Human Resource Selection 9th Edition by Marianne Jennings

Exercise 1

Nash Cooley is a 66-year-old African American male who lives in Montgomery, Alabama. Since the mid- 1980s, Mr. Cooley had earned a living from his ownership of residential rental properties in the Montgomery area. Mr. Cooley owns approximately 15 apartment units and 24 houses.
In order to have the financial flexibility to invest in new real estate ventures, Mr. Cooley maintained active lines of credit with various financial institutions. By the summer of 2000, Mr. Cooley had $100,000 in unsecured lines of credit at two separate banks. He ultimately hoped to establish five $100,000 lines of credit in order to complete a real estate project that he began in 1992. To meet his financial goals, Mr. Cooley approached Sterling Bank in September 2000 about another $100,000 unsecured line of credit. He chose Sterling because he had a prior business relationship with Kenny Hill, who had worked at another bank where Mr. Cooley had a line of credit. In early 2000, Mr. Hill had spoken with Mr. Cooley about bringing some of his business to Sterling. Mr. Cooley opened a checking account with Sterling and maintained a balance of approximately $15,000 in the account, then deposited a $100,000 insurance settlement several months before applying for his credit line.
In September 2000, Mr. Cooley met with Mr. Hill to apply for a $100,000 unsecured line of credit with Sterling. He submitted a credit application and provided Mr. Hill with all of his relevant financial information, including tax returns and a personal financial statement. On September 15, 2000, Mr. Hill conducted a credit check on Mr. Cooley that revealed a "Beacon Score" of 749. Although this score was commensurate with an "excellent credit rating," Mr. Hill became concerned about Mr. Cooley's income level after reviewing the remainder of Mr. Cooley's financial information. His most recent tax return indicated that Mr. Cooley and his wife had a joint pretax income of $106,214. Of this amount, Mr. Hill calculated that the income attributable to Mr. Cooley was $51,483. Because Mr. Cooley was applying for an unsecured line of credit in his name only, Mr. Hill was worried that the income level was insufficient for him to obtain a $100,000 line of credit. Additionally, Mr. Hill was apprehensive about approving Mr. Cooley's request knowing that Mr. Cooley had two existing $100,000 lines of credit.
After Mr. Hill compiled Mr. Cooley's loan materials, he presented them to Bob Ramsey, Sterling's executive vice president in charge of lending. Because Mr. Hill did not have the authority to approve a loan in excess of $50,000, he met with Mr. Ramsey to discuss the Cooley loan application. During this meeting Mr. Ramsey reviewed Mr. Cooley's financial statement and tax return. Mr. Hill expressed his concerns about Mr. Cooley's financial situation, and Mr. Ramsey concurred. In short, Mr. Ramsey concluded that Mr. Cooley's "individual income of $51,464 simply did not justify adding another $100,000 unsecured debt on top of the two existing lines of credit at other banks totaling $200,000." Instead of denying Mr. Cooley's request outright, Mr. Ramsey suggested making either a secured loan in the same amount or an unsecured loan for $25,000. After Mr. Ramsey and Mr. Hill agreed that a counteroffer was the best solution, Mr. Hill informed Mr. Ramsey that Mr. Cooley was "African American and might claim racism." In response, Mr. Ramsey suggested discussing the matter with Alan Worrell, Sterling's chief executive officer. Mr. Worrell agreed with Mr. Hill and Mr. Ramsey's assessment of Mr. Cooley's financial situation and indicated his preference to find an alternative way to establish a credit relationship with Mr. Cooley.
On September 18, 2000, Mr. Hill informed Mr. Cooley of Sterling's decision and gave him a document entitled "Notice of Action Taken." The document explained that Sterling could not provide Mr. Cooley with a $100,000 unsecured line of credit but was willing to offer "a $25,000 unsecured line of credit or a larger secured line." In response, Mr. Cooley immediately requested a list of the individuals on Sterling's Board of Directors so he could contact them about his loan denial. Mr. Cooley also expressed his belief that Sterling was discriminating against him on the basis of race.
Mr. Worrell met with Mr. Cooley and told him that he had "good credit" but expressed concerns about his income level and existing lines of credit. At the conclusion of the meeting, Mr. Worrell emphasized that he wanted to do business with Mr. Cooley.
During Sterling's Board of Directors meeting on September 20, 2000, and, according to Greg Calhoun, an African-American member of Sterling's Board of Directors, individual Board members began discussing Mr. Cooley's application during the meeting. Mr. Calhoun stated in his deposition that the Board "didn't think [Mr. Cooley] could qualify for a hundred thousand dollar line of credit being… that he was a retired school teacher." Moreover, Board members "jok[ed] about [Mr. Cooley's application]" and "laughed about Cooley." In response, Mr. Calhoun told the other Board members that he believed they were putting Mr. Cooley down. Mr. Calhoun then "told them they was [ sic ] all Republicans, and they're all members of the Montgomery Country Club. And there's no way that a black man can come in here and get money from the bank." Following this statement, Mr. Calhoun informed the Board that he was resigning. In Mr. Calhoun's opinion, Sterling denied the loan application "because of [Mr. Cooley's] skin color."
Mr. Cooley filed suit for violation of the ECOA. Should he prevail in the suit? [ Cooley v Sterling Bank , 280 F.Supp.2d 1331 (M.D. Ala. 2003)]