MICHAEL WOODS; RAMONA WOODS; BNT AD AGENCY, LLC, Plaintiffs - Appellants,
CITY OF GREENSBORO, a municipality; NANCY VAUGHAN, in her official capacity; ZACK MATHENY, In his official capacity; MARIKAY ABUZUAITER, in her official capacity; T. DIANE BELLAMY-SMALL, in her official capacity; TONY WILKINS, in his official capacity; NANCY HOFFMAN, in her official capacity, Defendants-Appellees.
Argued: March 23, 2017
from the United States District Court for the Middle District
of North Carolina, at Greensboro. William L. Osteen, Jr.,
Chief District Judge. (1:14-cv-00767-WO-JEP)
Lowell Hayes, LAW OFFICE OF MARK L. HAYES, Durham, North
Carolina, for Appellants.
Patrick Michael Kane, SMITH MOORE LEATHERWOOD LLP,
Greensboro, North Carolina, for Appellees.
P. Ashley, SMITH MOORE LEATHERWOOD LLP, Greensboro, North
Carolina; John Roseboro, GREENSBORO CITY ATTORNEY'S
OFFICE, Greensboro, North Carolina, for Appellees.
GREGORY, Chief Judge, WILKINSON, Circuit Judge, and DAVIS,
Senior Circuit Judge.
and remanded by published opinion. Senior Judge Davis wrote
the majority opinion, in which Chief Judge Gregory joined.
Judge Wilkinson wrote a dissenting opinion.
Senior Circuit Judge:
stigmas and stereotypes are not impairing unless we
internalize them. And there is no reason for us to do that
when we know that the history of black culture in America is
rich and reaffirming. We may live in a society that will only
grudgingly and inconsistently acknowledge our equality, but
that does not mean that we must live as if we are victims. I
understand that avoiding the effects of racial stigmas and
stereotyping is not always easy because many studies have
shown that most people harbor implicit biases and even
well-intentioned people unknowingly act on racist attitudes.
However, this merely confirms that we alone cannot carry the
burden of ameliorating racism in our country. This
responsibility must be assumed by all good people without
regard to race, sex, and ethnicity. 
appeal requires us to consider whether it is plausible to
believe that, in twenty-first century America, a municipal
government may seek to contract with a minority-owned
enterprise under some conditions, yet, on account of race,
avoid contracting with a minority-owned company under other
April 2013, Black Network Television Ad Agency, LLC
("BNT"), a minority-owned television network, was
granted and then subsequently denied a $300, 000 economic
development loan from the City of Greensboro, North Carolina
("the City"), prompting BNT to file this action
asserting a claim, among others, for racial discrimination
pursuant to 42 U.S.C. § 1981. The City argued, in
support of its motion to dismiss the complaint for failure to
state a claim upon which relief could be granted, that its
willingness to grant BNT a loan fully secured by
a second-position lien on the personal residence of
BNT's principals, notwithstanding its unwillingness to
grant BNT a loan fully secured by a
third-position lien on that residence, foreclosed a
claim of race discrimination as a matter of law. BNT
responded that, to the contrary, the City's refusal to
make the loan was based upon stereotypes about the risk of
lending to a minority business and that, at the pleading
stage, its allegations suggesting the pretextual character of
the City's explanation for the denial of the loan are
sufficient to survive a motion to dismiss under Federal Rule
of Civil Procedure 12(b)(6). The district court agreed with
the City's arguments, concluded that BNT's factual
allegations were so insubstantial as to render its claim
implausible, and therefore dismissed the complaint with
that the district court's crabbed plausibility analysis,
see Woods v. City of Greensboro, No. 1:14CV767, 2015
WL 8668228, at *8 (M.D. N.C. Dec. 11, 2015), misinterpreted
and misapplied the controlling pleading standard. The key
issue in this case is not whether the City would contract
with a minority-owned business, but whether the City would
contract with BNT on the same conditions and under
substantially the same circumstances as it would with a
nonminority-owned business. Because BNT has plausibly pled
that the conditions under which the City was willing to grant
it a loan were more stringent than those the City applied to
similarly situated white-owned applicants, we conclude that
the district court erred in dismissing BNT's claim of
discrimination at the pleading stage. Accordingly, for the
reasons explained within, we reverse the district court's
order dismissing this action and remand for further
begin by summarizing the cardinal facts surrounding BNT's
application for, and the City's ultimate denial of, the
economic development loan. (Additional factual allegations
are discussed infra pp. 15-20.) Throughout, we
consider as true all well-pleaded allegations in the
complaint, matters of public record, and documents attached
to the motion to dismiss that are integral to the complaint
and of unquestioned authenticity. Philips v. Pitt Cty.
Mem'l Hosp., 572 F.3d 176, 180 (4th Cir. 2009).
April 2013, members of the City's Economic and Business
Development Office recommended that Michael and Ramona Woods
(referred to by the parties, and hence herein, as "the
Woods") submit an application for a $300, 000 ten-year
economic development loan for their company, BNT, as part of
the City's economic development efforts. The Woods
offered to secure the loan by way of a note and deed of trust
to their home. On May 28, 2013, L.R. Appraisals, Inc.,
appraised the home at a value of $975, 000.00 "resulting
in equity well over the $300, 000.00 loan, after
consideration of all existing loans on the residence."
to Greensboro Code of Ordinances Section 4.55, the City may
make economic development loans only after receiving
authorization from its nine-member elected City Council. On
June 18, 2013, at a regularly scheduled meeting, the City
Council considered a Resolution authorizing the City to enter
into a loan agreement with BNT. The Resolution, which was
drafted by the Greensboro City Attorney's office, stated
that the City's interest would be secured by "no
more than a second lien" on the real property and
improvements. J.A. 15. Assistant City Manager of Economic
Development, Andy Scott, discussed with the City Council in
open session the financial statements of the Woods and the
collateral requirements of the proposed loan agreement and
"stated [to the Council] that the City would be placed
in the second loan position on the residence being used as
collateral." J.A. 44. The City Council voted seven to
two in favor of adopting Resolution 172-13, which authorized
the City to enter into an agreement with BNT for the $300,
000 loan. The Resolution provided the following conditions:
WHEREAS, the borrower is required to confirm compliance with
the following conditions prior to the City's loan closing
to protect the public funds invested in the project; . . .
2) City will complete a title search confirming no additional
liens are outstanding on the 5018 Carlson Dairy Road property
that will secure the City's loan beyond the first
mortgage that is currently outstanding.
. . .
3) City will confirm that the first mortgage balance does not
exceed $509, 000.
. . .
8) City loan will be secured by a note and deed of trust with
the City's interest secured by no more than a 2nd lien on
the real property and improvements located at 5018 Carlson
. . .
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF GREENSBORO:
The City of Greensboro is hereby authorized to execute the
necessary note and agreements with BNT Ad Agency LLC in
accordance with the above terms and conditions.
turned out, in addition to a first mortgage, the Woods had a
home equity line of credit on the property. The City informed
the Woods that the Resolution would have to be amended to
reflect that the City's security interest would be a
third lien, rather than a second lien. On July 16, 2013, at a
second meeting, the City Council considered modifying the
Resolution. According to the minutes, the following occurred:
Assistant City Manager of Economic Development Andy Scott
summarized the difference between the approved loan at the
June 18 council meeting and the modifications made in the
presented resolution; and spoke to the financial assessment
of the Woods' collateral in terms of loan repayment.
. . .
Council discussed the capped equity limits by Carolina Bank;
referenced three previous loans where the City had been in
the third position; the desire to support minority owned
small businesses; and concerns expressed about the City going
from second to the third position in loan repayment.
City Attorney Shah-Khan advised that if Council chose to move
forward with the transaction, it would be necessary to comply
with the changes with what Council was now aware of; and
stated the decision was a policy matter for Council.
Mayor Perkins stated there were speakers to the item.
George Hartzman . . ., stated there was not enough equity in
the property to fund the city's portion of a potentially
defaulted loan; and encouraged Council to respect their