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National Community Reinvestment Coalition v. Novastar Financial

March 27, 2009


The opinion of the court was delivered by: Royce C. Lamberth, Chief Judge


Before the Court are three substantive motions: plaintiff's Motion [26] for Leave to Amend the Complaint, plaintiff's Motion [38] to Compel Appearance of Rule 30(b)(6) Designee in Washington, D.C., and plaintiff's Motion [40] to Compel Discovery Responses. As detailed below, the Court will grant plaintiff's Motion [26], grant plaintiff's Motion [38], and deny without prejudice plaintiff's Motion [40].

A. Factual Background

Plaintiff is suing defendants for alleged violations of the Fair Housing Act, 42 U.S.C. §§ 3604 and 3605. Specifically, plaintiff alleges that defendants discriminated against Native Americans, people with disabilities, and African Americans by explicitly refusing to grant mortgages secured by "properties located on Indian reservations," "properties for adult foster care," or row houses in Baltimore, respectively. Plaintiff seeks declaratory, equitable, and monetary relief.

B. Plaintiff's Motion [26] for Leave to Add W. Lance Anderson as a Defendant

Plaintiff seeks leave to amend its Complaint to add W. Lance Anderson, co-founder of NovaStar Financial and president of both NovaStar Financial and NovaStar Mortgage, as a defendant. An answer having been filed, this Court will "freely give leave when justice so requires." Fed. R. Civ. P. 15(a)(2).However, it is within the Court's discretion to deny leave to amend for "sufficient reason, such as 'undue delay, bad faith, [ ] dilatory motive . . . repeated failure to cure deficiencies by [previous] amendments . . . [or] futility of amendment.'" Firestone v. Firestone, 76 F.3d 1205, 1208 (D.C. Cir. 1996) (quoting Foman v. Davis, 371 U.S. 178, 182 (1962)). The Court shall grant leave to amend here.

Plaintiff seeks to add Anderson because, based on defendants' interrogatory responses and other information, plaintiff contends that Anderson is the sole person responsible for the allegedly discriminatory lending policies challenged in the Complaint. (Pl.'s Mot. [26] at 1.) Defendants argue that (a) because of the fiduciary shield doctrine the Court cannot exercise jurisdiction over nonresident Anderson, and (b) even if it could the claims against Anderson are without merit and do not warrant amending the Complaint.

Anderson works in Kansas City, Missouri and lives in a nearby Kansas suburb. This Court may exercise jurisdiction over a nonresident defendant if jurisdiction is proper under both the D.C. longarm statute and the requirements of constitutional due process. GTE New Media Services, Inc. v. BellSouth Corp., 199 F.3d 1343, 1347 (D.C. Cir. 2000). Defendants argue that this Court's exercise of jurisdiction over Anderson would fail because of the fiduciary shield doctrine. The fiduciary shield doctrine counsels that "[p]ersonal jurisdiction over the employees or officers of a corporation in their individual capacities must be based on their personal contacts with the forum and not their acts and contacts carried out solely in a corporate capacity." Bailey v. J & B Trucking Servs., Inc., 577 F. Supp. 2d 116, 118--19 (D.D.C. 2008) (quoting Wiggins v. Equifax, Inc., 853 F. Supp. 500, 503 (D.D.C. 1994) (Lamberth, J.)). Because Anderson's contacts with D.C. are all in his corporate capacity, defendants argue, the fiduciary shield doctrine makes jurisdiction over him improper. Plaintiff counters that an exception to the fiduciary shield applies to Anderson and thus corporate contacts with the forum can be considered.

1. If an Exception to the Fiduciary Shield Applies, Personal Jurisdiction Over Anderson Is Appropriate

Absent the fiduciary shield doctrine issue-that is, if an exception to the doctrine applies-this Court can exercise personal jurisdiction over nonresident Anderson. Under the Fifth Amendment's Due Process Clause, this Court can exercise jurisdiction over Anderson if he has purposefully established "minimum contacts with [the District of Columbia] such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). The Court can-absent the fiduciary shield-attribute NovaStar Financial and NovaStar Mortgage's connections with Washington, D.C. to Anderson. Defendant companies clearly have such contacts: between 1999 and 2007 NovaStar Mortgage received 3,021 loan applications from D.C. residents, and 1,230 of those applications were approved with loans made. (Pl.'s Reply Ex. D [30-5] (Decl. of Caitlin Parton) (reviewing Home Mortgage Disclosure Act records).)Such a pattern of accepting applications from and making loans to District residents, when attributed to Anderson, constitutes purposeful establishment of minimum contacts with the District such that this Court's exercise of jurisdiction would not offend traditional notions of fair play and substantial justice.

As for the D.C. longarm statute, D.C. Code § 13-423(a), plaintiff argues that jurisdiction could be achieved under subsection (a)(1). Subsection (a)(1) grants personal jurisdiction over an individual "as to a claim for relief arising from the person's . . . transacting any business in the District of Columbia." This Circuit has held that subsection (a)(1) "is given an expansive interpretation that is coextensive with the due process clause." Helmer v. Doletskaya, 393 F.3d 201, 205 (D.C. Cir. 2004) (quoting Mouzavires v. Baxter, 434 A.2d 988, 992 (D.C. 1981)). Therefore, because this Court has already held that the due process clause has been satisfied through NovaStar Mortgage's transactions with District residents, subsection (a)(1) of the longarm statute is satisfied as well.

2. The "More Than An Employee" Exception to the Fiduciary Shield Applies to Anderson

Plaintiff argues that the fiduciary shield doctrine is inapplicable when the defendant is "more than an employee" of the corporation. This exception has indeed been recognized in this jurisdiction. For example, the D.C. Superior Court did not apply the fiduciary shield doctrine to two defendants who were the "only corporate officers" of the corporation, "set company policies and procedures," were "active in day-to-day operations of the company," and were "involve[d with] and supervis[ed] all aspects of the company." Covington & Burling v. Int'l Marketing & Research, Inc., Civ. No. 01-4360, 2003 WL 21384825 at *6 (D.C. Super. 2003) (BlackburneRigsby, J.). Another judge of this Court has twice recognized Covington, but in both those cases he determined that the exception did not apply to the relevant facts. In Kopff v. Battaglia, a "chief programmer" of a blast-fax advertising firm was found to be not as integrally involved with the company as the defendants in Covington. He was not an officer, and he did not have "any role in directing or controlling company policy." Kopff, 425 F. Supp. 2d 76, 85 (D.D.C. 2006) (Bates, J.). In D'Onofrio v. SFX Sports Group, Inc., the Court determined that a CFO and a head of human resources, though directly involved with the plaintiff's firing, did not play enough of a role in the corporate structure for jurisdiction to lie under the "more than an employee" exception. D'Onofrio, 534 F. Supp. 2d 86, 92--93 & n.6 (D.D.C. 2008) (Bates, J.).

Anderson lies somewhere between the sole officers in Covington and the employees in Kopff and D'Onofrio. Based on the information before the Court, though, he seems closer to the officers in Covington-that is, he appears to be "more than an employee." Again, he is the founder of defendant NovaStar Financial and the president of both defendant companies. Defendants' interrogatory response listed Anderson, and only Anderson, when asked to "identify . . . all individuals responsible for NovaStar's [challenged] policies." (Defs.' Opp'n Ex. B [27-4] at 9.) Although he is not the sole officer of the defendant entities, as was the case in Covington, Anderson, as president, does appear to exert significant ...

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