Calderone v. Sonic Houston JLR, LP
MEMORANDUM AND OPINION entered: Sonic Houston's motion for summary judgment on the §5567 retaliation claim is granted. (Docket Entry No. 11). The § 1981 claim remains. (Signed by Judge Lee H Rosenthal) Parties notified.(leddins, 4)
United States District Court
Southern District of Texas
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
STEVEN A. CALDERONE,
SONIC HOUSTON JLR, LP,
October 14, 2016
David J. Bradley, Clerk
CIVIL ACTION NO. H-15-3699
MEMORANDUM AND OPINION
Steven A. Calderone, a car salesman, sued his former employer, Sonic Houston, the owner
of the car dealership where he worked. (Docket Entry No. 23). Mr. Calderone alleged that during
his employment, Sonic Houston refused to extend financing for, or sell cars to, customers who were
otherwise qualified but who were members of racial minorities. (Id.). Mr. Calderone alleged that
he complained about the discrimination and was fired in retaliation. (Id.). He asserts a retaliation
claim under the Consumer Financial Protection Act, 12 U.S.C. § 5567, and a race-discrimination
claim under 28 U.S.C. § 1981, and seeks compensatory and punitive damages. (Id.).
Sonic Houston moved to dismiss Mr. Calderone’s retaliation claim under Rule 12(b)(6), or
alternatively, under Rule 56. (Docket Entry No. 11). Sonic Houston contends that it cannot be
liable under the Consumer Financial Protection Act because it excludes auto dealerships from the
jurisdiction or enforcement authority of the Consumer Financial Protection Bureau. (Id.). Mr.
Calderone responds by arguing that Sonic Houston falls within the exception to the auto-dealership
exclusion because it financed the cars it sold. (Docket Entry No. 12). He alternatively argues that
even if Sonic Houston is not covered by the Act, he reasonably believed that it was covered. (Id.).
Based on the pleadings, the motions and responses, the arguments of counsel presented in
a hearing as well as in their briefs, and the applicable law, the court grants Sonic Houston’s motion
for summary judgment as to the Consumer Financial Protection Act retaliation claim, making the
dismissal motion moot as to that claim. (Docket Entry No. 11). The court previously dismissed the
§ 1981 claim with leave to amend, which Mr. Calderone has done. The court dismissed the Sabine
Pilot claim with prejudice and without leave to amend, because the alleged illegal act Calderone
asserts he refused to perform did not carry criminal penalties and Mr. Calderone’s refusal to
participate in the discriminatory practices was not the sole reason for his termination.
The reasons for the ruling on the Consumer Financial Protection Act is stated below.
From October 2013 to September 2014, Mr. Calderone sold cars at a dealership owned by
Sonic Houston. (Docket Entry No. 23 at ¶ 9, 37). Mr. Calderone alleged that during his
employment, Sonic Houston supervisors and managers refused to allow him and other sales
representatives to obtain financing for minority customers who qualified for the loans and who were
members of racial minorities. (Id. at ¶¶ 15–20). Mr. Calderone alleged that even if minority
customers could get their own financing, Sonic Houston’s management refused to sell them cars.
(Id. at ¶¶ 15–18). Mr. Calderone specifically identified two minority customers who wanted to buy
cars with their own financing but could not because Sonic Houston supervisors and managers denied
The court is considering this as a motion for summary judgment. The factual summary is taken
from the complaint and from summary judgment evidence in the record, including the affidavit of Frank
Pecka, Sonic Houston’s finance manager, explaining how the dealership arranges for third-party lenders to
finance the vehicles Sonic Houston sells. (Docket Entry No. 5, Ex. A).
approval. (Id. at ¶¶ 15–20). Two other minority customers agreed to buy cars, but Sonic Houston
allegedly refused to approve them to obtain financing for the purchases. (Id.).
Mr. Calderone alleged that he confronted several supervisors and managers about the
discrimination. These included the new-car director, Dwayne Flynn, and the finance manager, Frank
Pecka. (Id. at ¶¶ 21–22). Mr. Flynn allegedly responded by lunging at Mr. Calderone with a raised
fist. (Id. at ¶ 21). Mr. Calderone then went to Mr. Pecka, who identified the general manager, A.J.
Giblin, as the one deciding whether the dealership would sell a car to a given customer. (Id. at ¶ 22).
Mr. Calderone reported the discriminatory practices and what happened at the meetings with Mr.
Flynn and Mr. Pecka to Marlena Warthan, a human-resources employee at the dealership. (Id. at
¶ 23). He also drafted a report about the incidents. (Id.). The next day, Mr. Giblin, the general
manager, came to Mr. Calderone to retrieve the file for a rejected sale to a minority customer. (Id.
at ¶ 24). At Ms. Warthan’s instruction, Mr. Calderone refused to hand over the file, and Mr. Giblin
told him to go home. (Id.).
Mr. Calderone met with Ms. Warthan about his complaint against Mr. Flynn. (Id.). Mr.
Calderone again emphasized that he believed that certain sales had not occurred because of racial
discrimination. (Id. at ¶ 26). Ms. Warthan called Mr. Flynn into the meeting and described the
racial discrimination Mr. Calderone had reported. (Id.). Mr. Giblin was then called into the meeting
and given the same report. (Id.) Mr. Calderone was asked to leave the meeting. (Id.).
Mr. Calderone alleged that the dealership began to build a fictitious case for terminating him
in retaliation for reporting the racially discriminatory practices. (Id. at ¶ 33). He alleged that the
dealership, among other things, paid “mystery shoppers” to give Mr. Calderone poor performance
reviews. (Id. at ¶¶ 42–43). Mr. Calderone was terminated based on these bad reviews and on
insubordination. (Id. at ¶¶ 39–40). Mr. Giblin was also terminated. (Id. at ¶ 37).
This memorandum and opinion addresses the retaliation claim under § 5567(a). The § 1981
claim is not addressed and remains in the case.
The Legal Standards under Rule 12(b)(6) and Rule 56
In considering a Rule 12(b)(6) motion to dismiss, the court is generally limited to the
allegations on the face of the complaint. To the extent a Rule 12(b)(6) motion or response relies on
matters outside the pleadings, the court may either ignore those additional data or to treat the motion
“as one for summary judgment under Rule 56.” FED. R. CIV. P. 12(d). In support of its motion,
Sonic Houston attached an affidavit from Mr. Pecka describing how Sonic Houston is involved in
customer financing to purchase vehicles. (Docket Entry No. 5, Ex. A). Because this court considers
the affidavit in its ruling, the motion is properly considered as one for summary judgment. FED. R.
CIV. P. 12(d).
“Summary judgment is required when ‘the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of law.’” Trent v. Wade,
776 F.3d 368, 376 (5th Cir. 2015) (quoting FED. R. CIV. P. 56(a)). “A genuine dispute of material
fact exists when the ‘evidence is such that a reasonable jury could return a verdict for the nonmoving
party.’” Nola Spice Designs, LLC v. Haydel Enters., Inc.,783 F.3d 527, 536 (5th Cir. 2015) (quoting
Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986)). “The moving party ‘bears the initial
responsibility of informing the district court of the basis for its motion, and identifying those
portions of [the record] which it believes demonstrate the absence of a genuine issue of material
fact.’” Id. (quoting EEOC v. LHC Grp., Inc., 773 F.3d 688, 694 (5th Cir. 2014)); see also Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986).
“Where the non-movant bears the burden of proof at trial, the movant may merely point to
the absence of evidence and thereby shift to the non-movant the burden of demonstrating by
competent summary judgment proof that there is an issue of material fact warranting trial.” Id.
(quotation marks omitted); see also Celotex, 477 U.S. at 325. Although the party moving for
summary judgment must demonstrate the absence of a genuine issue of material fact, it does not
need to negate the elements of the nonmovant’s case. Boudreaux v. Swift Transp. Co., 402 F.3d 536,
540 (5th Cir. 2005). “A fact is ‘material’ if its resolution in favor of one party might affect the
outcome of the lawsuit under governing law.” Sossamon v. Lone Star State of Texas, 560 F.3d 316,
326 (5th Cir. 2009) (quotation omitted). “If the moving party fails to meet [its] initial burden, the
motion [for summary judgment] must be denied, regardless of the nonmovant’s response.” United
States v. $92,203.00 in U.S. Currency, 537 F.3d 504, 507 (5th Cir. 2008) (quoting Little v. Liquid
Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc)).
“Once the moving party [meets its initial burden], the nonmoving party must ‘go beyond the
pleadings and by her own affidavits, or by the depositions, answers to interrogatories, and
admissions on file, designate specific facts showing that there is a genuine issue for trial.’” Nola
Spice, 783 F.3d at 536 (quoting EEOC, 773 F.3d at 694). The nonmovant must identify specific
evidence in the record and articulate how that evidence supports that party’s claim. Baranowski v.
Hart, 486 F.3d 112, 119 (5th Cir. 2007). “This burden will not be satisfied by ‘some metaphysical
doubt as to the material facts, by conclusory allegations, by unsubstantiated assertions, or by only
a scintilla of evidence.’” Boudreaux, 402 F.3d at 540 (quoting Little, 37 F.3d at 1075). In deciding
a summary-judgment motion, the court draws all reasonable inferences in the light most favorable
to the nonmoving party. Connors v. Graves, 538 F.3d 373, 376 (5th Cir. 2008); see also Nola Spice,
783 F.3d at 536.
The Consumer Financial Protection Act established an independent entity within the Federal
Reserve System called the Bureau of Consumer Financial Protection. The Bureau was authorized
to promulgate regulations to enforce “enumerated consumer laws,” including the Equal Credit
Opportunity Act. That Act makes it unlawful for any creditor to discriminate against any credit
applicant on the basis of race, color, religion, national origin, sex, marital status, or age (provided
that the applicant has the capacity to contract). 15 U.S.C. §1691(a)(1).
The Consumer Financial Protection Act’s antiretaliation provision states, in pertinent part:
(a) No covered person or service provider shall terminate or in any other way
discriminate against, or cause to be terminated or discriminated against, any covered
employee or any authorized representative of covered employees by reason of the
fact that such employee or representative, whether at the initiative of the employee
or in the ordinary course of the duties of the employee (or any person acting pursuant
to a request of the employee), has–
(1) provided, caused to be provided, or is about to provide or cause to be
provided, information to the employer, the Bureau, or any other State, local,
or Federal, government authority or law enforcement agency relating to any
violation of, or any act or omission that the employee reasonably believes to
be a violation of, any provision of this title or any other provision of law that
is subject to the jurisdiction of the Bureau, or any rule, order, standard, or
prohibition prescribed by the Bureau;
12 U.S.C. § 5567(a). Mr. Calderone contends that Sonic Houston’s actions violated the Equal Credit
Opportunity Act, which is within the Bureau’s jurisdiction. Sonic Houston raises the Consumer
Financial Protection Act’s exclusion of certain entities from the Bureau’s jurisdiction. The
Consumer Financial Protection Act’s exclusion provision states:
(a) Sale, servicing, and leasing of motor vehicles excluded
Except as permitted in subsection (b), the Bureau may not exercise any rulemaking,
supervisory, enforcement or any other authority, including any authority to order
assessments, over a motor vehicle dealer that is predominantly engaged in the sale
and servicing of motor vehicles, the leasing and servicing of motor vehicles, or both.
12 U.S.C. § 5519(a). There is an exception to the auto-dealer exclusion:
Subsection (a) shall not apply to any person, to the extent that such person–
(2) operates a line of business–
(A) that involves the extension of retail credit or retail leases involving motor
(B) in which–
(i) the extension of retail credit or retail leases are provided directly
to consumers; and
(ii) the contract governing such extension of retail credit or retail
leases is not routinely assigned to an unaffiliated third party finance
or leasing source . . . .
12 U.S.C. § 5519(b). Mr. Calderone argues that the Act covers his claim because Sonic Houston
extends financing to its customers, or that he at least reasonably believed that the Act covered his
Sonic Houston does not fall within the exception to the auto-dealer exclusion. Sonic
Houston presents an undisputed affidavit, (Docket Entry No. 5, Ex. A), showing that it does not
provide financing directly to customers. 12 U.S.C. § 5519(b)(2)(B)(i–ii). Instead, it helps prepare
and send customers’ financing applications to unaffiliated third-party lenders for the lenders to
review and to make the financing decisions. (Id.).
Although there are no cases on point that the parties cited, the legislative history shows that
the exception to the auto-dealership exclusion covers auto dealers that do not themselves provide
financing. The House member offering the amendment containing the relevant language stated that
“automobile dealers, in the normal course of their business, do not lend money and are not financial
institutions and should not be subject to the additional regulation of the CFPA. If, however, they
do lend money and act like financial institutions, then they will be subject. That is what the bill
says.” 155 Cong. Rec. H14747-04, 2009 WL 4729710, at *H14751 (Dec. 11, 2009). Senator Sam
Brownback offered the same amendment in the Senate and made a similar statement: “If you
actually loan the money . . . you are under the CFPB. If you are simply the retail storefront, which
is what the auto dealers are, you are not covered under the Consumer Financial Protection Bureau.
. . . If you are an auto dealer and you make the actual loan yourself and it is your money you are
lending, you are covered. . . . 100 percent of auto loans will still be covered. It is just the auto
dealership will not be the one that is covered, the upstream financier will . . . .”2 156 Cong. Rec.
S4130-01, 2010 WL 2035460, at *S4131 (May 24, 2010). The statute’s language and the legislative
history make it clear that the exception to the auto-dealership exclusion does not apply to a
dealership like Sonic Houston, which brokers loans for customers from unaffiliated third parties.
Mr. Calderone’s claim that he reasonably believed that Sonic Houston was an entity covered
under the Act’s protections is unpersuasive. The undisputed facts show that the Act does not apply
to the dealership as a matter of law. See Murray v. UBS Securities, LLC, 2015 WL 769586, at *5–*6
(S.D. N.Y. Feb. 24, 2015). When, as here, a statute does not apply to the defendant as a matter of
law, a plaintiff’s belief to the contrary, however sincere, is not “reasonable” within the meaning of
the case law. The analysis under Title VII is similar. See, e.g., Wilson v. Delta State Univ., 143 F.
App’x 611, 613–14 (5th Cir. 2005) (when conduct does not violate Title VII as a matter of law, the
plaintiff’s alleged belief to the contrary could not have been reasonable); Kummerle v. EMJ Corp.,
No. 3:11-cv-2839-D, 2012 WL 2995065, at *4 (N.D. Tex. July 23, 2012) (“A plaintiff’s belief is not
objectively reasonable if the law is settled that the employment practice . . . is not unlawful under
Mr. Calderone argues in supplemental briefing that the Bureau’s website shows that the Act covers
Sonic Houston because consumers can report complaints about vehicle loans. (Docket Entry No. 31). As
shown by the legislative history, there was never any question that vehicle loans were covered under the Act.
The exclusion covers auto dealerships that, like Sonic Houston, do not loan the money or otherwise act as
Title VII.”). Mr. Calderone could not have held a “reasonable belief” that Sonic Houston violated
the Equal Credit Opportunity Act’s protections when Sonic Houston itself is excluded from the
Bureau’s jurisdiction3 and enforcement authority.
Sonic Houston’s motion for summary judgment on the §5567 retaliation claim is granted.
(Docket Entry No. 11). The § 1981 claim remains.
SIGNED on October 14, 2016, at Houston, Texas.
Lee H. Rosenthal
United States District Judge
Mr. Calderone argues in supplemental briefing that Sonic Houston falls within the Bureau’s
jurisdiction because it is subject to the enumerated consumer laws listed in 12 U.S.C. § 5481(12). (Docket
Entry No. 30). That list specifically notes that it is subject to the auto-dealership exclusion. 12 U.S.C. §
5481(12) (“Except as otherwise specifically provided in section 5519 of this title . . .”). Nor does Sonic
Houston’s compliance with other federal laws subject it the jurisdiction of the Bureau. See 15 U.S.C. § 6804
(the Bureau does not have authority to prescribe regulations under the Graham-Leach-Billey Act, which
requires Sonic Houston to maintain an information security policy).
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