Kellie Ballard v. Bank of America, NA

Filing

PUBLISHED AUTHORED OPINION filed. Originating case number: 8:12-cv-03737-RWT. [999229736]. [13-1418]

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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 13-1418

KELLIE M. BALLARD,
Plaintiff - Appellant,
v.
BANK OF AMERICA, N.A.,
Defendant - Appellee.

Appeal from the United States District Court for the District of
Maryland, at Greenbelt. Roger W. Titus, District Judge. (8:12cv-03737-RWT)

Argued:

September 20, 2013

Decided:

October 30, 2013

Before MOTZ, SHEDD, and THACKER, Circuit Judges.

Affirmed by published opinion. Judge Motz wrote the opinion, in
which Judge Thacker joined.
Judge Shedd wrote a separate
opinion concurring in the judgment.

ARGUED:
Roger Charles Simmons, GORDON & SIMMONS, LLC,
Frederick, Maryland, for Appellant.
E. John Steren, OBER,
KALER, GRIMES & SHRIVER, PC, Washington, D.C., for Appellee. ON
BRIEF:
Jodi Lynn Foss, GORDON & SIMMONS, LLC, Frederick,
Maryland, for Appellant.
Amy E. Garber, OBER, KALER, GRIMES &
SHRIVER, PC, Washington, D.C., for Appellee.

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DIANA GRIBBON MOTZ, Circuit Judge:
Kellie Ballard appeals from the judgment of the district
court dismissing her federal and state Equal Credit Opportunity
Act (“ECOA”) claims, and her claims for unjust enrichment and a
declaratory judgment.

We affirm.

I.
Kellie

Ballard’s

husband,

Michael

Ballard,

operates FoodSwing, a food-packing company.

owns

and

In March 2008, he

entered into an agreement with Bank of America (“the Bank”) to
obtain

a

loan

for

FoodSwing

in

the

amount

of

$4,100,000.

Although Mrs. Ballard assertedly plays no role in the ownership
or operation of FoodSwing, Bank of America required her to sign
the loan agreement as a guarantor.

She guaranteed “full and

complete

waived

payment”

of

the

loan

and

“[a]ll

rights

of

redemption” with respect to the property securing the loan.
In 2009, FoodSwing defaulted on the loan.

Michael Ballard

then entered into a modified loan agreement with Bank of America
to restructure the debt.

FoodSwing defaulted two more times --

once

in

in

2010

and

once

2011.

agreements followed these defaults.

More

debt

restructuring

As with the initial loan,

Bank of America required that Mrs. Ballard guarantee each new
agreement.

These

restructuring

agreements

contained

a

comprehensive waiver requiring Mr. and Mrs. Ballard to waive
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“any and all” claims -- past, present, or future -- against Bank
of

America.

In

each

agreement,

Mr.

and

Mrs.

Ballard

acknowledged that they “actively and with full understanding”
participated

in

negotiating

the

agreement

“after

consultation

and review with their counsel.”
Although counsel represented Mrs. Ballard at the time she
signed all of the loan documents, she contends that her counsel
operated under impermissible conflicts of interest.

She alleges

that she signed the loan agreements only at the insistence of
her conflicted attorneys.

(At oral argument, Mrs. Ballard’s

counsel also claimed that her husband misinformed her about the
nature of the documents she signed.)
Among other assets, a home in Maryland and a winery in
California secured the loans to FoodSwing.

Mrs. Ballard co-

owned these two properties with her husband.

After the 2011

default,

liens

Bank

of

America

recorded

consensual

on

both

properties.
In November 2012, Mrs. Ballard filed this action against
Bank of America.
and

state

guarantor.

ECOA

She alleges that the Bank violated the federal
by

requiring

her

to

serve

as

her

husband’s

She seeks equitable and injunctive relief for these

asserted ECOA violations, asserts a claim for unjust enrichment,
and seeks a declaratory judgment.

The district court dismissed

her complaint with prejudice, reasoning that she failed to state
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a claim upon which relief can be granted and that, in any event,
waiver and limitations barred her claims.

II.
We review dismissals for failure to state a claim de novo.
United States ex rel. Nathan v. Takeda Pharm. N. America, Inc.,
707 F.3d 451, 455 (4th Cir. 2013).

To survive a motion to

dismiss, “a complaint must contain sufficient factual matter,
accepted as true, to state a claim to relief that is plausible
on its face.”

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

(quotation marks omitted).
favor of the plaintiff.

We draw “reasonable inference[s]” in

Id.

The Equal Credit Opportunity Act makes it unlawful for “any
creditor to discriminate against any applicant, with respect to
any aspect of a credit transaction on the basis of . . . marital
status.”

15 U.S.C. § 1691(a)(1) (2006).

Specifically, ECOA

regulations prohibit lenders from requiring a spouse’s signature
on a loan agreement when the applicant individually qualifies
for

the

requested

credit.

12

C.F.R.

§ 202.7(d)(1)

(2013)

(lenders may not “require the signature of an applicant’s spouse
or other person, other than a joint applicant, on any credit
instrument

if

the

applicant

qualifies

standards

of

creditworthiness”).

under

Congress

the

creditor’s

enacted

this

prohibition to eradicate credit discrimination against married
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women, whom many creditors traditionally had refused to consider
for individual credit.
Not

every

signature

required

of

a

borrower’s

spouse,

however, constitutes credit discrimination under ECOA.

Rather,

the statutory scheme provides for several exceptions permitting
lenders to obtain the signature of a borrower’s spouse on a loan
agreement.
First,

and

most

obviously,

ECOA

regulations

expressly

authorize lenders to obtain the signature of a borrower’s spouse
if the borrower does not independently qualify for the loan.
But

lenders

determining

may

obtain

that

creditor’s

the

the

spouse’s

borrower

standards

of

does

signature

not

creditworthiness

terms of the credit requested.”

only

qualify
for

after

“under

the

the

amount

and

Id.

Second, ECOA permits lenders to obtain the signature of a
borrower’s spouse who owns or co-owns the entity benefitting
from the loan.
for

the

applicant
business

loan

Even if the spouse does not technically apply
herself,

because
for

she

which

she

qualifies

possesses

the

loan

an

is

as

a

“de

ownership

sought.

facto”
stake

Given

joint

in

that

the
ECOA

regulations expressly permit a lender to require a signature
from a joint applicant spouse, see id., courts have found no
ECOA violation where a lender requires a signature from a de
facto

joint

applicant

spouse.

See
5

Midlantic

Nat’l

Bank

v.

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Hansen, 48 F.3d 693, 700 (3d Cir. 1995) (because loans financed
a company co-owned by the spouses, the wife “at the very least”
was

a

de

facto

joint

applicant

who

could

be

required

to

guarantee the loans); Riggs Nat’l Bank of D.C. v. Webster, 832
F. Supp. 147, 151 (D. Md. 1993) (because the loan was obtained
to renovate a property owned by the borrower’s wife, she was “de
facto a joint applicant” who could be required to guarantee the
loan).

Thus, banks may treat the co-owner of a business as a

joint applicant for a loan to that business -- even if the coowner happens to be the primary applicant’s spouse.
Third,

when

collateral

for

seeking

loan),

a

a

two

spouses

loan
ECOA

(as

co-own

opposed

permits

a

property
to

designated

co-owning

lender

to

the

require

as

entity

the

non-

applicant spouse to sign the loan “for the purpose of creating a
valid

lien,

passing

clear

title,

property, or assigning earnings.”

waiving

inchoate

rights

to

15 U.S.C. § 1691d(a) (2006).

ECOA regulations clarify that, in an application for secured
credit, “a creditor may require the signature of the applicant’s
spouse . . . on any instrument necessary, or reasonably believed
by the creditor to be necessary, under applicable state law to
make the property being offered as security available to satisfy
the debt in the event of default.”

12 C.F.R. § 202.7(d)(4).

These provisions ensure that a lender can acquire collateral co-

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owned by the borrower’s spouse in the event that the borrower
defaults.

III.
The parties primarily contest -- and the district court
primarily addressed -- whether Bank of America violated ECOA.
We therefore consider this question first.
A.
Mrs. Ballard contends that Bank of America violated ECOA by
forcing

her

to

guarantee

evaluating

her

husband’s

apparently

concedes

that

the

loan

agreement

independent
it

would

without

first

creditworthiness. 1

She

have

been

permissible

to

require her signature for the limited purpose of relinquishing
her rights “to property she co-owns with her husband” -- the
Maryland home and the California winery.

1

Appellant’s Br. 19.

Although Federal Reserve Board regulations (recently readopted by the Consumer Financial Protection Bureau) include
guarantors within the definition of “applicants” with standing
to bring an ECOA claim, 12 C.F.R. §§ 202.2(e) & 1002.2(e), Judge
Posner has expressed doubt that “the statute can be stretched
far enough to allow this interpretation.” Moran Foods, Inc. v.
Mid-Atl. Mkt. Dev. Co., LLC, 476 F.3d 436, 441 (7th Cir. 2007).
But no court has so held and, indeed, other courts have treated
guarantors as applicants as the regulations provide.
See
Silverman v. Eastrich Multiple Investor Fund, L.P., 51 F.3d 28,
31 (3d Cir. 1995); Anderson v. United Fin. Co., 666 F.2d 1274,
1276 (9th Cir. 1982).
Because resolution of this issue is not
determinative given our disposition of this case, we will
assume, without deciding, that guarantors do qualify as
applicants for purposes of ECOA.
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claims

that

ECOA

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prohibited

Bank

of

America

from

requiring her to assume unlimited liability on the debt.
ECOA’s text lends support to Mrs. Ballard’s claim that Bank
of

America

violated

ECOA

by

requiring

her

to

guarantee

the

FoodSwing loan.

It is undisputed that Bank of America required

Mrs.

execute

Ballard

to

an

unlimited

guarantee

of

the

loan.

This guarantee was therefore permissible only if it was subject
to

an

exception

to

ECOA’s

general

requiring a spousal signature.

rule

barring

lenders

from

No such exception is apparent

here.
First, the guarantee apparently cannot be justified on the
ground that the Bank had concluded that Mr. Ballard was not
creditworthy.
complaint

This is so because Mrs. Ballard alleges in her

that

Bank

of

America

did

not

assess

her

husband’s

creditworthiness before requiring her to sign on the loan.

In

reviewing a grant of a motion to dismiss, we must assume the
truth of this allegation.
Second,

obtaining

Mrs.

Ballard’s

signature

apparently

cannot be justified on the ground that she co-owns the business
benefitting

from

the

loan.

Mrs.

Ballard

alleges

in

her

complaint that she is neither an owner nor a shareholder of
FoodSwing.

And so, again, we must assume the truth of this

allegation at this stage of the litigation.

Because spouses are

“de facto joint applicants” only when they co-own the entity
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benefitting from the loan, the Bank apparently could not require
Mrs. Ballard to sign as a guarantor on the theory that she was a
de facto joint applicant.
Finally, it does not appear that the unlimited guarantee
can be justified on the ground that Mrs. Ballard co-owned two
properties securing the loan.

Although ECOA permits lenders to

seek the signature of a spouse who co-owns collateral securing
the loan, the plain language of the statute limits the effect of
the spouse’s signature in these circumstances to “creating a
valid lien [or] passing clear title” to co-owned property.
U.S.C.

§ 1691d(a).

ECOA’s

implementing

regulations

15

further

reinforce that a co-owner spouse’s obligation must be limited to
“mak[ing] the property being offered as security available to
satisfy

the

§ 202.7(d)(4).

debt

in

the

event

of

default.”

12

C.F.R.

In other words, although ECOA permits lenders to

require a borrower’s spouse to relinquish her interest in coowned collateral, it appears to prohibit lenders from demanding
that a spouse guarantee the full loan without first appraising
the borrower’s creditworthiness.
the

statute’s

clear

spouse’s guarantee.

limits

on

Any other reading would ignore
the

permissible

scope

Our case law supports this conclusion.

of

a
See

Riggs Nat’l Bank of D.C. v. Linch, 36 F.3d 370, 374 (4th Cir.
1994) (wife who co-owned collateral could be required to execute

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an unlimited personal guarantee, but only because the lender
first determined that her husband was not creditworthy).
B.
Bank

of

America

maintains,

of

course,

that

it

violate ECOA by requiring Mrs. Ballard’s guarantee.
contends

that

a

borrower’s

spouse

becomes

a

de

did

not

The Bank

facto

joint

applicant merely by virtue of co-owning any of the collateral
securing the loan.

The Bank claims that Moran, 476 F.3d at 442,

Hansen, 48 F.3d at 700, and Webster, 832 F. Supp. at 151, all
hold that a spouse who co-owns any collateral can be required to
provide an unlimited guarantee as a condition for the loan.
Those cases, however, do not sweep so broadly.

In Hansen,

48 F.3d at 700, and Webster, 832 F. Supp. at 151, the courts
grounded

their

conclusion

that

the

plaintiff

was

a

de

facto

joint applicant on the fact that she owned part or all of the
entity for which the loan was sought.

Although the reasoning in

Moran was less clear, no ECOA violation occurred in that case
because

the

plaintiff

also

benefitting from the loan.

co-owned

one

of

the

entities

See Appellant’s Br. at 49, Moran,

476 F.3d 436 (Nos. 05-3656 & 05-3735).

Accordingly, the lenders

in all three cases complied with ECOA not because the guarantor
spouse co-owned some property with the borrower, but because she
owned or co-owned the property directly benefitting from the
loan.
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Treating the co-owner of a property as a joint applicant
for a loan benefitting that property makes sense; repayment of
the loan will often depend on business decisions made by the coowners jointly.

It makes less sense to treat a spouse as a

joint applicant merely because she happens to co-own some assets
with her applicant husband.

Under the theory espoused by Bank

of America, any time a borrower’s spouse co-owns any property
designated

as

could

required

be

collateral,

borrower’s debt.

to

no

matter

assume

how

unlimited

minimal,

the

liability

spouse
on

the

Such a construction would permit an unlimited

spousal guarantee in almost every instance, and would seem to
contravene the plain language and purpose of ECOA.
Accordingly, Bank of America well may have violated ECOA by
requiring Mrs. Ballard to sign as an unlimited guarantor without
first determining that her husband was not creditworthy.

We

need not, however, definitively resolve that question because
Mrs. Ballard’s claim fails for another reason -- she waived it.

IV.
The initial loan guarantee that Mrs. Ballard executed in
March

2008

America
damages.”

for

included

a

“punitive,

waiver

of

exemplary

any

claims

or

other

against

Bank

of

non-compensatory

That waiver did not constitute a release of Mrs.

Ballard’s ECOA claims, for it did not forfeit her right to sue
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Bank of America for actual damages or attorneys’ fees.

See 15

U.S.C.

actual

§

1691e(a),

(d)

(authorizing

damages and attorneys’ fees).

ECOA

suits

for

After FoodSwing’s first default

in 2009, however, Mrs. Ballard executed a series of four loan
restructuring

agreements.

Each

of

these

restructuring

agreements expressly waived “any and all” claims by Mrs. Ballard
against Bank of America in exchange for the Bank’s waiver of
FoodSwing’s defaults.
A valid waiver can prevent a borrower from recovering under
a federal statute. 2
obtained

through

A court will enforce a waiver unless it was
intentional

misconduct,

Wartsila

NSD

N.

America, Inc. v. Hill Int’l, Inc., 530 F.3d 269, 274 (3d Cir.
2008); Eaglehead Corp. v. Cambridge Capital Grp., Inc., 170 F.
Supp.

2d

552,

559

n.7

(D.

Md.

2001);

was

not

knowing

and

voluntary, Alexander v. Gardner-Denver Co., 415 U.S. 36, 52 n.15
(1974);
statute]

or

would

was

“thwart

designed

to

the

legislative

effectuate,”

policy

Brooklyn

which

Sav.

[the

Bank

v.

O’Neil, 324 U.S. 697, 704 (1945).

2

Depending on the statute at issue, a court will apply
either federal or state law to determine the validity of a
waiver of federal statutory rights.
See Kendall v. City of
Chesapeake, 174 F.3d 437, 441 n.1 (4th Cir. 1999). We have not
yet determined whether we evaluate ECOA waivers under the
federal totality-of-the-circumstances approach or the state
contract-law approach.
We need not here resolve that question
because the waiver of “any and all” claims is valid under both
approaches.
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Mrs. Ballard contends that enforcing sweeping waivers like
the ones she signed as part of the restructuring would fatally
undermine the purpose of ECOA.

She maintains that if lenders

could, by obtaining a single signature, commit an ECOA violation
and simultaneously induce borrowers to waive their ECOA rights,
lenders

could

engage

in

credit

discrimination

with

impunity.

For this reason, she argues that the waivers she signed at Bank
of America’s insistence are unenforceable.
Her argument might well have merit if the Bank in fact had
required her to waive her ECOA rights as a precondition for
obtaining the loan.

In the analogous context of Title VII,

federal law prohibits employers from conditioning an offer of
employment
rights.

upon

an

applicant’s

waiver

of

nondiscrimination

See Gardner-Denver, 415 U.S. at 51 (“[W]e think it

clear that there can be no prospective waiver of an employee’s
rights under Title VII.ˮ). When enacting ECOA, it seems unlikely
that

Congress

intended

to

permit

lenders

to

predicate

the

extension of credit upon a borrower’s initial willingness to
endure discriminatory treatment.
But Bank of America did not require Mrs. Ballard to execute
a prospective waiver of her ECOA rights.

Instead, the Bank

obtained

Mrs.

exchange

agreement

to

Thus,

Bank

Ballard’s
restructure

of

America

waiver
the

loan

agreed

to
13

only

in

after
work

FoodSwing
with

the

for

its

defaulted.

Ballards

to

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resolve FoodSwing’s defaults, but only if the Ballards consented
to

forfeit

all

past,

present,

and

future

claims

against

the

Bank.
Conditioning a favorable loan restructuring upon a waiver
of ECOA rights seems to us analogous to the common employment
practice of conditioning a favorable severance agreement upon a
waiver of Title VII rights.

See, e.g., Gardner-Denver, 415 U.S.

at 52 (“presumably an employee may waive his cause of action
under Title VII as part of a voluntary settlement”); Cassiday v.
Greenhorne & O’Mara, Inc., 220 F. Supp. 2d 488, 494 (D. Md.
2002) (upholding Title VII release agreement made in exchange
for ten weeks of severance pay).

An ECOA waiver obtained in

exchange for a loan restructuring differs significantly from one
required as a precondition for a loan.

The latter would permit

a bank to circumvent ECOA’s clear dictates.
affords both parties a negotiated benefit:

The former merely
a means of escaping

default for the borrower, and protection against future claims
for the lender.
to

refinancing

In fact, refusing to enforce waivers attendant
could

well

harm

borrowers

like

the

Ballards,

since a lender would be reluctant to work with a borrower to
restructure a loan after a default if the lender knew that a
waiver would not be enforced.
In

exchange

for

Bank

of

America’s

restructuring

of

the

loan, Mrs. Ballard executed waivers of all claims against the
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Bank on four separate occasions over a period of more than two
years.

Further, she confirmed that she “actively and with full

understanding” participated in negotiating each agreement “after
consultation and review with [her] counsel.” 3

In doing so, Mrs.

Ballard waived her right to bring an action against Bank of
America, and thus her state and federal ECOA claims must fail.
We similarly conclude that Mrs. Ballard waived her claims
for unjust enrichment and for declaratory relief.

Because we

deem her claims waived, we need not address whether these claims
were also time-barred.

V.
For the foregoing reasons, the judgment of the district
court is
AFFIRMED.

3

Mrs. Ballard alleges that her attorneys’ asserted
conflicts of interest rendered her waivers involuntary. But she
fails to plead facts giving rise to a plausible inference that
any such conflicts prompted her repeated decisions to waive her
ECOA rights. See Iqbal, 556 U.S. at 678.
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SHEDD, Circuit Judge, concurring in the judgment:
Because I agree that Kellie Ballard waived any claim she
had under the Equal Credit Opportunity Act (“ECOA”), I concur in
the judgment reached by the court.
I do not join Part III of the majority opinion, which—as
even

the

appeal.
(noting

majority

concedes—is

unnecessary

to

deciding

the

See Leiba v. Holder, 699 F.3d 346, 352 (4th Cir. 2012)
dicta

majority’s

is

“non-binding”).

suggestion,

I

believe

In
that

fact,
ECOA

contrary
does

not

to

the

cover

a

“guarantor” under the circumstances presented here, where Bank
of America is not discriminating against Ballard on account of
her

marital

status;

rather,

the

Bank

is

requiring

more

of

Ballard on account of her joint-ownership of property and her
wealth.

Therefore, the Bank’s actions are “sound commercial

practice unrelated to any stereotypical view of a wife’s role”
and do not violate ECOA.

Moran Foods, Inc. v. Mid-Atl. Mkt.

Dev. Co., LLC, 476 F.3d 436, 442 (7th Cir. 2007).

16