Background
Mark and Bradley Baird, a married couple, sought to purchase a new home from Pulte Home Company at the Del Webb at Rancho Mirage development in Riverside County. Mark is a military veteran, and the couple intended to finance the purchase with a VA-backed home loan. During the sales process, salesperson Brett Picano informed the Bairds that VA-loan purchasers were limited to optional upgrades totaling no more than 10 percent of the base purchase price, while buyers using conventional loans could select upgrades without restriction. Pulte Home justified this cap by claiming that VA appraisers were more conservative, and that over-improving a home could result in a low appraisal that jeopardized financing.
The sales process was contentious. The Bairds received conflicting information about the upgrade cap from multiple Pulte Home representatives. After a heated discussion in which the Bairds informed Picano they had filed a Civil Rights Department complaint, Picano purported to void the purchase agreement. Pulte Home’s vice president of sales subsequently intervened, held the Bairds’ lot, assigned a new salesperson, and offered the same or better terms. The Bairds also applied for a VA loan from Pulte Mortgage but were denied for insufficient income. They ultimately signed a purchase agreement with Pulte Home but withdrew days later, purchasing a home from a different builder using a VA loan from a third lender.
The Bairds sued all Pulte-related entities and Picano under the Fair Employment and Housing Act (FEHA), alleging discrimination on the basis of veteran status. The trial court granted summary judgment for all defendants. The Bairds appealed.
The Court’s Holding
The Fourth District reversed in part and affirmed in part. On the central claim against Pulte Home, the court held that defendants failed to negate the Bairds’ disparate impact theory of discrimination. The court found that the complaint’s general reference to “discrimination” encompassed both disparate treatment and disparate impact theories, and that it was the defendants’ burden on summary judgment to negate all theories of liability. The court rejected defendants’ argument that the Bairds forfeited their disparate impact claim by not separately raising it below, reasoning that defendants’ own arguments — asserting there was no cap and that any references to it were a “misstatement” — were aimed at negating the claim in its entirety. Because triable issues of fact existed regarding whether Pulte Home maintained a 10 percent upgrade cap for VA-loan buyers, the court reversed summary judgment as to Pulte Home.
The court also reversed summary judgment as to Picano on the aiding and abetting claim under FEHA section 12955(g), finding his liability was interrelated with Pulte Home’s discrimination claim. However, the court affirmed summary judgment for PulteGroup and Del Webb, finding the Bairds forfeited any arguments for parent-company or affiliate liability by failing to develop them on appeal. The court likewise affirmed summary judgment for Pulte Mortgage, concluding it had a legitimate, nondiscriminatory reason for denying the loan application — insufficient income — that was consistent with other lenders’ decisions and was not rebutted by evidence of pretext.
Finally, the court held that the Bairds’ retaliation claim was forfeited because they failed to press it in the trial court, where they had specifically disclaimed that their case was about the purchase contract and instead focused on the upgrade policy.
Key Takeaways
- A homebuilder’s policy of limiting optional upgrades for VA-loan purchasers may constitute unlawful disparate impact discrimination against veterans under FEHA, even if the policy is facially neutral, because VA-loan usage is “a factor correlated with veteran status” and such a policy disproportionately affects veterans.
- When a plaintiff’s complaint generally alleges “discrimination” without limiting it to a single theory, a defendant moving for summary judgment bears the burden of negating all encompassed theories — including disparate impact — and cannot claim the plaintiff forfeited an alternative theory that was fairly encompassed in the pleadings.
- A mortgage lender that denies a VA-loan application based on documented insufficient income is entitled to summary judgment on a discrimination claim when the denial is consistent with other lenders’ assessments and the borrower presents no evidence of pretext or discriminatory motive.
Why It Matters
This decision is notable for its application of FEHA housing discrimination protections to veterans in the context of new home construction and financing. By recognizing that a facially neutral policy restricting upgrades based on loan type can give rise to a disparate impact claim when that loan type correlates with veteran status, the court opens the door for similar challenges to builder practices that disadvantage VA-loan users. Homebuilders, lenders, and real estate professionals should evaluate whether their policies or sales practices create differential treatment or adverse impacts based on the type of financing a buyer uses, particularly when that financing is tied to a protected characteristic like veteran status.
The decision also offers practical lessons about summary judgment strategy. Defendants seeking to dispose of a discrimination claim must ensure their motion addresses all theories fairly encompassed by the plaintiff’s pleadings, not just the most prominent one. Failing to separately seek adjudication of discrete theories may leave viable claims intact. For plaintiffs, the case underscores the importance of preserving all arguments in the trial court — the Bairds’ retaliation claim was forfeited because they had explicitly disclaimed it below, even though the factual record appeared to support it.