Ninth Circuit Reverses Dismissal of Pricing Discrimination Suit Against Auto Dealers

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On July 13, the U.S. Court of Appeals for the Ninth Circuit reversed a district court’s dismissal of a Department of Justice suit alleging that two automobile dealers violated the Equal Credit Opportunity Act by charging non-Asian customers higher “overages” or “dealer mark-ups” than similarly-situated Asian customers. United States v. Union Auto Sales, Inc. No. 9-7124, 2012 WL 2870333 (9th Cir. Jul. 13, 2012). A bank within whose network the automobile dealers operated, settled related charges concurrent with the filing of the case. The automobile dealers chose to litigate, eventually succeeding on a motion to dismiss. On appeal, the court reversed the district court’s holding that the complaint lacked sufficient supporting detail to give the defendants fair notice of the claim. Instead, the divided appeals court held that the government need not demonstrate discrimination at the pleading stage, but merely allege facts sufficient to make a discrimination claims plausible, a threshold met by the government’s complaint. One judge dissented from the majority opinion and argued that the government’s conclusory allegations do not meet the plausibility threshold established in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) and a subsequent Ninth Circuit decision. The majority also held that the district court erred in dismissing the complaint for failing to articulate intent, noting that under both disparate impact and disparate treatment theories, intent is irrelevant. Further, the court held that the link between names and racial categorization for the purposes of discriminatory conduct is well-established. The case was remanded for further proceedings.