N.A.A.C.P. v. American Family Mut. Ins. Co.
| Citation | 978 F.2d 287 |
| Decision Date | 07 December 1992 |
| Docket Number | No. 91-1176,91-1176 |
| Parties | , 24 Fed.R.Serv.3d 278 The NATIONAL ASSOCIATION FOR THE ADVANCEMENT OF COLORED PEOPLE, et al., Plaintiffs-Appellants, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Defendant-Appellee. |
| Court | United States Courts of Appeals. United States Court of Appeals (7th Circuit) |
William H. Lynch, Angermeier & Rogers, Mark M. Leitner, James Hall, Jr., Charne, Clancy & Taitelman, Gretchen Miller, Milwaukee, Wis., Dennis Cortland-Hayes, Willie Abrams, N.A.A.C.P., Gen. Counsel, Baltimore, Md., Curry First, Legal Aide Soc. of Milwaukee, Litigation Director, Milwaukee, Wis., John A. Powell (argued), ACLU, New York City, for plaintiffs-appellants N.A.A.C.P., Celestine Lindsey, Dorothy Listenbee, James Milner, Diane Pratt, Marvin Pratt, Simon Williams, Beverly Williams and Lois Woods, individually and as representatives of a class of all similarly situated persons.
Thomas L. Shriner, Jr., (argued), Richard M. Esenberg, Brian W. McGrath, Foley & Lardner, Milwaukee, Wis., for defendant-appellee American Family Mut. Ins. Co.
Grant F. Langley, Rudolph M. Konrad, Office of City Atty., Milwaukee, Wis., for amicus curiae City of Milwaukee.
John R. Dunne, Asst. Atty. Gen., Jessica Dunsay Silver, Linda F. Thome, Roger B. Clegg, Dept. of Justice, Civil Rights Div., Appellate Section, Paul F. Hancock (argued), Dept. of Justice, Civil Rights Div., Housing Section, Washington, D.C., for amicus curiae U.S.
Joseph R. Guerra, Sidley & Austin, Washington, D.C., for amicus curiae Nat. Fair Housing Alliance.
Lawrence M. Cohen, Jeffrey S. Goldman, Michael A. Paull, Fox & Grove, Chicago, Ill., for amicus curiae Nat. Ass'n of Independent Insurers.
Before COFFEY and EASTERBROOK, Circuit Judges, and FAIRCHILD, Senior Circuit Judge.
Is redlining in the insurance business a form of racial discrimination violating the Fair Housing Act? "Redlining" is charging higher rates or declining to write insurance for people who live in particular areas (figuratively, sometimes literally, enclosed with red lines on a map). The NAACP, its Milwaukee Branch, and eight of its members contend in this class action that redlining violates the Fair Housing Act, 42 U.S.C. §§ 3601-19, and four other rules of state and federal law when insurers draw their lines around areas that have large or growing minority populations.
Plaintiffs contend that a mortgage loan usually is essential to home ownership, and that lenders are unwilling to provide credit unless the borrower obtains insurance on the house that serves as security for the loan. Higher premiums price some would-be buyers out of the market; a refusal to write insurance excludes all buyers. If insurers redline areas with large or growing numbers of minority residents, that practice raises the cost of housing for black persons and also frustrates their ability to live in integrated neighborhoods. Even if they achieve their goal, they pay extra.
The complaint asserts that American Family Mutual Insurance Company engages in redlining in and near Milwaukee. The district judge concluded that two of plaintiffs' five theories are legally insufficient. See Fed.R.Civ.P. 12(b)(6). Following Mackey v. Nationwide Insurance Cos., 724 F.2d 419, 423-24 (4th Cir.1984), he held that the Fair Housing Act (Title VIII of the Civil Rights Act of 1968) does not apply to the property and casualty insurance business. And he held that Wisconsin would not recognize a private right of action to enforce the antidiscrimination portions of its insurance code. At the conclusion of his oral ruling, the judge entered a partial final judgment on these two theories under Fed.R.Civ.P. 54(b).
Because the district judge dismissed claims under Title VIII and Wisconsin's insurance code in advance of discovery, we must assume that plaintiffs can establish that the defendant intentionally discriminates on account of race. That is, we must assume that the plaintiffs can establish disparate treatment and not just a disparate impact of decisions made on actuarial grounds. The distinction is important not only because the Supreme Court has yet to decide whether practices with disparate impact violate Title VIII, see Huntington v. NAACP, 488 U.S. 15, 109 S.Ct. 276, 102 L.Ed.2d 180 (1988), but also because of the nature of insurance. Insurance works best when the risks in the pool have similar characteristics. For example, term life insurance costs substantially more per dollar of death benefit for someone 65 years old than for one 25 years old, although the expected return per dollar of premium is the same to both groups because the older person, who pays more, also has a higher probability of dying during the term. Auto insurance is more expensive in a city than in the countryside, because congestion in cities means more collisions. Putting young and old, or city and country, into the same pool would lead to adverse selection: people knowing that the risks they face are less than the average of the pool would drop out. A single price for term life insurance would dissuade younger persons from insuring, because the price would be too steep for the coverage offered; the remaining older persons would pay a price appropriate to their age, but younger persons would lose the benefits of insurance altogether. To curtail adverse selection, insurers seek to differentiate risk classes with many variables.
Risk discrimination is not race discrimination. Yet efforts to differentiate more fully among risks may produce classifications that could be generated by discrimination. Recall the dispute, in both courts and journals, whether separate annuity tables for women are sex discrimination. See Arizona Governing Committee v. Norris, 463 U.S. 1073, 103 S.Ct. 3492, 77 L.Ed.2d 1236 (1983); George J. Benston, The Economics of Gender Discrimination in Employee Fringe Benefits: Manhart Revisited, 49 U.Chi.L.Rev. 489 (1982); Lea Brilmayer, et al., Sex Discrimination in Employer-Sponsored Insurance Plans: A Legal and Demographic Analysis, 47 U.Chi.L.Rev. 505 (1980). No insurer openly uses race as a ground of ratemaking, but is a higher rate per $1,000 of coverage for fire insurance in an inner city neighborhood attributable to risks of arson or to racial animus?
A disparate treatment approach assigns burdens of proof and persuasion to the plaintiff, while a disparate impact approach places them on the insurer. Allocation of these burdens is bound to affect many cases, given the difficulty in drawing inferences. For example, a recent study by the Federal Reserve System concluded that black applicants for mortgage loans are more likely to be turned down, holding income constant. Glenn B. Canner & Dolores S. Smith, Home Mortgage Disclosure Act: Expanded Data on Residential Lending, 77 Fed.Res.Bull. 859, 868-76 (1991). Is this attributable to applicants' race, to the fact that they seek loans that are larger multiples of their average wealth, or to difficulties of obtaining insurance that may (or may not) themselves have a racial component? The Federal Reserve reported data on applicants' income but not their wealth or the value of the loans sought, both important variables. The greater the uncertainty in drawing inferences, the more the placement of the burden matters. We mention this not to resolve the question but to make clear that we have not done so by indirection. All we decide is whether the complaint states claims on which the plaintiffs may prevail if they establish that the insurer has drawn lines according to race rather than actuarial calculations.
Appellate jurisdiction is the first question. Rule 54(b) allows a court to "direct the entry of a final judgment as to one or more but fewer than all of the claims or parties" but does not employ a special meaning of "final". So it does not authorize appeal of decisions that, if made in stand-alone litigation, would not be final. Liberty Mutual Insurance Co. v. Wetzel, 424 U.S. 737, 96 S.Ct. 1202, 47 L.Ed.2d 435 (1976); Horn v. Transcon Lines, Inc., 898 F.2d 589 (7th Cir.1990). Unless the court enters judgment on an entire "claim," or wraps up the case with respect to all claims involving a particular party, Rule 54(b) does not permit an immediate appeal. Steve's Homemade Ice Cream, Inc. v. Stewart, 907 F.2d 364 (2d Cir.1990); FDIC v. Elefant, 790 F.2d 661, 664 (7th Cir.1986); Horn, 898 F.2d at 593-95.
The district judge did not discuss the legal and factual overlap between the two counts being dismissed and the three being retained and did not explain why he viewed them as separate claims. A "claim for relief" seeks redress of a distinct wrong; a distinct legal underpinning differs from a new claim and is not independently appealable. A/S Apothekernes Laboratorium for Specialpraeparater v. I.M.C. Chemical Group, Inc., 725 F.2d 1140, 1142-43 (7th Cir.1984). Yet the district judge appears to have equated theories with claims. He observed that because a trial lay more than a year in the future there was ample time to resolve these two legal disputes on appeal so that all theories could be handled during one trial. This suggests that the judge confused Rule 54(b) with 28 U.S.C. § 1292(b), which permits a court to certify the case for discretionary appeal when interlocutory resolution of important issues could advance the final disposition of the litigation. Because of the mismatch between the district court's stated rationale and the scope of Rule 54(b)--and the apparent overlap of the two dismissed counts with the three retained--our jurisdiction is in doubt.
Plaintiffs' complaint begins with 66 paragraphs and then states five "claims," each of which incorporates these paragraphs and asserts one reason why the conduct is wrongful. The Fair Housing Act and the state insurance code are two. The other three: Wisconsin's Fair Housing Act, 42 U.S.C. § 1981 (...
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