Lending Institution’s Decision Not To Make A Loan To A Company Because One Of Its Members Is A Felon Does Not Violate The Unruh Civil Rights Act

In Semler v. General Electric Capital Corporation, (— Cal.Rptr.3d —-, Cal.App. 2 Dist., June 29, 2011), a California Court of Appeal considered whether a commercial lending institution violated the Unruh Civil Rights Act (“Act”) when it declined to make a loan to a company because one its investors was a felon. The court ruled that being a felon is not a personal characteristic similar to those enumerated in the Act, that the lender had legitimate business reasons justifying its decision, and that courts should generally not second-guess lending institutions’ criteria in loan decisions. Therefore, the court affirmed the trial court’s ruling that the lender’s decision was not a violation of the Act.


Ronald Semler (“Semler”) was an investor in ARI Overland, LLC (“ARI”), a limited liability company formed to purchase real property. ARI sought a loan from General Electric Capital Corporation (“GE Capital”). GE Capital approved the loan and became an “equity investor” by making an investment in ARI. However, GE Capital also notified ARI that Semler could not be a party to the investment because he had been convicted of felonies in 1988. ARI excluded Semler as a member and did not allow him to invest in the venture.

Semler filed a lawsuit alleging a violation of the Unruh Civil Rights Act by GE Capital for discriminating against him because he was a felon. The trial court ruled that Semler’s action was barred by the two-year statute of limitations for personal injuries and dismissed his lawsuit. Semler appealed.


The court first stated that because it could resolve this case by determining whether the Act applied to Semler, it need not investigate the question of whether the two-year statute of limitations barred his claim.

The Act mandates that all persons “are entitled to the full and equal accommodations” and are “free and equal, and no matter what their race, color, religion, ancestry, or national origin are entitled to the full and equal accommodations . . . in all business establishments of every kind whatsoever.” Amendments to the Act have broadened the list of characteristics to include sex and physical disabilities. Courts have ruled that the Act may also protect personal characteristics other than those listed. For example, other cases have extended the Act to protect families with children from housing discrimination, people with unconventional hair and attire from being excluded from shopping centers, and a business that was denied a license because it catered to homosexual patrons.

The question here is whether being a felon is such a characteristic protected by the Act. While the Act’s enumerated characteristics are not morally objectionable, the court said, “Being a felon, however, denotes quite the opposite.” Individuals who fall within the Act’s listed categories are generally not restricted by other laws with respect to their rights and privileges. However, a felon does forfeit many rights and freedoms enjoyed by nonfelons, such as disqualification from jury service and inaccessibility to firearms. It is also significant, the court found, that felons are not protected by large bodies of law to protect classes of persons who have historically received adverse treatment, such as racial minorities and women. “In sum, there is no support in the language or history of the Unruh Act,” for Semler’s contention that being a felon is within its scope.

Secondly, the court found GE Capital had an unquestionable interest in ensuring the creditworthiness of its borrowers. A person’s criminal history, as it relates to character and judgment, “bears a legitimate and manifest relationship to the extension of credit.” Semler’s criminal convictions raised legitimate questions about his honesty and trustworthiness, which in turn are valid concerns in judging his creditworthiness.

Finally, interpreting the Act to allow the court to substitute its judgment of creditworthiness for the lender’s “would involve the courts of this state in a multitude of microeconomic decisions we are ill equipped to make.” The court determined that Semler’s claim is better left to resolution, if any, by market forces or specific legislation or administrative action to address his particular grievance, “not by expanding the scope of the Unruh Civil Rights Act.”

The court affirmed that the trial court properly dismissed Semler’s case because the Act did not protect felons from discrimination, the lender had a legitimate business reason for its action and the court was not equipped to make judgments of creditworthiness.


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