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Reneau v. Wells Fargo Bank N.A.

United States District Court, D. Oregon

December 23, 2019

CHRISTOPHER LEE RENEAU, Plaintiff-Appellant,
v.
WELLS FARGO BANK, N.A., Defendant-Appellee.

          OPINION AND ORDER

          Michael J. McShane, United States District Judge.

         Plaintiff-Appellant Christopher Lee Reneau appeals the final decision of the U.S. Bankruptcy Court for the District of Oregon granting Defendant Wells Fargo Bank, N.A.'s Motion for Summary Judgment. This Court has jurisdiction under 28 U.S.C. § 158. The issue before this Court is whether Reneau raised a genuine issue of material fact as to why Wells Fargo terminated his employment. Reneau argues that Wells Fargo unlawfully discriminated against him under 11 U.S.C. § 525 by terminating his employment solely because of his bankruptcy, insolvency, or failure to pay dischargeable debt. Wells Fargo responds that it lawfully terminated Reneau for failing to meet loan originator qualifications under Regulation Z of the Truth in Lending Act. Because Reneau did not raise a genuine issue of material fact, the Bankruptcy Court's decision granting summary judgment is AFFIRMED.

         BACKGROUND

         Wells Fargo is a loan originator organization subject to regulations under the Truth in Lending Act. Regulation Z of the Truth in Lending Act imposes loan originator qualifications, which require organizations to ensure that their loan originator employees meet certain standards having to do with financial responsibility. When an organization becomes aware, based on “reliable information known, ” that a loan originator employee likely does not meet these qualifications, the organization must obtain the employee's criminal background check, credit report, and information from the Nationwide Mortgage Licensing System and Registry. 12 C.F.R. § 1026.36(f)(3)(i)(A)-(C). With this information and any other information reasonably known to the organization, it must then determine whether the employee has demonstrated the “financial responsibility, character, and general fitness such as to warrant a determination that the individual loan originator will operate honestly, fairly, and efficiently.” 12 C.F.R. § 1026.36(f)(3)(ii)(B).

         Wells Fargo has written procedures to ensure compliance with Regulation Z. When there is reliable information known (“RIK”) to Wells Fargo that suggests a loan originator employee does not meet the loan originator qualifications, a Financial Fitness Team (“FFT”) reviews the RIK to determine whether the employee continues to meet the qualifications. The FFT includes a voting committee comprised of three members. To make its determination on the employee's financial fitness, the voting committee refers to Wells Fargo's New Loan Originator Delegation Guidelines. The guidelines include considerations like the reason for a credit delinquency, the debt amount, and any circumstances the employee may have submitted for consideration. ER 244, 247. Not all RIKs are subject to FFT review; for example, if a credit report shows a single bankruptcy that is greater than three years old with no other criteria present, the FFT system automatically approves the employee without a manual evaluation. ER 261. Additionally, the FFT will approve an employee with an active Chapter 13 bankruptcy without escalating the case to the voting committee if the employee has a history of two or more years of successful payments. Id.

         Reneau worked as a personal banker-i.e., a position subject to loan originator qualifications under Regulation Z-with Wells Fargo since 2012. ER 260, 307. Reneau filed for Chapter 13 bankruptcy on March 6, 2018. ER 346. On September 22, 2018, Wells Fargo received notification of a wage order to satisfy payments under Reneau bankruptcy plan. ER 272. A notification of this type qualified as RIK and, consequently, the FFT notified Reneau that it would perform a financial fitness review to ensure that he continued to meet the loan originator qualifications. ER 261-62, 274-75. An Operational Risk Consultant corresponded with Reneau multiple times over the next few weeks to obtain information for the FFT, including an explanation of why he filed for bankruptcy and why he fell behind on his bankruptcy payments. ER 262, 276-80.

         The consultant presented a case summary to the FFT voting committee and, instead of voting to approve or deny, the voting committee members requested more information from Reneau. ER 262. Specifically, the voting committee sought an explanation of a $30, 000 debt to Verizon and Reneau's reason for filing for bankruptcy. Id. Reneau explained that the Verizon account was his ex-wife's personal bill and he filed for bankruptcy because of a $100, 000 medical expense from his ex-wife and because he needed to get caught up on personal bills. ER 279, 295. The consultant presented Reneau's case to the voting committee a second time, including the new information he provided, and the voting committee unanimously voted to deny Reneau as failing to meet the loan originator qualifications. ER 263. As a result, Reneau was removed from his loan originator position and placed on an unpaid job-search leave for six months. ER 211-12. Reneau resigned his employment with Wells Fargo three months later. Appellee's Br. 11.

         Reneau then filed a complaint alleging that Wells Fargo unlawfully discriminated against him under 11 U.S.C. § 525 by terminating his employment solely because of his bankruptcy, insolvency, or failure to pay dischargeable debt. Wells Fargo moved for summary judgment, arguing that the undisputed evidence showed it lawfully terminated Reneau's employment for failing to meet loan originator qualifications. After the Bankruptcy Court granted Wells Fargo's Motion for Summary Judgment, Reneau timely filed a notice of appeal seeking judicial review of the Bankruptcy Court's decision.

         STANDARD OF REVIEW

         This Court reviews the Bankruptcy Court's findings of fact for clear error and conclusions of law de novo. In re Filtercorp, Inc. v. Gateway Venture Partners III, L.P., 163 F.3d 570, 576 (9th Cir. 1998). On appeal of a grant of summary judgment, this Court must determine whether any genuine issues of material fact exist and whether the Bankruptcy Court correctly applied the relevant substantive law. Id. at 578. An issue is “genuine” if a reasonable jury could find in favor of the nonmoving party. Rivera v. Phillip Morris, Inc., 395 F.3d 1142, 1146 (9th Cir. 2005) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). A fact is “material” if it could affect the outcome of the case. Id. This Court views evidence in the light most favorable to the nonmoving party. In re Filtercorp, 163 F.3d at 578. But the “mere existence of a scintilla of evidence in support of the plaintiff's position [is] insufficient” to avoid summary judgment. Anderson, 477 U.S. at 252. Uncorroborated allegations and “self-serving testimony” are also insufficient. Villiarimo v. Aloha Island Air, Inc., 281 F.3d 1054, 1061 (9th Cir. 2002).

         DISCUSSION

         The Bankruptcy Code prohibits a private employer from terminating an employee “solely because” the employee is or has been bankrupt or a debtor, has been insolvent, or has not paid a dischargeable debt. 11 U.S.C. § 525(b). To maintain a cause of action under 11 U.S.C. § 525(b), a plaintiff must demonstrate that one of these reasons “provided the sole reason for termination.” Comeaux v. Brown & Williamson Tobacco Co., 915 F.2d 1264, 1269 (9th Cir. 1990). As the inquiries leading to Reneau's termination all revolved around his Chapter 13 bankruptcy, it may appear at first glance that Wells Fargo terminated Reneau because of his bankruptcy, insolvency, or failure to pay dischargeable debt. However, the evidence shows that Wells Fargo evaluated Reneau's financial situation after reliable information became known to Wells Fargo that called into question Reneau's financial fitness. Ultimately, Wells Fargo lawfully terminated Reneau for failing to meet loan originator qualifications.

         As a loan originator organization, Wells Fargo has policies and procedures in place to meet the requirements of Regulation Z. Among these procedures is a multi-level review process that evaluates the circumstances of a loan originator employee's financial situation when the employee's financial fitness is called into question. Here, after Wells Fargo received notification of a wage order from Reneau's bankruptcy, the FFT voting committee reviewed Reneau's case on two separate occasions, requesting additional information from him, and allowed him to provide any explanation and documentation to support his case. See ER 262-63, 354-57. In a series of emails, Reneau explained that the $30, 000 Verizon debt was his ex-wife's personal account and that he filed for bankruptcy because of a $100, 000 medical expense from his ex-wife going to rehab and to get caught up on personal bills. ER 279, 295. Voting committee member John Hauer recalled the $30, 000 Verizon debt coming up in a case review because “the amount was so unusually high.” ER 245.

I wondered whether the debt related to a personal account, (which suggested to me financial irresponsibility), or a business account. I also recall reviewing a Case Summary where the loan originator identified a $100, 000 medical debt as a reason for ...

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