ALEXANDRIA, Va. — The plaintiffs in a closely watched and widely publicized mortgage discrimination lawsuit against Navy Federal Credit Union have voluntarily dropped their claims, bringing an end to litigation that accused the nation’s largest credit union of discriminating against minority mortgage applicants and had produced a significant federal appeals court ruling on class-action litigation.
The nine plaintiffs voluntarily dismissed their claims in August in U.S. District Court for the Eastern District of Virginia in Oliver v. Navy Federal Credit Union, according to court records and reports based on the federal docket.
The dismissal came more than two years after the litigation began and about six months after the 4th U.S. Circuit Court of Appeals handed the plaintiffs a partial victory that could have allowed them to continue pursuing some of their allegations on behalf of a class.
The plaintiffs’ voluntary dismissal does not represent a judicial finding that Navy Federal discriminated against borrowers, nor does it constitute a ruling rejecting the remaining discrimination claims on their merits.
No reason for the decision to abandon the litigation was stated in the information publicly available concerning the dismissal.
Lawsuit Followed Report on Approval Rates
The litigation began in December 2023 when Laquita Oliver filed suit against Navy Federal in federal court in Alexandria. Several similar cases were subsequently consolidated.
A consolidated complaint filed in February 2024 named nine plaintiffs — eight Black borrowers and one Hispanic borrower — who had applied for mortgage-related products from Navy Federal.
Civil rights attorney Ben Crump was among the attorneys representing the plaintiffs.
The Allegations
The plaintiffs alleged Navy Federal’s mortgage underwriting practices violated the Fair Housing Act, Equal Credit Opportunity Act and other federal and state civil rights laws.
The proposed class included minority applicants beginning in 2018 who alleged they had been denied mortgage products, received higher rates or less favorable terms, or experienced slower processing than similarly situated nonminority applicants.
The litigation followed reporting that identified significant racial differences in Navy Federal’s conventional mortgage approval rates.
The plaintiffs alleged Navy Federal used a semi-automated underwriting process and a proprietary algorithm that produced discriminatory results for minority applicants.
Navy Federal disputed the allegations.
District Court Narrows Case
U.S. District Judge Leonie Brinkema significantly narrowed the case in May 2024.
Brinkema dismissed the plaintiffs’ disparate-treatment claims, finding the complaint failed to plausibly allege direct or circumstantial evidence that Navy Federal intentionally discriminated against the borrowers.
But she declined to dismiss claims alleging Navy Federal’s practices had an unlawful disparate impact on minority applicants.
“At the motion to dismiss stage,” Brinkema found that the statistical disparities alleged by the plaintiffs, combined with their allegations concerning Navy Federal’s underwriting process, were sufficient to allow the disparate-impact claims to continue.
Brinkema also struck the plaintiffs’ class allegations, concluding the circumstances surrounding the borrowers and their mortgage applications were too varied to proceed as a single class.
The nine plaintiffs were permitted to continue pursuing their individual claims.
Appeals Court Gives Plaintiffs Partial Victory
The plaintiffs appealed the class-action portion of Brinkema’s decision, producing a 2-1 ruling from the Richmond, Virginia-based 4th Circuit on Feb. 9.
The appeals court agreed with Brinkema that the plaintiffs could not pursue a Rule 23(b)(3) class seeking damages.
The court pointed to substantial differences among the nine plaintiffs, including that they lived in five states, sought at least four different mortgage products and had different financial circumstances and outcomes.
But the appeals court reached a different conclusion regarding a potential class seeking declaratory or injunctive relief under Rule 23(b)(2).
The majority ruled Brinkema had acted prematurely in striking those allegations before development of a factual record.
What Appeals Court Ruled
The appeals court said district courts considering class certification at the pleading stage must determine whether the allegations fail to satisfy federal class-action requirements as a matter of law.
The decision sent that portion of the class allegations back to the district court, potentially allowing the plaintiffs to pursue discovery into Navy Federal’s underwriting practices before another determination on class certification.
Navy Federal subsequently sought additional time to consider asking the U.S. Supreme Court to review the 4th Circuit ruling. Chief Justice John Roberts granted an extension until June 9 for the credit union to file a petition.
The litigation instead ended after the plaintiffs voluntarily dismissed their claims in August.
