Gonzalez v. Home Ins. Co.

Citation909 F.2d 716
Decision Date23 July 1990
Docket NumberD,No. 726,726
Parties53 Fair Empl.Prac.Cas. 862, 54 Empl. Prac. Dec. P 40,128, 59 USLW 2151 Edward F. GONZALEZ, Ana T. Gonzalez and A.T.G. Agency, Incorporated, Plaintiffs-Appellants, v. The HOME INSURANCE COMPANY, the Home Indemnity Company, the Home Insurance Company of Indiana and City Insurance Company, Defendants-Appellees. ocket 89-7856.
CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Cornelia T.L. Pillard, New York City (Julius LeVonne Chambers, Charles Stephen Ralston, Ronald L. Ellis, Loren Baily, New York City, Harry C. Kaufman, Eastchester, N.Y., on brief), for plaintiffs-appellants.

Lawrence O. Kamin, New York City (Mitchel H. Ochs, Willkie Farr & Gallagher, New York City, on brief), for defendants-appellees.

Before KEARSE, MINER, and WALKER, Circuit Judges.

KEARSE, Circuit Judge:

Plaintiffs Edward F. Gonzalez, Ana T. Gonzalez, and A.T.G. Agency, Incorporated (collectively "Gonzalez"), former insurance agents for the defendant insurance companies, appeal from a final judgment of the United States District Court for the Southern District of New York, John M. Cannella, Judge, dismissing their complaint alleging principally that defendants discriminated against them on the basis of their race, in violation of 42 U.S.C. Sec. 1981 (1982). The district court granted judgment on the pleadings on the ground that the complaint sought redress for discrimination merely in the performance and termination of the contractual relationships, rather than in their creation, and hence was foreclosed by Patterson v. McLean Credit Union, --- U.S. ----, 109 S.Ct. 2363, 105 L.Ed.2d 132 (1989). On appeal, plaintiffs contend that the case should not have been dismissed because, inter alia, (1) the complaint alleged that two of the defendants entered into agreements with them that included overtly discriminatory terms, (2) their agreements with the other two defendants included covertly discriminatory terms, (3) Patterson does not foreclose suits for discriminatory termination of a relationship, and (4) Patterson should not have been applied retroactively. For the reasons below, we conclude that the complaint stated a claim on which relief can be granted against two of the defendants in the wake of Patterson and that plaintiffs should be allowed to file an amended complaint. Accordingly, we vacate the judgment of dismissal and remand for further proceedings.

I. BACKGROUND

Plaintiffs Edward F. Gonzalez and his wife Ana T. Gonzalez, who are Hispanic On December 28, 1982, Gonzalez entered into an agency agreement with Home and Home Indemnity (the "1982 Agreement"), whereby Gonzalez would act as a property/casualty insurance agent for those two companies. The 1982 Agreement provided that it could be terminated upon 90 days' written notice by either party. Gonzalez began working as defendants' agent in January 1983, and was assigned to defendants' field office in Yonkers, New York. The complaint alleged that Home and Home Indemnity proceeded to impose on Gonzalez conditions and restrictions that they did not impose on their white agents and otherwise to treat Gonzalez unfavorably as compared to their white agents. As specifics, the complaint alleged that these defendants, inter alia, promoted to their white agents a premier comprehensive coverage called "Gold Key" but refused to allow Gonzalez to sell Gold Key; that they intentionally delayed acting on policies submitted by Gonzalez, while acting expeditiously on those submitted by white agents; and that they imposed on Gonzalez requirements for minimum premium performance, while not imposing similar quotas on their white agents.

are the sole stockholders in A.T.G. Agency, Incorporated. Defendants are four affiliated insurance companies: The Home Insurance Company ("Home"), The Home Indemnity Company ("Home Indemnity"), The Home Insurance Company of Indiana ("Home of Indiana"), and City Insurance Company ("City Insurance"). Gonzalez acted as an insurance agent for Home and Home Indemnity from January 1983 through November 15, 1984, and as an agent for Home of Indiana and City Insurance from October 1983 through November 15, 1984. As to the formation, performance, and termination of the agency agreements, the complaint alleged the following.

The premium quotas, along with certain other requirements, were imposed on Gonzalez by Home and Home Indemnity in or about September 1983. Those defendants informed plaintiffs at that time that Gonzalez would be required to produce $100,000 in policy premiums between September 1, 1983, and June 30, 1984; that its "$100,000 of premiums must be 70% commercial insurance and 30% personal insurance"; and that Gonzalez could not sell an automobile insurance policy unless it also sold that insured a homeowner's policy. The complaint alleged that these were conditions that were not similarly imposed by Home and Home Indemnity on their white agents.

In October 1983, plaintiffs entered into an agency agreement with Home of Indiana and City Insurance (the "1983 Agreement"). This agreement included the requirements then-recently imposed on Gonzalez by Home and Home Indemnity, which were not imposed on white agents.

The complaint further alleged that, after the September 1983 imposition of the premium quotas, Gonzalez submitted to defendants more than 300 applications for insurance policies, approximately 85% of which were for commercial policies. These policies would have generated first-year premiums in excess of $600,000. Defendants rejected all but 23 of the submitted policies; thereafter, they canceled or refused to renew 19 of the 23 policies. Gonzalez also submitted three applications for mass-marketing group insurance plans that would have generated first-year premiums in excess of $500,000. Defendants rejected all of these applications.

The premiums on the Gonzalez policies that were accepted by defendants amounted to only $12,500. On August 15, 1984, defendants gave Gonzalez 90 days' written notice that the 1982 and 1983 Agreements would be terminated, giving as the reason Gonzalez's failure to meet the $100,000 premium production goal. The agency relationships were terminated on November 15, 1984.

Plaintiffs commenced the present action in July 1985, alleging that defendants had discriminated against them because of their race in violation of 42 U.S.C. Sec. 1981 and asserting various state-law claims. After engaging in substantial discovery, defendants moved in January 1988 for, inter alia, judgment on the pleadings under Fed.R.Civ.P. 12(c) or, in the alternative, for On June 15, 1989, while defendants' motion was sub judice, the Supreme Court issued its decision in Patterson v. McLean Credit Union, --- U.S. ----, 109 S.Ct. 2363, 105 L.Ed.2d 132 (1989) ("Patterson"). In Patterson, the Court noted that Sec. 1981 speaks of the making and enforcement of contracts, and ruled that an employer's racial harassment of an employee during the term of employment does not fall within the scope of Sec. 1981. Defendants argued that Patterson required dismissal of plaintiffs' Sec. 1981 claims.

summary judgment, dismissing the Sec. 1981 claims.

In a Memorandum and Order dated July 28, 1989 ("Memorandum"), the district court granted defendants' motion for judgment on the pleadings, agreeing that Patterson barred Gonzalez's Sec. 1981 claims:

The allegations contained in plaintiffs' complaint do not involve either a refusal by the Home to enter into a contract with plaintiffs or the impairment of plaintiffs' ability to enforce established contract rights. Rather, all of plaintiffs' allegations relate to alleged discriminatory treatment by the Home after the formation of the contractual relationship.

Memorandum at 6. The court found that defendants' alleged conduct "simply does not involve the right to make or enforce a contract. Instead, such conduct involves 'the performance of established contractual obligations,' ... which, after Patterson, is not actionable under section 1981." Id. at 7 (quoting Patterson, 109 S.Ct. at 2373).

The court also held that discriminatory termination of an agreement does not involve the making or enforcement of a contract and therefore is not actionable under Sec. 1981 after Patterson. Accordingly, the court granted judgment on the pleadings to defendants on the Sec. 1981 claims, and dismissed plaintiffs' pendent state-law claims. This appeal followed.

II. DISCUSSION

On appeal, Gonzalez argues principally that the district court should not have dismissed the complaint on the basis of Patterson because (1) Home of Indiana and City Insurance entered into an agency agreement with Gonzalez that included overtly discriminatory terms, (2) Home and Home Indemnity entered into an agency agreement that included covertly discriminatory terms, and (3) all four defendants refused on the basis of Gonzalez's race to enter into insurance contracts with clients solicited by Gonzalez. Plaintiffs also contend, inter alia, that the district court either should not have applied Patterson to their case retroactively or should have allowed them to amend their complaint in light of Patterson. We conclude that plaintiffs' first contention has merit and that they should be allowed to amend their complaint.

A. The Patterson Decision and the Scope of Sec. 1981

Section 1981 provides, in pertinent part, that "[a]ll persons within the jurisdiction of the United States shall have the same right ... to make and enforce contracts ... as is enjoyed by white citizens...." 42 U.S.C. Sec. 1981 (1982). In Patterson, the Supreme Court stated that this provision "cannot be construed as a general proscription of racial discrimination in all aspects of contract relations, for it expressly prohibits discrimination only in the making and enforcement of contracts." Patterson, 109 S.Ct. at 2372. The Court held that an employer's alleged racial harassment of an employee involved neither the "ma...

To continue reading

Request your trial
40 cases
  • Frazier v. First Union Nat. Bank
    • United States
    • United States District Courts. 4th Circuit. Western District of North Carolina
    • October 2, 1990
    ...and reject the holding of Hicks. See generally Shuman v. General Motors Corp., 914 F.2d 258 (6th Cir.1990); Gonzalez v. Homes Insurance Co., 909 F.2d 716 (2d Cir.1990); Reeves v. MCI Telecommunications Corp., 909 F.2d 144 (5th Cir.1990); McKnight v. General Motors Corp., 908 F.2d 104, 53 Fa......
  • Stradford v. Rockwell Intern. Corp.
    • United States
    • United States District Courts. 6th Circuit. United States District Courts. 6th Circuit. Southern District of Ohio
    • January 17, 1991
    ...832, 840 (5th Cir.1990); Carroll v. General Accident Ins. Co., 891 F.2d 1174, 1175-77 (5th Cir. 1990). 6 See also Gonzalez v. Home Ins. Co., 909 F.2d 716, 722 (2d Cir.1990) (finding that termination of a contract may still be actionable under section 1981, but only where intent to discrimin......
  • Cabrera v. Fischler
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • February 17, 1993
    ...Circuit decisions indicates that, despite Bowen, the Bradley standard is still entitled to consideration. (See e.g., Gonzalez v. Home Ins. Co., 909 F.2d 716, 723 2d In Bradley, the Supreme Court set forth the following formula for courts to use in determining the retroactive application of ......
  • Hill v. New York City Bd. of Educ.
    • United States
    • United States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
    • November 12, 1992
    ...Up until 1989, the Second Circuit interpreted Section 1981 as prohibiting discriminatory contract termination. See Gonzalez v. Home Ins. Co., 909 F.2d 716, 722 (2d Cir.1990) (citing cases); Ramseur v. Chase Manhattan Bank, 865 F.2d 460, 464 (2d Cir.1989). However, the Supreme Court — in Pat......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT