Court’s statement in
Patterson, 491 U.S. at 187-88, that “[t]he evidence which [a
plaintiff] can present in an attempt to establish that [a
defendant’s] stated reasons are pretextual may take a variety of
forms,” and its acknowledgment in McDonnell Douglas, 411
U.S. at 804-05, that evidence of pretext could include the
defendant’s “treatment of [the plaintiff] during his prior term of
employment; [and the defendant’s] reaction, if any, to [the
plaintiff’s] legitimate civil rights activities.”

22
Douglas, the Court held that a prima facie case of racial
discrimination in an employment discrimination case generally
requires a plaintiff to show “(i) that he belongs to a racial
minority; (ii) that he applied and was qualified for a job for
which the employer was seeking applicants; (iii) that, despite his
qualifications, he was rejected; and (iv) that, after his rejection,
. . . the employer continued to seek applicants from persons of
complainant’s qualifications.” 411 U.S. at 802. The Court also
noted that this test should be tailored to conform “to differing
factual situations.” Id. at 802 n.13.

When invoking McDonnell Douglas for lending
discrimination claims brought under § 1981, the first three
things a plaintiff must show at the prima facie stage are (1) that
he belongs to a protected class, (2) that he applied and qualified
for available credit from the defendant,11 and (3) that his

11
We note that whether a plaintiff is “qualified” for a
loan under the third prong should focus on the general form of
credit and qualifications for such credit rather than on every
possible condition that might need to be fulfilled to proceed to
closing. Just as in the employment context “qualifications” are
the minimum prerequisites, and do not include every
conceivable trait that an employer desires in an employee, here,
the qualifications should encompass minimum requirements.
For instance, a plaintiff who applied for a home mortgage
offered by the defendant only to borrowers of a certain income
level should be required to establish that the defendant was
issuing home mortgages, and that the borrower satisfied the
income requirement established by the lender for that type of

23
application was denied or that its approval was made subject to
unreasonable or overly burdensome conditions.12 In the
employment context, we have held that the fourth prong of the
prima facie case may be established by satisfying the original
fourth prong articulated in McDonnell Douglas, or, as an
alternative to the original fourth prong, by showing that

loan.
12
Wachovia contends that denial of the loan is necessary
to give rise to an inference of discrimination, and thus that only
borrowers whose loan applications are denied can make out a
prima facie case. It urges that the imposition of restrictive
conditions by a lender cannot support “a prima facie case of
discrimination as traditionally understood.” Appellees’ Opening
Br. at 34. We disagree. Section 1981 specifically brings
discriminatory conditions into its ambit by defining “the term
‘make and enforce contracts’ [to] include[] . . . the enjoyment of
all benefits, privileges, terms, and conditions of the contractual
relationship.” § 1981(b). Thus, § 1981 is violated not only
when a lender discriminatorily rejects applicants, but also when
the lender engages in other conduct that amounts to
discrimination with respect to the “terms” and “conditions” of
the borrower’s contractual relationship with the lender. Indeed,
in the employment context we have modified the third prong of
the McDonnell Douglas prima facie case to require evidence of
an adverse employment action, as opposed to outright rejection.
See Jones v. Sch. Dist. of Phila., 198 F.3d 403, 411 (3d Cir.
1999). We see no reason why a similar modification should not
be made to the third prong in the credit context.

24
similarly situated individuals outside the plaintiff’s class were
treated more favorably. Matczak, 136 F.3d at 939-40; Olson v.
Gen. Elec. Astrospace, 101 F.3d 947, 951 (3d Cir. 1996).

However, as plaintiffs rightly point out, “[t]his is not an
employment case where it is frequently easy to identify similarly
situated individuals.” Appellants’ Op. Br. at 33. Further,
requiring evidence of similarly situated individuals in the
lending context would be overly burdensome during discovery
because it would require banks to turn over hundreds of loan
applications—once confidentiality issues are addressed—and
the parties would likely have considerable difficulty determining
which applicants are similarly situated. Thus, we agree with
plaintiffs that they should not be required to satisfy the fourth
prong of the McDonnell Douglas prima facie case as it has been
articulated in the employment context, so long as in some other
way they are able to show “circumstances which give rise to an
inference of unlawful discrimination.” Burdine, 450 U.S. at
253.

The question, then, is what will suffice to satisfy the last
prong of the prima facie case in the lending discrimination
context. The Court of Appeals for the Sixth Circuit had
occasion in Lindsay v. Yates, 578 F.3d 407 (6th Cir. 2009), to
consider a discrimination claim in connection with a real estate
transaction. The seller had terminated the agreement of sale
within a few days after meeting the buyers—who happened to
be African-American—twelve days after signing the agreement,
deciding not to sell the house “‘for sentimental reasons.’” Id. at
412. The court noted the flexibility of McDonnell Douglas and
the fact that in Shah v. General Electric Co., 816 F.2d 264 (6th

25
Cir. 1987), an employment discrimination case, it had previously
indicated that it was enough if a plaintiff could adduce “‘some
additional evidence’” to establish the “‘inference of
discrimination.’” Id. at 416 (quoting Shah, 816 F.2d at 269). In
Shah, the court had concluded that the fact that a position did
not remain available was not fatal to the claim, as long as there
existed “‘additional evidence’ from which a reasonable juror
could find an inference of discrimination.” Lindsay, 578 F.3d
at 416 (quoting Shah, 816 F.3d at 269). While noting that
“comparative evidence” could constitute “additional evidence,”
the court stated that McDonnell Douglas and its progeny do not
require this. Id. at 417. The inquiry “was never intended to be
rigid, mechanized, or ritualistic. Rather, it is merely a sensible,
orderly way to evaluate the evidence in light of common
experience as it bears on the critical question of discrimination.”
Id. (internal quotation marks and citation omitted). The court
then reasoned:

A prima facie case is established
whenever the actions taken by the
property owner lead one to
reasonably infer, if such actions
remain unexplained, that it is more
likely than not that such actions
were based on discriminatory
criterion such as race. Keeping this
ultimate inquiry in mind, we find
that so long as “additional
evidence” exists—beyond showing
the first three elements of the
McDonnell Douglas test—that

26
 indicates discriminatory intent in
“light of common experience,” the
required “inference of
discrimination” can be made in
satisfaction of the prima facie case.
This holds true even if the plaintiff
is not necessarily able to identify
sim ilarly-situate d in dividuals
outside of the relevant protected
group who were treated more
favorably.

The “additional evidence”
which can be relied upon to
establish a prima facie claim
depends on the attendant facts and
circumstances. In this case, the
suspicious tim ing of the
termination of the purchasing
agreement provides the evidentiary
basis for inferring the [defendants]
acted with discriminatory motives.

Id. at 417-18 (internal quotation marks and citations omitted).

We adopt this approach. In order to make out a prima
facie case of lending discrimination in a § 1981 case, a plaintiff
must show (1) that he belongs to a protected class, (2) that he
applied and was qualified for credit that was available from the
defendant, (3) that his application was denied or that its
approval was made subject to unreasonable or overly

27
burdensome conditions, and (4) that some additional evidence
exists that establishes a causal nexus between the harm suffered
and the plaintiff’s membership in a protected class, from which
a reasonable juror could infer, in light of common experience,
that the defendant acted with discriminatory intent.

Here, all of the plaintiffs are African-American, applied
for types of mortgage loans being offered by Wachovia, and
were qualified for these loans.13 Thus, they satisfy the first and
second prongs of the prima facie case. Whether the plaintiffs
have satisfied the third and fourth prongs is a closer call.

As to the third prong, with respect to the Wilkinses, we
are not persuaded that it was unduly burdensome for Wachovia
to have required them to use their own assets, rather than assets
effectively borrowed from their credit card issuer, to fund their
escrow payment. However, with respect to the Andersons and
the Wheatleys, we agree that it may be unreasonable or overly
burdensome to require a borrower to make improvements to a
property he does not own, and to double the amount of the
borrower’s down payment at the last minute.14

13
Although Mr. Wheatley’s credit score was not
sufficient to qualify him for the non-income-verification loan he
initially sought, it appears that the Wheatleys were qualified for
the stated income loan and the exception loan that they
subsequently pursued.
14
The third prong could also be satisfied by evidence that
the complained-of conditions, even if facially reasonable, were

28
 As to the fourth prong, the evidence that would connect
the conditions to racial animus is not that clear. Plaintiffs have
produced some evidence that the conditions may have been
imposed because they were African-Americans moving into a
predominantly Caucasian neighborhood. A Wachovia
employee, Deanne Wicks, told Mr. Anderson that “[t]here are a
lot of people that are not happy” with plaintiffs’ purchase of
homes in Silver Lake, which she described as a “lily white
community.” JA384-85. Hogsten allegedly said that he was
“getting a lot of pressure on this transaction” and referred to
plaintiffs as “you people,” JA387, JA398, potentially
corroborating Wicks’s statements. Moreover, plaintiffs had not
experienced similar treatment when purchasing homes, using
Wachovia financing, in other neighborhoods. Together, this
evidence may be sufficient to support at least an inference that
Wachovia imposed the conditions it did for racially
discriminatory reasons. On the other hand, the timing of the
sellers’ change of heart in Lindsay certainly supplies a stronger
nexus between the complained-of conduct and the plaintiffs’
race.

Regardless of whether plaintiffs have in fact satisfied the
third and fourth prongs, the conditions were grounded in
applicable regulations, as we explain below, so even if plaintiffs
could convince us that they had made out a prima facie case,

not applied evenhandedly among individuals of different races.
Such conditions are per se unreasonable and/or unduly
burdensome for purposes of the McDonnell Douglas analysis.
Here, there is no such evidence.

29
they must clear an additional hurdle at the third stage of the
McDonnell Douglas analysis.

2.

Wachovia urges that it carried its burden of production at
the second stage of McDonnell Douglas by tendering
nondiscriminatory reasons for all of its actions, because all of
the conditions it imposed were driven by its underwriting
guidelines and by the requirements imposed by Fannie Mae
(which parallel Wachovia’s own guidelines). Wachovia sells
most of its residential mortgages to Fannie Mae, and Fannie
Mae will not purchase loans that do not comply with its
requirements. Thus, Wachovia contends that its underwriters
are obligated to ensure that these requirements are satisfied
before approving a loan.

According to Wachovia, the repair requirements for the
Anderson and Wheatley properties were necessitated by
underwriting guidelines that require a home to be inhabitable
and an appraisal to be completed before a mortgage can be
issued. Under these guidelines, a property may not “have any
physical deficiencies or conditions that would affect its
livability.” JA302. When there are such problems, “the
property must be appraised subject to completion of the specific
alterations or repairs,” and Wachovia “must obtain a certificate
of completion from an appraiser before it delivers the mortgage
to the investor.” JA302.

The appraiser retained by Wachovia to evaluate the
Anderson property, John Mullens, informed Hogsten that he

30
could not appraise the property because there were significant
problems with its livability. Mullens stated that there was
“extensive water damage,” some missing drywall, mold on some
of the remaining drywall, and exposed, water-damaged
insulation. JA352. He explained that because of these
problems, he “determined that he could not appraise the
property” without, at a minimum, an assessment by a mold
specialist, a plumbing certification, certifications that the water
had not damaged the structure or electrical systems, and an
estimate from a contractor of the costs to repair the damage.
JA352-53. Mullens also stated that he “knew of no comparable
properties in the Dover area that were in a similar state of
disrepair and in a similar location,” and thus could not appraise
the property without the repairs. JA353.

An appraiser was able to determine the value of the
Wheatley property, but stated in his appraisal report that there
was no heat on the second floor, that the roof needed repair, that
the second floor landing needed a “‘finished floor covering,’”
and that some of the basement pipes appeared to be wrapped
with asbestos. JA428-29. According to Fazzino, these
problems raised concerns about the livability of the property and
necessitated repairs. On August 4, the appraiser sent a
certificate to Fazzino stating that the repairs had been
completed. However, the report indicated that the appraiser was
relying on a contractor’s statement that the “roof was in
adequate condition with no known leakage,” which the appraiser
had “assumed to be accurate.” JA321. Fazzino determined that
she could not rely on this assumption, and therefore required the
Wheatleys to obtain a roofing certificate to show that the
property was inhabitable.

31
 According to Wachovia, the other conditions imposed on
the Wheatley loan resulted from an effort to approve the loan
despite the livability problems, in light of Aigner’s mandate that
all three transactions settle at one time. An “exception loan”
was eventually approved for the Wheatleys by an “exception
officer” named Terri Hamm, in part because Mr. Wheatley was
a “five star customer.” JA469. This meant that the Wheatley
loan would be maintained in Wachovia’s own portfolio, without
being sold to Fannie Mae, and could thus be approved under
different guidelines. However, reclassifying the loan as an
exception loan triggered a new requirement under the
underwriting guidelines, which specify that an exception loan
may only be issued if the customer makes a 20% down payment;
thus, the Wheatleys would no longer be permitted to make a
10% down payment as they had planned. The Wheatleys
decided to obtain the additional 10% from the assets of their
business, but that triggered another requirement under the
underwriting guidelines: that an accountant “confirm that the
borrower files the business on the Schedule C” of his tax return.
JA308.

These reasons suffice to satisfy Wachovia’s burden of
production, which demands only that it “introduc[e] evidence
which, taken as true, would permit the conclusion that there was
a nondiscriminatory reason” for the adverse action. Fuentes, 32
F.3d at 763. Although plaintiffs argue that Wachovia failed to
meet its burden at the second stage of this analysis, it appears
that this argument is actually directed at the issue of pretext, and
we will consider it in that context.

32
 3.

At the third stage of the McDonnell Douglas analysis, a
plaintiff “may defeat a motion for summary judgment by either
(i) discrediting the proffered reasons, either circumstantially or
directly, or (ii) adducing evidence, whether circumstantial or
direct, that discrimination was more likely than not a . . .
determinative cause of the adverse . . . action.” Fuentes, 32 F.3d
at 764. The plaintiff can discredit the proffered reasons by
“demonstrat[ing] such weaknesses, im plausibilities,
inconsistencies, incoherencies, or contradictions in the
[defendant’s] proffered legitimate reasons for its action that a
reasonable factfinder could rationally find them unworthy of
credence, and hence infer that the [defendant] did not act for the
asserted non-discriminatory reasons.” Id. at 765 (internal
quotation marks, alteration, and citations omitted).
Alternatively, to show that discrimination was the likely cause
of the adverse action, a plaintiff can show, for example, that the
defendant had previously subjected the same plaintiff to
“unlawful discriminatory treatment,” that it had “treated other,
similarly situated persons not of his protected class more
favorably,” or that it had “discriminated against other members
of his protected class or other protected categories of persons.”
Id.

We conclude that plaintiffs have not offered sufficient
evidence of pretext to survive summary judgment. Plaintiffs
have produced no evidence to support their contention that
Wachovia’s reliance on its underwriting guidelines and the
Fannie Mae requirements was pretextual. There is no evidence
that the Anderson loan could have been approved without

33
repairs to the property, or that the Wheatley loan could have
been approved as a conventional loan without repairs to the
property or as an exception loan without a 20% down payment
and verification by an accountant. Despite plaintiffs’
contentions to the contrary, the underwriting guidelines are
consistent with all of these requirements. Although plaintiffs do
note that the Fannie Mae guidelines were inapplicable to the
Wheatley loan because it was ultimately approved as an
“exception loan,” this does not undermine Wachovia’s reliance
on its underwriting guidelines; the reclassification as an
exception loan occurred very late in the process, after Wachovia
had already indicated that it could not approve the Wheatley
loan without repairs. Plaintiffs do not dispute that the repairs
required by Wachovia were necessary to make the Anderson and
Wheatley properties livable; in fact, Mr. Wheatley conceded this
as to his property during his deposition.

Plaintiffs argue that Wachovia’s reliance on its
underwriting guidelines is pretextual because Wachovia
deviated from its procedures by allowing Hogsten (rather than
Fazzino, Akerley, and Hamm) to impose the loan conditions on
plaintiffs. We have recognized that “[a] violation of company
policy can constitute a pretext for unlawful discrimination”
under certain circumstances. Goosby v. Johnson & Johnson
Med., Inc., 228 F.3d 313, 322 (3d Cir. 2000). Here, however,
there is no evidence that any Wachovia procedures were
violated, since there is no evidence that Hogsten improperly
imposed loan conditions. Indeed, as discussed in more detail
above with regard to the direct evidence test, the evidence
show ed that F az z ino, A ke rle y, and Ha mm— not
Hogsten—actually imposed the conditions, while Hogsten

34
communicated them to plaintiffs. Plaintiffs have not offered any
evidence to refute this or to otherwise demonstrate that
Wachovia deviated from its policies.

Plaintiffs also compare their experiences in the Silver
Lake transaction with their experiences in other real estate
transactions. They claim that Wachovia and other banks did not
impose similar conditions on their loans in the other
transactions, which assertedly did not involve property located
in a predominantly Caucasian neighborhood. However, those
transactions are not readily comparable to the Silver Lake
transaction: they appear not to have involved a requirement that
three sales happen simultaneously, on an accelerated timetable,
and many involved investment properties, which are not subject
to the Fannie Mae requirements. Moreover, plaintiffs have
offered no demographic evidence to substantiate their claims
that the racial makeups of the communities involved in those
other transactions were meaningfully different from that of the
Silver Lake area. These anecdotal comparisons are thus not
probative of discrimination in this case.

Plaintiffs also suggest that Hogsten is not credible
because he testified that he did not know the racial makeup of
the Silver Lake community, but, according to an affidavit
submitted on plaintiffs’ behalf, “[a]nyone who has ever lived for
any period of time in Dover would know that . . . the homes
around Silver Lake in Dover were almost all owned by white
families.” JA191. However, this affidavit is unsupported by
any data or other evidence, and does nothing more than recite
the personal viewpoint of one member of the Dover community.
It is also inconsistent with census data in the record, which show

35
that 29.6% of the 544 residents of the “census tract” in which
plaintiffs’ houses were located were African-American.
JA263.15 Accordingly, the affidavit would not suffice to
convince a reasonable factfinder that Wachovia’s proffered
reasons were unworthy of credence, especially in the face of
Fazzino’s testimony and the clear language of the underwriting
guidelines, both of which corroborated Hogsten’s explanations
of why Wachovia imposed the conditions that it did. Nor are we
persuaded by plaintiffs’ argument that Fazzino lacked credibility
because she could not remember certain details of the Silver
Lake transactions during her deposition. That claim is belied by
the record, as Fazzino was able to testify in considerable detail
after refreshing her recollection with notes and other documents.

Finally, plaintiffs cite Hogsten’s unfriendly attitude, use
of the phrase “you people,” and the comment that he was
receiving “pressure” regarding the transactions.16 They also

15
The same data show considerable variation in the racial
composition of the other areas bordering Silver Lake. Although
a small area bordering the Silver Lake waterfront falls in the
demographic category of “0-7.7%” African-Americans, and
another area falls into the “8.3-24.5%” category, the majority of
the waterfront is made up of over 24.9% African-Americans.
JA263.
16
Hogsten did not recall referring to “pressure” in
conversations with plaintiffs, but explained that the comment
may have referred to the pressure of “getting all [the plaintiffs]
to the settlement table all at the same time,” and given such a

36
point to the comment by Wicks that “a lot of people . . . are not
happy” with the Silver Lake sale, apparently because plaintiffs
were moving into “an exclusive lily white community.” JA384,
385. When we give plaintiffs the benefit of any inferences that
can be drawn, as we must when reviewing a grant of summary
judgment, these comments, taken together, might hint at
discrimination. However, a rational jury could not say they are
sufficient to show, by a preponderance of the evidence, “that
discrimination was more likely than not a . . . determinative
cause of” Wachovia’s actions. Fuentes, 32 F.3d at 764. Nor do
they suffice to discredit the nondiscriminatory reasons proffered
by Wachovia by demonstrating such weaknesses in those
reasons that a reasonable juror could rationally find them
unworthy of credence. Id. at 765. Moreover, the loans were
ultimately approved and the sales did close. While not
conclusive, this tends to detract from a finding of purposeful
discrimination.

It was therefore proper for the District Court to enter

short time frame, which was especially difficult because of “the
properties” and the bank’s “guidelines.” JA459. In other words,
“the pressure was from the underwriter,” and “from Mr.
Anderson because he was the spokesman for all three of the loan
applications” and was calling Hogsten every day about them.
JA459. Hogsten denied having received any pressure from any
members of the Silver Lake community. However, he was not
asked during his deposition to comment on his alleged use of the
phrase “you people.”

37
summary judgment in Wachovia’s favor on the § 1981 claim.17

III.

Plaintiffs argue that the District Court inappropriately
granted summary judgment on their breach of contract claim.
As noted above, we exercise plenary review of a district court’s
grant of summary judgment.

The District Court initially dismissed this claim in
deciding Wachovia’s motion to dismiss. The Court concluded
that plaintiffs had not satisfied the requirement of Delaware law
that a breach of contract claim identify the contractual provision
that was allegedly breached. Anderson I, 497 F. Supp. 2d at
581. Plaintiffs then filed a second amended complaint, which
retained the breach of contract claim. The only changes
plaintiffs made to this claim in the second amended complaint
were to replace the phrase “[b]reach of contract for a mortgage”
with the phrase “[b]reach of the mortgage application contract”
and to adjust the amount of damages that they claimed. JA616,
JA620, JA624.

17
Plaintiffs also argue that the entry of summary
judgment was inappropriate because they had been denied
discovery about Wachovia’s mortgage approval rates. Since, as
we discuss above, plaintiffs should not have been required to
produce comparative evidence, this argument is moot. In any
event, we would not consider such an argument in light of
plaintiffs’ failure to file an affidavit under Rule 56(f). See, e.g.,
Bradley v. United States, 299 F.3d 197, 207 (3d Cir. 2002).

38
 Wachovia then moved for summary judgment. Although
the motion did not explicitly address the breach of contract
claim, it did indicate that Wachovia was seeking judgment on
what it said were the only two claims remaining in the case (the
§ 1981 and good faith and fair dealing claims), and it was not
styled as a motion for partial summary judgment. Even though
Wachovia had not specifically requested dismissal of the breach
of contract claim in this motion, the Court dismissed the claim,
noting that it had been “previously dismissed . . . for failure to
identify ‘any express contract provision that was breached,’”
and that plaintiffs had “again fail[ed] to identify an express
contract provision that was breached.” Anderson II, 609 F.
Supp. 2d at 366 (quoting Anderson I, 497 F. Supp. 2d at 581).
Plaintiffs argue that it was improper for the Court to have
granted judgment on this claim, since Wachovia had not
explicitly sought summary judgment.

We disagree. “[D]istrict courts are widely acknowledged
to possess the power to enter summary judgments sua sponte, so
long as the losing party was on notice that she had to come
forward with all of her evidence.” Celotex Corp. v. Catrett, 477
U.S. 317, 326 (1986). The notice requirement is satisfied when
a case involves “the presence of a fully developed record, the
lack of prejudice, [and] a decision based on a purely legal
issue.” Gibson v. City of Wilmington, 355 F.3d 215, 224 (3d
Cir. 2004).

Plaintiffs here were on adequate notice that this claim
was subject to dismissal. The District Court entered summary
judgment on this claim as a matter of law on the ground that it
was inadequately pled, for the same reasons stated in the Court’s

39
previous decision. Plaintiffs have offered no explanation as to
how they would have benefitted from an opportunity to submit
further evidence or briefing on this claim; indeed, they appear
to have essentially disregarded the District Court’s earlier
admonition explaining why the claim was inadequately pled.18
Although we reiterate that “the sua sponte grant of summary
judgment, without giving notice to the parties, is not the
preferred method by which to dispose of claims,” Gibson, 355
F.3d at 224, we find no error in the District Court’s disposition
of the breach of contract claim in this case.19

IV.

Plaintiffs argue that the District Court erred in dismissing
their claim that Wachovia tortiously interfered with their
contracts with Aigner by requiring unnecessary repairs. As
stated above, we exercise plenary review of a district court’s
grant of summary judgment.

Plaintiffs’ tortious interference claim is grounded in

18
Plaintiffs do not appear to argue that the disposition of
this claim was wrong on the merits, and, in any event, we agree
with the District Court that plaintiffs failed to plead the breach
of contract claim adequately.
19
We do not accept Wachovia’s argument that plaintiffs
waived this cause of action simply by informing the Court that
the claims in the second amended complaint would not require
additional discovery.

40
§ 766A of the Restatement (Second) of Torts, which states as
follows:

O ne who intentionally and
improperly interferes with the
performance of a contract . . .
between another and a third person,
by preventing the other from
performing the contract or causing
his performance to be more
expensive or burdensome, is
subject to liability to the other for
the pecuniary loss resulting to him.

The key difference between § 766A and the more traditional
form of a tortious interference claim, which is embodied in
§ 766 of the Restatement and has been expressly adopted by
Delaware courts, see Irwin & Leighton, Inc. v. W.M. Anderson
Co., 532 A.2d 983, 992 (Del. Ch. 1987),20 is that a § 766A claim

20
Section 766 provides as follows:
O ne w ho intentionally and
improperly interferes with the
performance of a contract . . .
between another and a third person
by inducing or otherwise causing
the third person not to perform the
contract, is subject to liability to the
other for the pecuniary loss
resulting to the other from the

41
can rest on an allegation that the plaintiff’s “performance [was
caused] to be more expensive or burdensome.” Thus, unlike a
§ 766 plaintiff, a § 766A plaintiff is not required to show that
the defendant caused the breach of the plaintiff’s contract.

The District Court dismissed this claim because “no state
court in Delaware has ever recognized a cause of action under
§ 766A,” noting that we had predicted in Gemini Physical
Therapy & Rehabilitation, Inc. v. State Farm Mutual
Automobile Insurance Co., 40 F.3d 63, 66 (3d Cir. 1994), that
Pennsylvania would not recognize § 766A as a cause of action
because allowing such a claim would be “too speculative and
subject to abuse.” Anderson I, 497 F. Supp. 2d at 583-84.

Plaintiffs contend that the District Court erred in this
determination. They argue that § 766A has been incorporated
into Delaware law by two decisions: DeBonaventura v.
Nationwide Mutual Insurance Co., 419 A.2d 942, 947 (Del.
Super. Ct. 1980), and Nelson v. Fleet National Bank, 949 F.
Supp. 254, 260 (D. Del. 1996). However, nothing in
DeBonaventura indicates that the Court intended to adopt
§ 766A as part of Delaware law. Nor does Nelson offer any
support for plaintiffs, since it is a decision issued by a federal
court without any analysis of whether Delaware courts would
recognize § 766A.

We are aware of no cases in which the Delaware courts

failure of the third person to
perform the contract.

42
have adopted § 766A, and plaintiffs offer no argument as to why
Delaware would recognize § 766A as a new cause of action.
We explained at some length in Windsor Securities, Inc. v.
Hartford Life Insurance Co., 986 F.2d 655, 661-63 (3d Cir.
1993), why Pennsylvania courts would be unlikely to adopt
§ 766A, and we relied on this analysis in Gemini to predict that
Pennsylvania courts would not adopt § 766A. We similarly
believe that Delaware courts would not allow a tortious
interference claim based on an allegation that the defendant
caused the plaintiff’s performance to be more expensive or
burdensome, since such an allegation would be “too speculative
and subject to abuse to provide a meaningful basis for a cause
of action.” Gemini, 40 F.3d at 66 (internal quotation marks and
citation omitted). We therefore hold that the District Court
properly dismissed the tortious interference claim.

V.

Plaintiffs argue that the District Court erred by denying
their motion to compel responses to certain discovery requests.
We review a district court’s discovery orders for abuse of
discretion, and will not disturb such an order absent a showing
of actual and substantial prejudice. Mass. Sch. of Law at
Andover, Inc. v. Am. Bar Ass’n, 107 F.3d 1026, 1032 (3d Cir.
1997); Hewlett v. Davis, 844 F.2d 109, 113 (3d Cir. 1988).

Plaintiffs moved to compel responses to two categories
of discovery requests. The first category comprised
interrogatories regarding plaintiffs’ loan applications, such as
the names of various people involved in the approval process
and the dates on which certain events occurred. The second

43
category sought information regarding Wachovia’s approval
rates of mortgages for African-American applicants. The
District Court denied the motion on the ground that the
discovery sought was unduly burdensome or irrelevant. With
respect to the first category, the Court accepted Wachovia’s
representations that the responsive information was available in
plaintiffs’ loan files (which amounted to about 1000 pages and
had already been produced to plaintiffs), and that plaintiffs were
in as good a position to compile the information as Wachovia.
The Court therefore instructed plaintiffs to review the
documents they had received and to notice depositions if
necessary to obtain additional information. With respect to the
second category, the Court noted that information regarding
approval rates would not be meaningful unless it was evaluated
in the context of all of the criteria used by Wachovia to approve
or deny specific mortgages. However, the Court determined that
this additional information could be obtained only through a
detailed review of application files, which would constitute “an
incredible invasion of privacy.” JA19.

Wachovia’s principal argument on appeal is that
plaintiffs were required to file an affidavit under Federal Rule
of Civil Procedure 56(f) in order to preserve their challenge to
the discovery order. We disagree. Nothing in Rule 56(f) or the
cases cited by Wachovia supports this argument. While a Rule
56(f) affidavit must be filed to preserve an argument that
summary judgment was improperly granted because they were
denied discovery, that requirement does not prevent plaintiffs
from challenging the District Court’s discovery order itself.

Nonetheless, in light of plaintiffs’ failure to show any

44
prejudice from the discovery order, we believe that the District
Court acted within its discretion in denying plaintiffs’ motion.
According to Wachovia’s unrefuted representations, the
information sought by plaintiffs’ interrogatories was contained
in the documents produced to plaintiffs. Nor is there any basis
for us to conclude that the District Court abused its discretion in
denying discovery regarding the approval rates, since this
information was not crucial to plaintiffs under the prima facie
case that we have set forth above,21 and since compiling
meaningful statistics about Wachovia’s approval rates would
have been highly burdensome and would have entailed a
substantial invasion of the privacy of other Wachovia customers.

VI.

After granting summary judgment on plaintiffs’ other
claims, the District Court remanded their good faith and fair
dealing claim to Delaware state court. Wachovia argues that
this was an abuse of discretion, principally because the dismissal
of the § 1981 claim was fatal to the good faith and fair dealing
claim, and the District Court could thus have easily disposed of
the state law claim. Wachovia also contends that the good faith
and fair dealing claim is preempted by federal law, and that the

21
Moreover, in light of plaintiffs’ allegation that
Wachovia discriminated against them specifically because they
wished to purchase homes in the Silver Lake community, we are
not persuaded that a general breakdown along racial lines of
Wachovia’s approval rates “in Delaware or nationally,” JA255-
56, would have been probative of plaintiffs’ claims.

45
District Court had greater expertise to resolve that issue.

We review a district court’s decision to remand a claim
under 28 U.S.C. § 1367(c)(3) for abuse of discretion. Lazorko
v. Pa. Hosp., 237 F.3d 242, 247 (3d Cir. 2000). In determining
whether the district court abused its discretion, we consider
“whether the dismissal of the pendent claims best serves the
principles of judicial economy, convenience, fairness, and
comity.” Annulli v. Panikkar, 200 F.3d 189, 202 (3d Cir. 1999),
abrogated on other grounds, Rotella v. Wood, 528 U.S. 549
(2000).

Under Delaware law, a party breaches the implied
covenant of good faith and fair dealing by engaging in “arbitrary
or unreasonable conduct which has the effect of preventing the
other party to the contract from receiving the fruits of the
bargain,” or by “frustrat[ing] the overarching purpose of the
contract by taking advantage of [its] position to control
implementation of the agreement’s terms.” Dunlap v. State
Farm Fire & Cas. Co., 878 A.2d 434, 442 (Del. 2005).
Plaintiffs’ good faith and fair dealing claim thus raises different
issues from their § 1981 claim. Even if Wachovia did not act
with discriminatory intent, a jury might find that Wachovia had
acted arbitrarily or had taken advantage of its position to control
the implementation of any contract between Wachovia and the
plaintiffs. 22 Thus, the disposition of the § 1981 claim was not
fatal to the good faith and fair dealing claim. Contrary to

22
We of course express no opinion regarding the merits
of this claim.

46
Wachovia’s contention, the state court is adequately positioned
to resolve all aspects of this claim, including the issue of
whether it is preempted by federal law. We therefore find no
abuse of discretion in the District Court’s decision to remand
this claim, and we need not reach Wachovia’s arguments
regarding its merits.

VII.

For the foregoing reasons, we will affirm the orders and
judgment of the District Court.

47