Mackey v. Nationwide Ins. Companies

• Decision Date: 06 January 1984
• Docket Number: No. 82-1912,82-1912
• Citation: 724 F.2d 419
• Parties: , 33 Empl. Prac. Dec. P 34,048, 1984-1 Trade Cases 65,795 Charles E. MACKEY, Appellant, v. NATIONWIDE INSURANCE COMPANIES, Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 419

724 F.2d 419

73 A.L.R.Fed. 885, 33 Empl. Prac. Dec. P 34,048,

1984-1 Trade Cases 65,795

Charles E. MACKEY, Appellant, v. NATIONWIDE INSURANCE COMPANIES, Appellee.

No. 82-1912.

United States Court of Appeals, Fourth Circuit.

Argued May 10, 1983.

Decided Jan. 6, 1984.

John T. Nockleby, Charlotte, N.C. (J. LeVonne Chambers, Jonathan Wallas, Ronald L. Gibson, Chambers, Ferguson, Watt, Wallas, Adkins & Fuller, P.A., Charlotte, N.C., on brief), for appellant.

Jeffrey S. Goldman, Chicago, Ill. (Lawrence M. Cohen, Vicki G. Lafer, Fox & Grove, Chartered, Chicago, Ill., on brief), for appellee.

Before WIDENER and ERVIN, Circuit Judges, and HAYNSWORTH, Senior Circuit Judge.

HAYNSWORTH, Senior Circuit Judge:

The plaintiff, a former agent of Nationwide's and a black, brought an action alleging that the defendant had discriminated against him on the basis of his race in terminating his contract and in the terms and conditions of his prior employment. He also complained of the defendant's alleged practice of "redlining," defined as the arbitrary refusal to underwrite the risks of persons residing in predominantly black neighborhoods. He alleged that he had suffered economic harm because of his inability to sell or renew policies insuring the houses of black friends and business acquaintances. Mackey asserted that the redlining practices were in violation of the Sherman Act, 15 U.S.C. Sec. 1, et seq.; the Civil Rights Acts of 1866 and 1871, 42 U.S.C. Secs. 1981, 1982 and 1985(3); the Fair Housing Act, 42 U.S.C. Sec. 3601, et seq.; and the North Carolina Unfair Trade Practices Act, N.C.G.S. Sec. 75-1, et seq.

Upon Nationwide's Rule 12(b)(6) motion, the district judge dismissed the complaint insofar as it challenged the alleged redlining practice. In concluding that these allegations did not state claims upon which relief could be granted, the district judge ruled that the McCarran-Ferguson Act, 15 U.S.C.A. Sec. 1011, et seq., shielded the alleged redlining practice from challenges under the Sherman Act, the Fair Housing Act and the Civil Rights Acts. He found no standing to assert any of those claims because the plaintiff was not a member of the class of policy holders or potential insureds who were harmed by the redlining practice. He also ruled that insurance redlining is not prohibited by the Fair Housing Act and that, even if it was, this claim was barred by the applicable statute of limitations. The pendent claim under the North Carolina Unfair Trade Practices Act was dismissed because it was inadequately related to the plaintiff's remaining claims of direct discrimination against himself.

Upon the plaintiff's motion, the district court entered a judgment under Federal Rule of Civil Procedure 54(b), and we permitted an immediate appeal from the dismissal of these claims challenging Nationwide's alleged redlining practice. While we do not adopt all of the reasoning of the district judge, we affirm the dismissal of these claims for, as to each, there is a substantial ground supporting the conclusion that the claim is not one upon which relief can be granted.

I. The McCarran-Ferguson Act

The district court correctly held that the McCarran-Ferguson Act precludes the Sherman Act claim, but we do not agree that it forecloses the claims under the Fair Housing Act and the Civil Rights Acts of 1866 and 1871.

The McCarran-Ferguson Act was the congressional response to the decision of the Supreme Court in United States v. Southeastern Underwriters Association, 322 U.S. 533, 64 S.Ct. 1162, 88 L.Ed. 1440 (1944). Although Southeastern Underwriters established that insurance companies transacting business across state lines were subject to federal regulation under the Commerce Clause, the Congress wished to preserve the traditional role of the states in the taxation and regulation of the business of insurance. See, e.g., Group Life and Health Insurance Co. v. Royal Drug Co., 440 U.S. 205, 217-18, 99 S.Ct. 1067, 1076-77, 59 L.Ed.2d 261 (1979). A secondary objective was to give to insurance companies a limited exemption from the antitrust laws. Id. at 218, 99 S.Ct. at 1077. The Act specifically provides that the antitrust laws are inapplicable to the activities of insurance companies if the "business of insurance" is regulated by state law, 15 U.S.C.A. Sec. 1012(b), unless boycotting, coercion or intimidation is involved, id. Sec. 1013(b).

The plaintiff's Sherman Act claim falls squarely within the exemption provided by the McCarran-Ferguson Act. The Sherman Act applies generally to the business of insurance only in those states in which it is not regulated by local law. A body of state law which proscribes unfair insurance practices and provides for administrative supervision and enforcement satisfies the state regulation requirement of the exemption. Federal Trade Commission v. National Casualty Co., 357 U.S. 560, 564, 78 S.Ct. 1260, 1272, 2 L.Ed.2d 1540 (1958).

North Carolina has an insurance commissioner who is responsible for administering an expansive regulatory scheme, see N.C.G.S. Sec. 58-1, et seq. The business of insurance is regulated by North Carolina law, and the McCarran-Ferguson Act bars the plaintiff's Sherman Act claim.

We disagree, however, with the conclusion that the McCarran-Ferguson Act bars the plaintiff's claims under the Fair Housing Act and the Civil Rights Acts.

Unless a federal statute specifically relates to the business of insurance, the McCarran-Ferguson Act provides that "no act of Congress shall be construed to invalidate, impair or supersede any law enacted by any state for the purpose of regulating the business of insurance." 15 U.S.C.A. Sec. 1012(b). We are not pointed to any law enacted by North Carolina which would be "impaired" by application of the Fair Housing Act or the Civil Rights Acts. ¹ The presence of a general regulatory scheme does not show that any particular state law would be invalidated, impaired or superseded by the application of the Fair Housing Act and the Civil Rights Acts. In these circumstances, barring these claims is unnecessary to the effectuation of the congressional goals in enacting McCarran-Ferguson, insuring that the states retain the power to regulate the business of insurance and providing regulated insurance companies with a limited exemption from the antitrust laws. ²

II. Standing

A.

The district court was correct in concluding that the plaintiff had no standing to attack Nationwide's alleged redlining practice under the Civil Rights Acts, 42 U.S.C.A. Sec. 1981 and Sec. 1982.

A racially discriminatory refusal to insure houses in predominantly black neighborhoods may give a cause of action under those two sections to the homeowners, the direct victims of racial discrimination. The plaintiff does not claim to be such a victim, but alleges only that he lost opportunities to sell property insurance to black friends and acquaintances.

Under Article III of the Constitution, a plaintiff has standing if he has alleged "such a personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court so largely depends ...." Baker v. Carr, 369 U.S. 186, 82 S.Ct. 691, 7 L.Ed.2d 663 (1962). The plaintiff's alleged loss of commission income probably satisfies the constitutional requirement that a plaintiff have suffered some injury in fact and have a "personal stake" in the outcome of the litigation. This does not end the matter, however, for there are prudential limitations which enter into the equation in solving most problems of standing. Generally, a litigant is not permitted to assert the legal rights of others. The courts should not be called upon to decide questions of broad social import in cases in which no individual rights will be vindicated, and access to the federal courts should be limited to those litigants best suited to assert the claims. Gladstone Realtors v. Village of Bellwood, 441 U.S. 91, 99-100, 99 S.Ct. 1601, 1607-1608, 60 L.Ed.2d 66 (1979). The persons best suited to challenge the redlining practice are those owners of homes and buildings who have been the direct victims of the alleged discriminatory practice.

Mackey appears to concede that the prudential limitations on standing would ordinarily preclude his claims under Secs. 1981 and 1982 challenging Nationwide's alleged redlining practice. He contends, however, that he was "punished" for trying to vindicate the Secs. 1981 and 1982 rights of the home and building owners, and that the fact of punishment brings him within the exception of Sullivan v. Little Hunting Park, 396 U.S. 229, 90 S.Ct. 400, 24 L.Ed.2d 386 (1969).

In Sullivan, a white man owned two houses in the area served by Little Hunting Park, a community playground operated by a nonstock corporation. He rented one of the houses to Freeman and assigned to him a membership share in the park. The board of the park refused to approve the assignment because Freeman was black. When Sullivan protested the board's action, he was expelled from membership in the park and was tendered cash for his two shares. The Supreme Court held that Sullivan had standing to sue the park because he had been "punished for trying to vindicate the rights of minorities protected by Sec. 1982." The Court was careful to state, however, that Sullivan's standing to sue was based on the fact that he was the "only effective adversary" of the unlawful racial discrimination.

If the Supreme Court had held that Sullivan had no standing to sue, there might have been a breakdown in the machinery for the vindication of important rights. A possibility of expulsion for assigning a membership share to a black would tend to make most white householders fearful of doing so. A potential black purchaser would have a difficult time proving that he had been the victim of discriminatory action by the board. Perhaps, in Little Hunting Park, Sullivan's history might get a black...