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Discrimination Lawsuit Update: Baltimore Case Carries On

by Isaac Peck, Publisher

The case of Connolly & Mott v. Shane Lanham et al. has been one of the most widely publicized lawsuits alleging racial discrimination in a real estate appraisal to date. And it’s still ongoing.

One of the most notable factors of this case is that Shane Lanham, the appraiser, filed a countersuit against his accusers, Nathan Connolly and Shani Mott, seeking dismissal of their lawsuit and alleging that they falsely labeled him a racist and defamed him on national television, which he claims has caused severe harm to his business, reputation and well-being. (See Appraiser Countersues Black Plaintiffs Who Alleged Discrimination.)

Since Lanham’s counterclaim was filed in January 2023, a number of material developments have taken place in the case, including co-defendant LoanDepot’s settlement of Connolly’s and Mott’s claim against them (the claims against Lanham continue), the tragic death of co-plaintiff Mott, and Lanham’s launching of a GoFundMe account to help pay for his ongoing legal expenses.

Here’s the latest on this monumental case in which the appraiser is not only refusing to settle, but fighting back.

GoFundMe
One of the dangers facing appraisers in today’s legal environment is that, depending on who their E&O insurance carrier is, their insurance coverage for discrimination claims is often completely excluded or severely limited. Just like fraud, all professional liability policies exclude discrimination, and only a select few policies add back any discrimination coverage.

In Lanham’s case, his E&O insurance policy provided only $100,000 of Discrimination Claim Coverage. Since the case has been in litigation for more than two years, Lanham launched a GoFundMe in March to help him cover the legal expenses involved in his defense and counterclaim.

In his initial GoFundMe post, Lanham writes: “I am an independent fee appraiser of residential real estate…I have been wrongfully accused of intentionally assigning a low value to a home in Baltimore City because of the owner’s race.

I am currently being sued in The United States District Court of Maryland. I am not the person I have been made out to be in this lawsuit, or the large media outlets that have covered the situation, and I am confident in the appraisal that I completed. I fully intend to fight this allegation through trial. I am also countersuing the accusers for defamation and have engaged a consultant with significant experience in these types of cases.” Lanham goes on to describe how his insurance coverage falls short.

“Through an insurance policy I carry, I have limited funds (only $100,000) to cover the costs of the lawsuit through investigation, discovery, motions and trial. However, my understanding is that the $100,000 amount will not be enough to take this case through trial both defending myself from the false allegations and prosecuting the defamation case,” Lanham writes.

The goal of Lanham’s GoFundMe is to raise $50,000 to cover the lawsuit costs that his insurance policy will not. Any excess funds raised that aren’t used for his litigation costs will go to an appraiser scholarship fund run by an appraiser association.

Ken Y., one of the supporters on Lanham’s GoFundMe account left the following words of support for Lanham: “Keep pushing; please do not back down. This is very important. I encourage all appraisers to donate. Please donate again if you’ve already done so (I have). I think it’s very important to take this case forward to teach lessons that will help the profession.” Appraisers interested in donating to Shane Lanham’s GoFundMe can visit gofundme.com/f/raise-funds-for-trial.

LoanDepot Settlement
In Connolly’s and Mott’s initial discrimination lawsuit, Shane Lanham and LoanDepot were both named in the lawsuit as co-defendants.

On March 22, a settlement agreement between LoanDepot and the plaintiffs was filed with the court. In many of the other appraisal discrimination lawsuits that have named either an appraisal management company (AMC) or lender, it’s often the AMC or lender that drives the settlement negotiations. For example, AMC Links settled first in Tate-Austin v. Miller et al. In Washington v. Wells Fargo and Bryan Klosterman, Wells Fargo led settlement negotiations, and the case was settled quietly last year with respect to the appraiser and lender.

A tragic twist to the Lanham case is that 10 days before the LoanDepot settlement was announced, co-plaintiff Mott, who was Connolly’s wife, passed away from adrenal cancer. On his GoFundMe page, Lanham acknowledged Mott’s passing, writing that the timeline of his case will be extended and likely carry into 2025, owing to Mott’s and Connolly’s legal team asking for an extension on depositions and other legal next steps.

The case against Lanham will continue with Connolly and Mott’s estate as plaintiffs.

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Settlement Details
In their settlement with the plaintiffs, LoanDepot agreed to pay Connolly and Mott an undisclosed amount to “resolve all claims for damages and attorneys’ fees and costs” as well as make a number of structural operational changes within their mortgage operation.

The operational changes that LoanDepot agreed to include:

1.  Reconsideration of Value (ROV) Process: LoanDepot will establish clear policies around its ROV processes and communicate them consistently to all borrowers. These policies must include standards for when a second appraisal will be ordered, including when the first appraisal is found to be defective or indicative of bias, and the borrower must not be charged for the cost of the second appraisal as part of the ROV process, among other things.
2.  Flagging for Discrimination: Loan Depot will flag appraisals for indica of discrimination if (A) an undervalue flag is present from Fannie Mae or Freddie Mac, or (B) the appraisal contains “coded words,” which the settlement defines as “words or phrases that may suggest demographic characteristics despite not explicitly indicating such characteristics as may be defined by the Government Sponsored Enterprises.” In the event that an appraisal is flagged for indica of discrimination, the borrower will not be charged for the second appraisal.
3.  Annual Training: LoanDepot will require annual training for all its credit, valuation and customer service staff on fair housing and fair lending laws and regulations, the history of discrimination in residential mortgage lending and appraisals, the continuing nature of appraisal discrimination as reflected in studies and reports, implicit bias, and anti-discrimination principles.
4.  Statistical Analysis: LoanDepot will conduct statistical analyses of appraisal practices by protected class. The statistical analyses shall track appraisal outcomes by protected class and neighborhood demographics, including whether the loan was denied, and they will also track ROV outcomes by protected class and neighborhood demographics, including whether a second appraisal was ordered and whether there was a change in the valuation as a result of the ROV process. The statistical analyses will track data related to individual appraisers used by LoanDepot, including appraisal outcomes, ROV outcomes, ROV requests, and appraisal-related bias or discrimination complaints.
5.  Blacklisting: In any contract with an AMC or appraiser, LoanDepot will require all appraisers they do business with to certify that they have not been the subject of any adverse finding related to a complaint of bias or discrimination in a regulatory body or court of law and, when they are unable to do so, to list and describe all such findings. LoanDepot will not utilize appraisers who have previously been found to have discriminated in an appraisal by a regulatory body or court of law. Additionally, LoanDepot shall not utilize appraisers who, according to the statistical analysis explained above, have received multiple complaints from minority applicants or applicants in minority neighborhoods alleging appraisal bias or discrimination, or whose appraisals have a pattern of undervaluing homes owned by minority applicants or homes in minority neighborhoods.

For context on how this settlement might affect the broader mortgage market, LoanDepot was the third largest mortgage lender in 2022 and the 10th largest in 2023.

Relman Colfax
One interesting aside is that Relman Colfax, the law firm representing the plaintiffs in this case, is actually the same firm that was hired by The Appraisal Foundation (TAF) to provide input on the latest version of the Uniform Standards of Professional Appraisal Practice (USPAP).

TAF hired Relman Colfax in 2022 to perform a comprehensive review of USPAP’s Ethics Rule. In one of its press releases, TAF writes that the “advice from Relman Colfax result[ed] in proposed changes that make it crystal clear that bias and discrimination against protected classes have always been prohibited by USPAP and that USPAP has always required appraisers to comply with all applicable fair housing laws.”

Relman Colfax also assisted TAF in updating a 90-minute section of the 7-Hour National USPAP Update course focused on bias and discrimination.

According to TAF’s non-profit tax filings, TAF paid the law firm $570,031 for its consulting work on USPAP in 2022. (This was more than 10 percent of TAF’s total budget that year.)

Next Steps
On his GoFundMe page, Lanham acknowledges the LoanDepot settlement but boldly declares the resolution doesn’t change his resolve. “This does not affect my position as I still intend to take my cases, both defense of the accusations against me and prosecution of the defamation suit, to trial,” writes Lanham.

This is an especially meaningful case because, to date, no real estate appraiser has lost a case or been found “guilty” in court relating to appraisal discrimination. The only appraisal discrimination cases resolved thus far have been quietly settled—with the settlement amounts undisclosed to the public.

Lanham is the first real estate appraiser who has countersued his accusers and expressed his commitment to see the case through to the end in order to clear his name.

This is a developing story—visit WorkingRE.com and subscribe to our digital newsletter to stay up to date on the latest news in the profession.

Visit Shane Lanham’s GoFundMe at: gofundme.com/f/raise-funds-for-trial.

About the Author
Isaac Peck is the Publisher of Working RE magazine and the President of OREP Insurance, a leading provider of Appraiser E&O insurance that includes additional Discrimination Claim Coverage for appraisers (many programs exclude this important coverage). OREP serves over 10,000 appraisers with comprehensive E&O coverage, competitive rates, and 14 hours of free CE for OREP Members (CE not approved in IL, MN, GA). Visit www.OREP.org to learn more. Reach Isaac at isaac@orep.org or (888) 347-5273. CA License #4116465.

OREP Insurance Services, LLC. Calif. License #0K99465