Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County, No. SC-092611, John H. Reid, Judge.
Ezer & Williamson LLP and Mitchel J. Ezer, for Plaintiff and Appellant.
Tod V. Beebe, A Professional Corporation and Tod V. Beebe; Barton Klugman & Oetting LLP and Ronald R. St. John, for Defendant and Respondent.
ZELON, J.
INTRODUCTION
Appellant Ronald H. Semler filed a complaint alleging that Respondent Wells Fargo Bank National Association violated the Unruh Civil Rights Act (Civ. Code, § 51 et seq.) by arbitrarily denying a loan application on the basis of Semler’s status as a convicted felon. Respondent moved for summary judgment, arguing that the Unruh Act did not apply to claims predicated on differential treatment of convicted felons. The trial court granted the motion and entered judgment in favor of Respondent. Appellant appeals the grant of summary judgment; we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
A. Events Preceding the Filing of Semler’s Complaint
Michael Adler (Adler) is a principal of Adler Realty Investments, Inc. (ARI), which owns and operates approximately 30 real estate projects throughout the country. Appellant Ronald H. Semler has invested in numerous ARI ventures. In 2007, Semler provided ARI with $50,000 to invest in “ARI Dallas, ” a real estate development. Semler’s funds would have entitled him to a 0.9 percent ownership interest in the project. Adler set up a limited liability corporation named “ARI Dallas LLC” to finance the project and appointed ARI as the managing member, with Semler and other investors included as non-managing members. Adler then prepared a loan application on behalf of the LLC, which he submitted to Respondent Wells Fargo Bank National Association. Under the terms of the lending agreement, Adler signed a guarantee that made him personally liable for the LLC’s loan. The non-managing members of the LLC were not treated as borrowers, principals or guarantors of the loan, nor were they personally liable for its repayment.
After Wells Fargo received ARI Dallas LLC’s loan application, it conducted a routine background investigation of each of the LLC’s members. During that investigation, Wells Fargo discovered that Semler was barred by the United States Department of State from engaging in arms export as the result of a prior felony conviction. Wells Fargo conducted additional research and discovered that, in 1988, Semler had been the target of an investigation regarding the illegal sale of 87 military helicopters to North Korea. Semler had pled guilty to four felony counts, including: (1) causing the filing of a Shipper’s Export Declaration that falsely stated the place and shipment of helicopters in violation of 18 U.S.C. § 1001; (2) conspiracy to cause the filing of false export control documents concealing or misstating the ultimate destination of export shipment in violation of 18 U.S.C. § 371; (3) exporting items to Syria in violation of the Arms Export Control Act, 22 U.S.C. § 2778, subdivision (c), and; (4) conspiracy to impede the functions of the Internal Revenue Service in the ascertainment, computation and collection of taxes in violation of 18 U.S.C. § 371. Semler was sentenced to three years in prison and fined $40,000.
Although Wells Fargo does not automatically refuse loans sought by convicted felons or entities associated with convicted felons, it requires that senior officials review any such loan application. As a result of this policy, Wells Fargo senior personnel reviewed ARI Dallas LLC’s application and concluded that Semler’s criminal offenses were “troubling from a loan underwriting standpoint because [they] involved admissions of dishonesty, of fraud, and of creating fraudulent documents.” Due to “the specific nature of [Semler’s] fraud-based felony convictions involved and the relationship to lending risks, ” Wells Fargo refused to approve the loan unless Semler was removed as a member of the LLC. Thereafter, Adler removed Semler from the LLC and returned the funds he had advanced for the ARI Dallas project.
B. Summary of Appellants’ Complaint and the Proceedings Below
On March 19, 2008, Semler filed a complaint against Wells Fargo alleging that the bank had violated the Unruh Civil Rights Act (Civ. Code, §§ 51, 52, hereafter the Unruh Act or the Act) by arbitrarily denying ARI Dallas LLC’s loan application on the basis of Semler’s status as a convicted felon. The complaint alleges that “convicted felons who completed their prison sentences and have demonstrated that they are rehabilitated are a class of persons entitled to protection under the Unruh Act.” After the court overruled its demurrer, Wells Fargo filed a motion for summary judgment arguing that convicted felons were not a class of persons protected under the Act.
All further statutory references are to the Civil Code unless indicated otherwise.
The trial court granted the motion, concluding that, although an individual’s status as a convicted felon constituted a personal characteristic that might receive protection under the statute, Wells Fargo’s denial of ARI Dallas LLC’s loan application was not actionable because it was based on a legitimate business interest. Specifically, the court ruled that the undisputed evidence demonstrated that Wells Fargo believed “the charges against Plaintiff were severe enough to question the wisdom of entering into the loan.” After granting the motion, the court entered judgment in favor of Wells Fargo. Semler timely appealed the judgment.
DISCUSSION
A. Standard of Review
“Summary judgment is granted when a moving party establishes the right to the entry of judgment as a matter of law. [Citation.] In reviewing an order granting summary judgment, we must assume the role of the trial court and redetermine the merits of the motion. In doing so, we must strictly scrutinize the moving party’s papers. The declarations of the party opposing summary judgment, however, are liberally construed to determine the existence of triable issues of fact. All doubts as to whether any material, triable issues of fact exist are to be resolved in favor of the party opposing summary judgment. While the appellate court must review a summary judgment motion by the same standards as the trial court, it must independently determine as a matter of law the construction and effect of the facts presented.” (S.M. v. Los Angeles Unified School Dist. (2010) 184 Cal.App.4th 712, 716.)
B. The Unruh Civil Rights Act
1. Text and Early Interpretations of the Act
“The Unruh Civil Rights Act prohibits businesses from denying any person access to public accommodations based on specified classifications.” (Hessians Motorcycle Club v. J.C. Flanagans (2001) 86 Cal.App.4th 833, 835 (Hessians).) Section 51, subdivision (b), provides in part: “All persons within the jurisdiction of this state are free and equal, and no matter what their sex, race, color, religion, ancestry, national origin, disability, [or] medical condition... are entitled to the full and equal accommodations, advantages, facilities, privileges, or services in all business establishments of every kind whatsoever.” Section 52, in turn, “is designed to provide an enforcement mechanism for section 51 and other provisions of law. This section states in relevant part: ‘Whoever denies... or makes any discrimination, distinction or restriction on account of sex, color, race, religion, ancestry, national origin, or blindness or other physical disability contrary to Section 51...is liable for each and every offense....’” (Beaty v. Truck Ins. Exchange (1992) 6 Cal.App.4th 1455, 1461-1462 (Beaty).)
Prior to 1991, the California Supreme Court issued a series of opinions concluding that the Unruh Act’s “protections were not confined to the enumerated categories in the statute but that these categories were ‘illustrative rather than restrictive.’ [Citation.]” (Koebke v. Bernardo Heights Country Club (2005) 36 Cal.4th 824, 839 (Koebke).) The Court further held that, “in enacting the [Act], the Legislature intended to ban all forms of arbitrary discrimination in public accommodations.” (Id. at p. 840.) Under this broad interpretation of the statute, the Court established various “judicially recognized classifications[, ] includ[ing] unconventional dress or physical appearance [citations], families with children [citation], homosexuality [citation], and persons under age 18 [citation].” (Hessians, supra, 86 Cal.App.4th at p. 836.)
2. Limitations on Further Extensions of the Act
In Harris v. Capital Growth Investors XIV, (1991) 52 Cal.3d 1142 (Harris), the Supreme Court revisited its prior decisions extending the Unruh Act to classifications beyond those enumerated in the statute. The plaintiffs in Harris alleged that “a landlord’s policy requiring prospective tenants to have gross monthly incomes equal to or greater than three times the rent charged for an apartment... constituted economic status discrimination and was barred by the... Act. The plaintiffs argued that the defendant’s policy excluded persons who could pay the rent but were unable to meet the minimum income policy. They maintained they were entitled to a trial to determine whether the policy constituted arbitrary discrimination under the Act.” (Koebke, supra, 36 Cal.4th at p. 840.) The specific issue before the Court was whether the Act extended to claims of economic status discrimination.
After reviewing the text and legislative history of the Act, the Court concluded that “[W]ere we writing on a clean slate, the repeated emphasis in the language of sections 51 and 52 on the specified classifications of race, sex, religion, etc., would represent a highly persuasive, if not dispositive, factor in our construction of the Act. [Citation.]” (Harris, supra, 52 Cal.3d. at p. 1159.) “Despite this conclusion, the... court did not overrule the prior cases which extended the Act to certain nonenumerated classifications, ” (Hessians, supra, 86 Cal.App.4th at p. 836), and “affirmed the principle... that the Act’s... categories are illustrative, rather than restrictive.” (Koebke, supra, 36 Cal.4th at p. 840.) The Court did, however, reject “the broad proposition... that the Act was intended to ban all forms of arbitrary discrimination, ” (id. at p. 841) and “‘made... clear [that] future expansion of prohibited categories should be carefully weighed to ensure a result consistent with legislative intent.’ [Citations.]” (Hessians, supra, 86 Cal.App.4th at p. 836.) To that end, Harris devised a three-part analysis to evaluate whether the Act applied to “economic” discrimination. (Koebke, supra, 36 Cal.4th at p. 841.)
Under the first step of its analysis, the Court reviewed the text of the statute and “discerned an essential difference between economic status and both the Act’s enumerated categories and those added by judicial construction. [The Court] found that their common element was that they ‘involve personal as opposed to economic characteristics.’” (Koebke, supra, 36 Cal.4th at p. 840.) The Court further noted that “[c]onspicuously absent from the list [of classifications in the statute] is any reference to financial or economic status.... [¶] The Legislature’s decision to enumerate personal characteristics, while conspicuously omitting financial or economic ones, strongly suggests a limitation on the scope of the Unruh Act.” (Harris, supra, 52 Cal.3d. at pp. 1160-1161.)
In the second prong of its analysis, Harris considered “whether a legitimate business interest justified the [landord’s] minimum income policy.” (Koebke, supra, 36 Cal.4th at p. 841.) The Court began by noting that “[b]usiness establishments have an obvious and important interest in obtaining full and timely payment for the goods and services they provide. Indeed in the absence of a subsidy, prompt receipt of payment is generally vital to the continuation of a business enterprise and the public accommodation it provides.” (Harris, supra, 52 Cal.3d. at pp. 1162-1163.) After reviewing several lower court holdings affirming a business’s right to make economic distinctions among customers, the Court ruled that the minimum income policy was intended to ensure that a landlord receives “the benefit of its bargain with the consumer: full payment of the price. In pursuit of the object of securing payment, a landlord has a legitimate and direct economic interest in the income level of prospective tenants....” (Id. at p. 1163.)
Finally, in the third prong of its analysis, Harris “considered the potential consequences of allowing claims for economic status discrimination to proceed under the Act.” (Koebke, supra, 36 Cal.4th at p. 841.) The Court concluded that if it interpreted the Act to require landlords to “make individualized determinations of each prospective tenant’s ability to pay rent without the use of a minimum income policy....” (Harris, supra, 52 Cal.3d. at pp. 1165), the judicial system would become involved “in a multitude of microeconomic decisions [it is] ill equipped to make.” (Id. at p. 1166) Specifically, the Court expressed concerns that rejecting the use of a minimum income policy would result in numerous trials regarding the reasonableness of the criteria used by landlords to screen tenants, which would “generate expense and uncertainty on a massive scale with little or no demonstrable benefit to the antidiscrimination policy of the Unruh Act.” (Id. at p. 1167.) Applying the three part test, the Court held that “the minimum income policy did not violate the Act.” (Koebke, supra, 36 Cal.4th at p. 842.)
Following Harris, appellate courts applied the newly-articulated three-part analytic framework to a variety of proposed classifications including “marital status, ” (Beaty, supra, 6 Cal.App.4th 1455), “civil rights litigants, ” (Gayer v. Polk Gulch, Inc. (1991) 231 Cal.App.3d 515 (Gayer)), patients asserting malpractice claims, (Gatto v. County of Sonoma (2002) 98 Cal.App.4th 744), “nonsmoker” status, (King v. Hofer (1996) 42 Cal.App.4th 678), and customers wearing gang patches. (Hessians, supra, 86 Cal.App.4th 833.) In each case, the courts declined to extend coverage under the Act to the newly proposed classification.
3. Koebke v. Bernardo Heights Country Club
In Koebke v. Bernardo Heights Country Club, supra, 36 Cal.4th 824, the Supreme Court again considered the breadth of the Unruh Act. The plaintiffs, a same-gender couple who had been in a relationship since 1993, challenged a country club policy that extended golfing privileges to the spouses of married club members but denied those privileges to unmarried couples. Shortly after the enactment of the 2005 Domestic Partner Act, the plaintiffs registered as domestic partners with the State. Because the Domestic Partner Act was passed during the pendency of the plaintiffs’ suit, the Supreme Court construed the complaint as seeking Unruh Act damages for two distinct time periods: the period during which they were registered as domestic partners and the period prior to the effective date of the domestic partnership law. (Id. at pp. 836-837.)
The Court first analyzed the period during which the plaintiffs were registered domestic partners and considered “whether, in light of the current version of the domestic partnership law, the Act requires businesses to treat registered domestic partners the same as spouses.” (Koebke, supra, at p. 837.) To answer this question, the Court applied the Harris framework. It began by evaluating whether status as a registered domestic partner constituted a personal characteristic, which the Court defined as “traits, conditions, decisions, or choices fundamental to a person’s identity, beliefs and self-definitions.” (Id. at pp. 842-843.) The Court found that the decision to enter into a formalized domestic partnership did qualify as a “personal characteristic” because it reflected “personal beliefs and core values.” (Id. at p. 843.) In support, the Court noted that the Legislature, through the enactment of the Domestic Partner Act, granted domestic partners all of the same rights, benefits, responsibilities and obligations that are granted to spouses. (Ibid.) It further noted that the statute specifically described domestic partnerships as “‘lasting, committed, and caring’” relationships “undertaken by two individuals to ‘share their lives together...’ [Citations.]” (Id. at p. 843.)
The Court next analyzed whether the country club had demonstrated a legitimate business interest in extending benefits to spouses but not registered domestic couples. The Club argued that broadening its policy to include nonmarried couples “might lead to overuse of facilities, create a disincentive for such friends to apply for membership, and would discourage its ‘legitimate goal of creating a family-friendly environment by welcoming the immediate family of married members.’” (Koebke, supra, at p. 847.) The Court rejected these arguments, noting that the club’s concerns “did not apply to registered domestic partners” because, under the Domestic Partnership Act, “registered domestic partners occupy a legal status that, like marital status, is formalized, public and verifiable.” (Ibid.)
Finally, under the third prong of the Harris inquiry, the Court ruled that the consequences of barring discrimination against domestic partners would be limited in that it would only affect “registered domestic partners, not all unmarried couples.” (Koebke, supra, at p. 848.) Moreover, prohibiting such discrimination would “effectuat[e] the Legislature’s intent expressed in the Domestic Partner Act to create substantial legal equality between registered domestic partners and spouses.” (Ibid.)
Having concluded the Unruh Act barred discrimination on the basis of domestic partner status, the Court next considered whether the plaintiffs had stated a cognizable Unruh Act claim for the time period preceding the effective date of the Domestic Partner Act. The Court framed the relevant issue as “whether, during this earlier period, [the Club’s] denial of spousal benefit to plaintiffs constituted impermissible marital status discrimination under the Act.” (Koebke, supra, at p. 851.) The Court declined, however, to decide whether marital status was categorically “precluded... as a protected category under the Unruh Civil Rights Act.” (Ibid.) Instead, it concluded that under Harris, “even if we assume that marital status discrimination, outside the context of the Domestic Partner Act, is cognizable under the Act, such discrimination would nonetheless be permissible if justified by ‘legitimate business interests.’” (Ibid.)
The club argued that its spousal benefit policy was legitimately intended to “strike a balance between competing concerns[. The club] wanted to attract and maintain members while preventing overutilization of its facilities.” (Koebke, supra, at p. 851.) The Court accepted this justification, explaining that the club “could reasonably have concluded that these goals would best be served by extending certain benefits to families created through marriage but not to unmarried couples and individuals.” (Ibid.) The Court then denied the plaintiffs’ claims, reasoning that “[p]rior to The Domestic Partner Act, a marriage license presented the clearest method by which [the club] could distinguish among its members in order to extend benefits to some, but not to others, and achieve its larger goals. In this connection, [the club] was... free to cut finer distinctions than married and unmarried, but its failure to do so, even though it may have resulted in some degree of unfairness to committed couples like plaintiffs, did not on its face constitute impermissible marital status discrimination.” (Id. at p. 852.)
C. The Trial Court Properly Granted Summary Judgment
Applying the holdings in Harris and Koebke, we conclude that Semler has failed to state a cognizable claim under the Unruh Act. Semler’s complaint contends that convicted felons who have served their prison sentences constitute a class of individuals protected by the Act. Wells Fargo disagrees, arguing that the statute’s protections do not extend to differential treatment predicated on convicted felon status. We need not, however, decide whether claims based on discriminatory treatment of convicted felons are categorically precluded under the Act, as even assuming there was protection under the Act, Wells Fargo’s differential treatment of Semler was justified by a legitimate business interest. Moreover, requiring Wells Fargo to justify the reasonableness of its lending decision would have the adverse consequences articulated in Harris.
Semler has argued for the first time on appeal that, despite the broad class description stated in his complaint, the class he seeks to protect consists only of “convicted felon passive investors.” Semler defines the phrase “passive investors” to include individuals who invest money in “entities over which they have no control and whose liabilities they do not assume.” Semler did not present this narrowed class definition at any point in the trial court proceedings nor did he amend his complaint to narrow the class definition. Indeed, he repeatedly asserted that the primary issue in this case is “whether or not persons convicted of felonies are a protected class under the Unruh Act.” Because Semler never presented his newly-proposed narrow class definition to the trial court, we will not consider his attempt to do so now. (Premier Medical Management Systems, Inc. v. California Ins. Guarantee Assn. (2008) 163 Cal.App.4th 550, 564 [““‘“‘[I]t is fundamental that a reviewing court will ordinarily not consider claims made for the first time on appeal which could have been but were not presented to the trial court.’”’ [Citation.]”].)
1. Wells Fargo has a legitimate business interest in considering felony status when making a lending decision
As explained in Koebke, regardless of whether convicted felon status discrimination may, under certain circumstances, present a cognizable claim under the Unruh Act, Wells Fargo’s decision to deny ARI Dallas LLC’s loan on the basis of Semler’s prior convictions would “nonetheless be permissible if justified by ‘legitimate business interests.’” (Koebke, supra, 36 Cal.4th at p. 851.) In applying the Act, courts have made clear that “[a] business establishment may... promulgate reasonable deportment regulations that are rationally related to the services performed and the facilities provided.’” (Gayer, supra, 231 Cal.App.3d at p. 523; Beaty, supra, 6 Cal.App.4th at pp. 1463-1464.) Policies or practices that are intended to “maintain[ ] order, comply[] with legal requirements, and protect[] a business reputation or investment [are generally] sufficient to justify distinctions among... customers.” (Harris, supra, 52 Cal.3d 1142, 1162.) “[T]he critical issue is whether the challenged [act] ‘bears a reasonable relation to commercial objectives appropriate to an enterprise serving the public...’ [Citation.]” (Hessians, supra, 86 Cal.App.4th at p. 838.)
In the trial court, the parties presented evidence indicating that a Wells Fargo loan officer cannot approve a loan application if the applicant is a convicted felon or associated with a convicted felon, but must instead elevate the application to senior personnel who are then responsible for determining whether the criminal offenses present an unacceptable lending risk. In furtherance of this policy, a loan officer forwarded ARI Dallas LLC’s loan application to senior personnel after discovering Semler’s status as a convicted felon. The senior personnel reviewed Semler’s offenses and found them to be “troubling from a loan underwriting standpoint.” The officials ultimately decided “not to make [the] loan.... because of the specific nature of the fraud-based felony convictions involved and the relationship to lending risks.”
During deposition testimony, a Wells Fargo official explained that the bank considered Semler’s participation in the LLC to be a potential risk “[b]ecause he was part of the borrower.... the borrower consists of all the parties of the borrower. [¶] And it’s our job to know who all those parties are and feel comfortable recommending a loan with those parties and the borrower. We feel like we’re doing business with those parties and the borrower.” A second individual involved in the lending decision explained that “from the bank’s standpoint or from my subjective personal judgment standpoint as being involved in an underwriting and recommending [an] approval decision, [Semler’s convictions] are severe enough that... based on my judgment, that... wouldn’t warrant moving forward....” The official continued: “there’s a consortium of people, me included, that went into ultimately concluding that this is of a severe enough nature, international arms dealing, conspiracy to impede the IRS, forgery of documents, et cetera, ... is if you’re a bank [this] doesn’t give you a [good] feeling about wanting to do business with a borrower that is owned by that type of member, whether it is 1 percent, or 30 percent or.5 percent or 99 percent.” Wells Fargo emphasized that its decision had nothing to do with Semler’s financial circumstances. The bank simply questioned whether Semler could be trusted to repay the loan or cooperate with the lender in the event that issues arose regarding the LLC’s ability to repay. This uncontroverted evidence demonstrated that Wells Fargo’s differential treatment of Semler was motivated by concerns about being repaid in a timely and efficient manner.
We see little difference between the interests animating Wells Fargo’s decision to deny the ARI Dallas LLC’s loan application and the interests underlying the landlord’s minimum income policy in Harris. In both instances, the business’s challenged act was intended to ensure that it “obtain[ed] full and timely payment for the goods and services they provide.” (Harris, supra, 52 Cal.3d at p. 1162) Lending institutions have an obvious and important interest in evaluating whether a prospective customer can be trusted to repay his or her loan in a timely manner. A loan applicant’s character and past conduct is highly relevant to that inquiry. Wells Fargo’s decisions in this case bore a “reasonable relation to [its] commercial objectives....’ [Citation.]” (Hessians, supra, 86 Cal.App.4th at p. 838.)
Semler disagrees, arguing that, in this particular case, his status as a convicted felon had no reasonable connection to whether Wells Fargo would be repaid. Semler asserts that he owned less than one percent of the LLC, he was not personally liable for the loan and his net worth is in excess of $100 million. However, “[w]e decline to second-guess ‘Wells Fargo’s] business judgment in this matter.” (Hessians, supra, at p. 838 [accepting defendant’s argument that excluding patrons who wore bike gang patches was intended to prevent fights despite the fact that no such fights had ever occurred].) Regardless of the extent of his ownership of the LLC or his personal wealth, we cannot conclude that it was illegitimate or unreasonable for Wells Fargo to treat Semler’s convictions, which involved illegal arms dealing and filing of fraudulent documents, as an unacceptable lending risk. Although Wells Fargo was free to make “finer distinctions” by considering Semler’s favorable lending attributes, the bank was not required to do so even if “it may have resulted in some degree of unfairness” in this case. (Koebke, supra, at p. 852.)
(2) Consequences of adopting Semler’s interpretation of the Act
Our holding is also supported by the adverse consequences that would likely result if we accepted Semler’s interpretation of the Act. (See Beaty, supra, 6 Cal.App.4th at p. 1465 [“Harris holds that before extending the categories set forth in the Unruh Act, the court must consider the consequences of allowing the type of claim sought by the plaintiffs”].) Like the plaintiffs in Harris, Semler argues that, under the Act, he is entitled to a trial to determine whether Wells Fargo reasonably concluded his status as a convicted felon presented a lending risk. (See Harris, supra, 52 Cal.3d at p. 1165 [“According to plaintiffs, landlords are required by the Unruh Act to make individualized determination of each prospective tenant’s ability to pay rent without the use of a minimum income policy”].) In Semler’s view, the Act requires that banks demonstrate that their lending decision was made in “good faith... based upon the individual facts of the matter.”
Semler’s proposed interpretation of the Act introduces the exact concerns articulated at length in Harris. There, the Court concluded that if it interpreted the Act to require landlords to justify the reasonability of their rental criteria on a case-by-case basis, the judiciary would become entangled “in a multitude of microeconomic decisions we are ill equipped to make.” (Harris, supra, 52 Cal.3d at pp. 1166.) The Court expressed further concern that:
[P]laintiffs’ argument is not readily confined to landlords and tenants. Many other businesses, including lending institutions and retail and wholesale sellers, are in the position of extending money, goods, or services in exchange for promises to pay or repay in the future. They use minimum income policies as well as other financial criteria to make risk-oriented decisions regarding what customers to deal with and on what terms. These businesses, as well as others, could be subjected to legal challenges to their policies based on summary allegations that they had acted “arbitrarily.” Plaintiffs’ approach would require that each business defend its policies as “reasonable” in a trial on the merits. Those trials, like the one plaintiffs propose here, would generate expense and uncertainty on a massive scale with little or no demonstrable benefit to the antidiscrimination policy of the Unruh Act.
For these reasons, the economics of credit practices, whether those of landlords or other businesses, have traditionally been left to the guidance of market forces or to specific legislative and administrative action designed to address particular grievances.
(Id. at pp. 1166-1167.)
Harris’s analysis is directly applicable here. Semler concedes that Wells Fargo has an interest in screening out loan applicants who present a risk of default but disagrees with the criteria that Wells Fargo applied in this case. As a result, Semler’s trial would necessarily focus on whether his status as a convicted felon is actually predictive of default and how much emphasis should have been placed on that criterion, as opposed to other factors. Semler’s filings demonstrate that he believes Wells Fargo should have considered a host of issues beyond the nature of his actual offenses including, “For example, is the conviction recent or in the distant past? Was it a major or minor felony? Did it involve theft or embezzlement? Has the borrower had credit subsequent to the conviction? How much/has it all been repaid? What are the borrower’s FICO scores?” Holding a trial on the reasonableness of Wells Fargo’s business judgments about such issues would “involve the courts... in a multitude of microeconomic decisions we are ill equipped to make.” (Harris, supra, at p. 1166.) A bank’s lending decision, like a landlord’s rental decision, involves a complex balancing of risk “to which the courts bring no special expertise.” (Id. at p. 1167.)
Moreover, if accepted, Semler’s argument might open the door to additional classes of borrowers arguing that the particular criteria used to deny their loans were arbitrary or unreasonable. The result would be a myriad of trials requiring banks to justify lending decisions, generating “expense and uncertainty on a massive scale.” (Harris, supra, at p. 1166.) This, in turn, could have any number of collateral consequences including increased lending costs for consumers and inducing institutions like Wells Fargo, which describes itself as a “conservative” lender, to engage in riskier loans. We decline to extend the court’s reach into the private lending market in the manner proposed by Semler and conclude that such tasks are best “left to the guidance of market forces or to specific legislative... action.” (Id. at p. 1167.)
We are sympathetic to Semler’s contention that permitting banks to differentiate on the basis of convicted felon status may unfairly proscribe the ability of some felons to acquire loans long after they have served their debt to society. (See, e.g., Hetherington v. State Personnel Bd. (1978) 82 Cal.App.3d 582, 606 (dis. opn. of Reynoso, J.) [arguing that convicted felons are unfairly “stigmatized by society... as the result of outdated social stereotyping, ” the effects of which are “compounded by the minority and indigent status of most ex-felons”].) Although there may be sound policy reasons for protecting convicted felons from differential treatment in the lending arena, “that [argument] should be made to the Legislature not to a court.” (San Joaquin County Human Services Agency v. Marcus W. (2010) 185 Cal.App.4th. 182, 192; see also Beaty, supra, 6 Cal.App.4th at p. 1463 [“It is for the Legislature, not the courts, to determine whether nonmarital relationships... deserve the statutory protection afforded [in the Unruh Act]]”; “plaintiffs’ real quarrel is with the California Legislature”].)
We note, however, that the record indicates that Semler himself has had no trouble procuring loans from other lending institutions. According to his declaration, Semler currently has two loans from other lending institutions that total approximately $3 million. In addition, Semler has previously qualified “for loans as high as several million dollars.” Thus, although Wells Fargo declined to do business with Semler, there are apparently others in the marketplace who would be happy to do so.
DISPOSITION
The trial court’s judgment in favor of Wells Fargo is affirmed. Respondents are awarded their costs on appeal.
We concur: PERLUSS, P. J.WOODS, J.