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Diamond Ventures, LLC v. Baruah

March 29, 2010


The opinion of the court was delivered by: Gladys Kessler United States District Judge


In this case brought under the Equal Credit Opportunity Act ("ECOA"), Plaintiff, Diamond Ventures, LLC ("Diamond"), claims that the Small Business Administration ("SBA") discriminated against it as a minority-owned company when it failed to license it as a Small Business Investment Company ("SBIC"). Defendant moves for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure, which Plaintiff has opposed. Upon consideration of the parties' submissions and the entire record, and for the following reasons, the Court will deny Defendant's motion.


SBICs are privately owned companies the SBA licenses to provide financing and consulting services to small businesses. See 15 U.S.C. § 681 et seq. In December 2001, Diamond submitted to the SBA a Management Assessment Questionnaire ("MAQ") dated December 7, 2001, to obtain a Participating Securities SBIC license. Def's Mot., Declaration of Harry Haskins ("Haskins Decl.") [Dkt. No. 90-2] ¶ 20. The MAQ was referred to SBA Financial Analyst Karen Ellis for review. Id. Subsequently, Diamond submitted a revised or amended MAQ dated March 29, 2002. Id. ¶¶ 20-21. Diamond proposed "to focus on funding businesses in inner city low income areas with high African American populations." 2nd Am. Compl. [Dkt. No. 47] ¶ 57. By letter of April 24, 2002, Diamond submitted another amended MAQ and requested the SBA to review Diamond as a Debenture Securities Licensee, rather than as a Participating Securities Licensee. Haskins Decl., Ex. 4 (sealed).

Ellis recommended against inviting Plaintiff for an interview, and on June 4, 2002, Defendant's Investment Committee unanimously adopted her recommendation, effectively rejecting Diamond's proposal for an SBIC license. Haskins Ex. 6; see 2nd Am. Compl. ¶ 14 ("The SBA does not accept SBIC license applications from those who have not been invited."). Defendant explained its decision in a detailed letter to Plaintiff dated July 23, 2002. Haskins Decl., Ex. 7. Following a meeting with Plaintiff in September 2002, Defendant agreed to review another MAQ submitted by Diamond, in October, 2002, Haskins Decl. ¶ 32, and assigned it to SBA Analyst Stephen Knott for review, Haskins Decl. ¶ 33. Knott also recommended against inviting Plaintiff for an interview, and the Investment Committee again unanimously adopted the recommendation. Id. ¶ 34. Defendant explained its decision in a detailed letter dated February 25, 2003. Haskins Decl., Ex. 11.*fn1

Earl Peek, who was a member of Diamond's management team, filed this civil action pro se on June 30, 2003. His second amended complaint filed on December 12, 2003, substituted Diamond Ventures, LLC, as the proper plaintiff. The parties commenced discovery in June 2004 following the Court's denial of Defendant's Rule 12(b)(6) motion to dismiss on the ground that Defendant is not a creditor within the meaning of ECOA. See Memorandum Opinion and Order of June 8, 2004 [Dkt. No. 25]. Defendant has not renewed the foregoing argument as a basis for dismissal or summary judgment.

Defendant filed its Motion for Summary Judgment on October 30, 2008 and briefing was completed on March 26, 2009.


Summary judgment is warranted only "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c); see Celotex Corp. v. Catrett, 477 U.S. 317 (1986). As a general rule, "[i]n deciding whether there is a genuine issue of fact before it, the court must assume the truth of all statements proffered by the party opposing summary judgment." Greene v. Dalton, 164 F.3d 671, 674 (D.C. Cir. 1999). All reasonable inferences that may be drawn from the facts must be drawn in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). The non-movant, however, "may not rest upon the mere allegations or denials of his pleading, but... must set forth specific facts showing that there is a genuine issue for trial." Id., 477 U.S. at 248.

"A dispute over a material fact is 'genuine' if 'the evidence is such that a reasonable jury could return a verdict for the non-moving party'.... Factual disputes that are irrelevant or unnecessary will not be counted." Arrington v. United States, 473 F.3d 329, 333 (D.C. Cir. 2006) (quoting Anderson, 477 U.S. at 248). A fact is "material" if it might affect the outcome of the case under the substantive governing law. Anderson, 477 U.S. at 248. When facts are not controverted in opposition to a summary judgment motion, the Court "may assume that facts identified by the moving party in its statement of material facts are admitted." Local Civil Rule 7(h). When facts are disputed, however, "credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts, are jury functions, not those of a judge." Anderson, 477 U.S. at 255. The Supreme Court has consistently emphasized that "at the summary judgment stage, the judge's function is not... to weigh the evidence and determine the truth of the matter, but to determine whether there is a genuine issue for trial." Id. at 248. Our Court of Appeals has warned that in cases alleging discrimination, summary judgment "must be approached with special caution." Aka v. Washington Hospital Center, 116 F.3d 876, 879-80 (D.C. Cir. 1997), rev'd on other grounds, 156 F.3d 1284 (D.C. Cir. 1998) (en banc) (citation and internal quotation omitted).


ECOA makes it unlawful for any creditor to discriminate against any application, with respect to any aspect of a credit transaction... on the basis of race...." 15 U.S.C. § 1691(a). The purpose of ECOA is to prohibit "credit decisions based on factors such as... race which are irrelevant to creditworthiness." Miller v. Am. Express Co., 688 F.2d 1235, 1238 (9th Cir. 1982).

Pursuant to the Small Business Investment Act, the SBA licenses SBICs to "stimulate and supplement the flow of private equity capital and long-term loan funds" to small businesses. 15 U.S.C. § 661. In general, SBICs raise their own financing capital by, among other vehicles, issuing securities backed or guaranteed by the SBA. Thus, in the event an SBIC defaults on its commitment to security holders, the SBA guarantees payment and the SBIC becomes indebted to the SBA for repayment. Haskins Decl. ¶¶ 5-8. Upon receipt of an application for an SBIC license, the SBA Administrator must determine whether the applicant meets certain private capital requirements and whether its management "is qualified and has the knowledge, experience, and capability necessary to comply with this chapter." 15 U.S.C. § 681(c)(3). Consideration is given to "the need for and availability of financing for small business concerns in the geographic area in which the applicant is to commence business," the business reputation of the applicant's owners and management and the probable success of proposed operations, "including adequate profitability and financial soundness." Id.

The "first step" in the process is "the [applicant's] submission of an MAQ, which seeks information primarily on the proposed business strategy of the SBIC and the qualifications of the individuals who will manage the prospective SBIC." Haskins Decl. ΒΆ 12. If a majority of Defendant's Investment Committee votes in favor of the MAQ, the "prospective management team is invited for an interview. If that is successful, [the team] receives what is commonly ...

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