Nationwide Mut. Ins. Co. v. Cisneros

• Decision Date: 04 August 1995
• Docket Number: No. 94-3296,94-3296
• Citation: 52 F.3d 1351
• Parties: NATIONWIDE MUTUAL INSURANCE COMPANY and Nationwide Mutual Fire Insurance Company, Plaintiffs-Appellants, v. Henry CISNEROS, Secretary of the United States Department of Housing & Urban Development; Jerald L. Steed, Executive Director, Dayton Human Relations Council; Charles W. Brown, Chairperson, Dayton Human Relations Council; and City of Dayton, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1351

52 F.3d 1351

63 USLW 2698

NATIONWIDE MUTUAL INSURANCE COMPANY and Nationwide Mutual Fire Insurance Company, Plaintiffs-Appellants, v. Henry CISNEROS, Secretary of the United States Department of Housing & Urban Development; Jerald L. Steed, Executive Director, Dayton Human Relations Council; Charles W. Brown Chairperson, Dayton Human Relations Council; and City of Dayton, Defendants-Appellees.

No. 94-3296.

United States Court of Appeals Sixth Circuit.

Argued March 30, 1995.

Decided May 1, 1995.

Rehearing and Suggestion for

En Banc Denied Aug 4, 1995.

Lawrence M. Cohen (argued), Jeffrey S. Goldman, Joel W. Rice (briefed), Fox & Grove, Chartered, Chicago, IL, for plaintiffs-appellants.

Jessica D. Silver, Linda F. Thome (argued and briefed), U.S. Dept. of Justice, Civil Rights Div., Appellate Section, Washington, DC, for Henry Cisneros.

Kenneth Eugene Barden (argued and briefed), Office of the City Atty., Dayton, OH, for Jerald L. Steed, Charles W. Brown, and City of Dayton.

Before: KENNEDY and MILBURN, Circuit Judges; WISEMAN, ^* District Judge.

MILBURN, J., delivered the opinion of the court, in which WISEMAN, D.J., joined. KENNEDY, J. (p. 1364), delivered a separate dissenting opinion.

MILBURN, Circuit Judge.

Plaintiffs Nationwide Mutual Insurance Company and Nationwide Mutual Fire Insurance Company appeal the district court's grant of summary judgment to defendants Henry Cisneros, Secretary of the United States Department of Housing and Urban Development; Jerald L. Steed and Charles W. Brown, Executive Director and Chairperson, respectively, of the Dayton, Ohio Human Relations Council; and the City of Dayton, Ohio, in this action for declaratory judgment and injunctive relief in which plaintiffs challenged defendants' authority to regulate the issuance and cancellation of homeowner's insurance policies under the Fair Housing Act. On appeal, the issues are (1) whether the district court erred in finding that the Fair Housing Act governs the business of property insurance, (2) whether the district court erred in finding that the McCarran-Ferguson Act does not preempt the regulation of the business of insurance under the Fair Housing Act, and (3) whether the district court erred in dismissing plaintiffs' state law claims. For the reasons that follow, we affirm.

I.

A.

Plaintiffs Nationwide Mutual Insurance Company and Nationwide Mutual Fire Insurance Company (collectively "Nationwide"), Ohio corporations, seek declaratory and injunctive relief from attempts by the Department of Housing and Urban Development ("HUD") to regulate plaintiffs' property insurance underwriting practices under the Fair Housing Act ("the Act"), 42 U.S.C. Sec. 3601, et seq. The insurance underwriting practices in question involve "redlining," in which the insurer charges higher rates or declines to write insurance for people who live in particular areas. Defendant HUD is responsible for the administration of the Fair Housing Act. Plaintiffs also seek declaratory and injunctive relief from attempts by defendants Jerald L. Steed, Charles Brown, and the City of Dayton ("the Dayton defendants") to regulate plaintiffs' property insurance underwriting practices under Ohio state law and Dayton municipal law. As earlier stated, Jerald L. Steed and Charles Brown are the Executive Director and the Chairperson, respectively, of the Dayton Human Relations Council ("DHRC"). In addition to enforcing fair housing provisions of Dayton ordinances, DHRC also assists HUD in the local administration of housing discrimination complaints under the Fair Housing Act.

Under the Fair Housing Act, HUD is responsible for receiving and investigating charges of discrimination in housing. Because mortgage lenders require borrowers to obtain and maintain property and hazard insurance on mortgaged property as a condition of obtaining a loan, HUD has interpreted the Fair Housing Act as prohibiting discriminatory practices relating to property and hazard insurance. HUD has adhered to this interpretation of the Act since at least 1978, when HUD's General Counsel wrote in a memorandum to the Assistant Secretary for Equal Opportunity:

Adequate insurance coverage is often a prerequisite to obtaining financing. Insurance redlining, by denying or impeding coverage makes mortgage money unavailable, rendering dwellings "unavailable" as effectively as the denial of financial assistance on other grounds[.]

Memorandum to the Assistant Secretary for Equal Opportunity, dated August 25, 1978 (quoted in defendant HUD's brief at 10). Furthermore, in 1988, the Fair Housing Act was amended to authorize HUD to issue rules to implement the Act. 42 U.S.C. Sec. 3614a. At that time, HUD issued a regulation reflecting its interpretation of the Act and its application to insurance companies. This regulation defined "other prohibited sale and rental conduct" to include:

Refusing to provide municipal services or property or hazard insurance for dwellings or providing such services or insurance differently because of race, color, religion, sex, handicap, familial status, or national origin.

24 C.F.R. Sec. 100.70(d)(4).

In May 1990, HUD received a complaint from Steven and Jennifer Beavers alleging that Nationwide had cancelled their homeowner's insurance because of their race and/or place of residence. HUD referred this complaint to the DHRC, which determined that it was "probable" that Nationwide had violated the City of Dayton's fair housing ordinances. In addition, on September 28, 1990, Sarah Wilson filed a housing discrimination complaint with HUD, alleging that Nationwide had refused, because of her sex, race, and the racial make-up of the area, to reinstate her insurance policy on a residential building that was located in a predominantly black area of Toledo, Ohio. HUD and the DHRC were in the process of investigating these complaints when Nationwide filed this action. Both investigations have been held in abeyance pending the conclusion of this case.

B.

Plaintiffs commenced this action for declaratory and injunctive relief on May 6, 1991, in the United States District Court for the District of Columbia. Plaintiffs named as defendants Jack Kemp, then Secretary of HUD; Jerald L. Steed and the Reverend Charles Brown, the Executive Director and Chairperson, respectively, of the Dayton Human Relations Committee; and the City of Dayton, Ohio. The Dayton defendants moved for a change of venue, and on December 13, 1991, pursuant to 28 U.S.C. 1404(a), the action was transferred to the United States District Court for the Southern District of Ohio.

In May 1992, defendants moved to dismiss plaintiffs' complaint on jurisdictional grounds. Thereafter, on December 1, 1992, plaintiffs moved for summary judgment. The Dayton defendants and HUD filed crossmotions for summary judgment on January 14 and 15, 1993, respectively. On September 27, 1993, the magistrate judge issued his Report and Recommendation in which he concluded that the issues presented in the case were ripe for review and thus recommended that the district court deny HUD's motion to dismiss. In addition, the magistrate judge recommended that the district court grant defendants' cross-motions for summary judgment and deny plaintiffs' motion for summary judgment upon concluding (1) that HUD's interpretation of the Fair Housing Act was entitled to judicial deference; (2) that, in any event, it was a correct interpretation of the Fair Housing Act; and (3) that the regulation was not barred by the McCarran-Ferguson Act. Finally, the magistrate judge granted HUD's motion for a protective order barring certain discovery and recommended that the district court decline to exercise jurisdiction over plaintiffs' state law claims.

Plaintiffs filed timely objections to the magistrate judge's report and recommendation. On February 24, 1994, the district court adopted the magistrate judge's report and recommendation and dismissed this action. This timely appeal followed.

II.

A.

Plaintiffs argue that the district court erred in granting defendants' cross-motions for summary judgment and denying their motion for summary judgment. ¹ We review a district court's grant of a motion for summary judgment de novo. Michigan Protection & Advocacy Serv., Inc. v. Babin, 18 F.3d 337, 341 (6th Cir.1994). "This court will affirm the district court's order only if we determine that the pleadings, affidavits, and other submissions show 'that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.' " Babin, 18 F.3d at 341 (quoting Federal Rule of Civil Procedure ("Fed.R.Civ.P.") 56(c)). All evidence must be viewed in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). However, "[t]he moving party need not support its motion with evidence disproving the non-moving party's claim, but need only show that 'there is an absence of evidence to support the non-moving party's case.' " Babin, 18 F.3d at 341 (quoting Celotex Corp v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2554, 91 L.Ed.2d 265 (1986)).

Plaintiffs argue that the district court erred in finding that defendants have delegated authority, under the Fair Housing Act, or under "substantially equivalent" local ordinances, to regulate plaintiffs' property insurance underwriting practices. Specifically, plaintiffs assert that the plain language, structure, and legislative history of Sec. 3604(a) and (b) of the Fair Housing Act preclude this finding. Section 3604(a) and (b) of the Fair Housing Act state that it shall be unlawful:

(a) To refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin.

(b) To discriminate against...