Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-04-02346/USCOURTS-ca8-04-02346-0/pdf.json

Nature of Suit Code: 443
Nature of Suit: Civil Rights Accommodations
Cause of Action: 

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United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 04-2346

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Coleman McClain, et al., *

*

Plaintiffs - Appellants, *

*

v. * Appeals from the United States

* District Court for the

American Economy Insurance * Western District of Missouri.

Company; American States Insurance *

Company; American States Preferred *

Insurance Company, *

*

Defendants - Appellees. *

___________

No. 04-2347

___________

Sara Kenner, et al., *

*

Plaintiffs - Appellants, *

*

v. *

*

Safeco Insurance Company, *

*

Defendant - Appellee. *

Appellate Case: 04-2346 Page: 1 Date Filed: 09/07/2005 Entry ID: 1948615
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The HONORABLE FERNANDO J. GAITAN JR., United States District

Judge for the Western District of Missouri.

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___________

No. 04-2353

___________

Cynthia E. Canady, et al., *

*

Plaintiffs - Appellants, *

*

v. *

*

Federal Insurance Company, et al., *

*

Defendants - Appellees. *

___________

Submitted: April 13, 2005

Filed: September 7, 2005

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Before LOKEN, Chief Judge, FAGG and BYE, Circuit Judges.

___________

LOKEN, Chief Judge.

In 1996, numerous plaintiffs sued twenty-five insurers under the Fair Housing

Act, 42 U.S.C. §§ 3601 et seq., and the Civil Rights Acts of 1866 and 1870, 42 U.S.C.

§§ 1981 & 1982, seeking class action relief for defendants’ alleged discriminatory

policies denying homeowners insurance to the residents of minority neighborhoods

in Missouri. The district court1

 denied class certification and dismissed the complaint

without prejudice, concluding that “plaintiffs lack standing to bring claims against

defendants against whom they have alleged no direct injury.” Canady v. Allstate Ins.

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Co., 1997 U.S. Dist. LEXIS 24067 (W.D. Mo. 1997), aff’d, 1998 U.S. App. LEXIS

15157, 162 F.3d 1163 (8th Cir. 1998) (table) (Canady I). Ten Canady I plaintiffs then

filed class actions in state court against eighteen Canady I defendants, alleging that

the same practices violate Missouri law. The district court enjoined plaintiffs from

relitigating in state court the same causes of action against multiple unrelated

defendants. Canady v. Allstate Ins. Co., 1999 U.S. Dist. LEXIS 23031 (W.D. Mo.

1999). Again, this court affirmed. Canady v. Allstate Ins. Co., 282 F.3d 1005 (8th

Cir. 2002) (Canady II). 

Meanwhile, in response to Canady I, plaintiffs filed ten new actions in the

district court, each asserting virtually identical claims against a single Canady I

defendant. Initially, the district court stayed the actions pending the appeals in

Canady I and Canady II. After we affirmed, the district court ordered plaintiffs to file

Revised Second Amended Complaints eliminating all claims of indirect injury,

cautioning plaintiffs that they “cannot establish a ‘direct injury’ without showing a

‘direct contact’ between the plaintiffs and the defendant.” Plaintiffs then filed

Revised Second Amended Complaints, each challenging a single defendant’s alleged

“unlawful practices with respect to the marketing, underwriting, sale and pricing of

homeowners insurance in a single, contiguous black community in Kansas City,

Jackson County, Missouri (the ‘Community’).” The district court dismissed the

amended complaints with prejudice for lack of Article III standing. In these

consolidated appeals, plaintiffs challenge the dismissal of their claims against

American States Insurance Company (the McClain action), Safeco Insurance

Company (the Kenner action), and the Chubb group (the Canady action). We affirm.

 Whether a plaintiff has standing to sue “is the threshold question in every

federal case, determining the power of the court to entertain the suit.” Steger v.

Franco, Inc., 228 F.3d 889, 892 (8th Cir. 2000) (quotation omitted). The question

arises from Article III, § 2, of the United States Constitution, which limits the subject

matter jurisdiction of federal courts to actual cases and controversies. “[T]o satisfy

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Article III’s standing requirements, a plaintiff must show (1) it has suffered an

‘injury-in-fact’ that is (a) concrete and particularized and (b) actual or imminent, not

conjectural or hypothetical; (2) the injury is fairly traceable to the challenged action

of the defendant; and (3) it is likely, as opposed to merely speculative, that the injury

will be redressed by a favorable decision.” Friends of the Earth, Inc. v. Laidlaw

Envtl. Servs. (TOC), Inc., 528 U.S. 167, 180-81 (2000). An injury in fact is a “direct

injury” resulting from the challenged conduct. Steger, 228 F.3d at 892.

In ordering plaintiffs to file Revised Second Amended Complaints, the district

court relied upon the direct injury requirement of Steger, an action under the

American with Disabilities Act alleging that a private commercial building was not

properly accessible to handicapped persons:

[T]he Court finds that plaintiffs cannot establish a “direct injury”

without showing a “direct contact” between the plaintiffs and the

defendant [insurer]. . . . As the court in Steger noted, although the

plaintiffs [in that case] did not have to engage in the futile gesture of

visiting a non-complying building that the landlord had no intention of

remedying, the plaintiff “must at least prove knowledge of the barriers

and that they would visit the building in the imminent future but for

those barriers.” [228 F.3d] at 892. Similarly, in the instant case, the

plaintiffs must at least prove that they had knowledge of the defendants’

discriminatory policies and that through this direct contact with the

defendants, the plaintiffs knew that it would be futile to apply for

insurance and were thus deterred.

Order of Sept. 30, 2002, at pp. 4-5 (emphasis added). Despite this directive, most of

the plaintiffs named in the Revised Second Amended Complaints never contacted the

defendant about the possibility of obtaining insurance. Like the district court, we will

separately address the standing of the few plaintiffs who alleged “direct contacts” and

the remaining plaintiffs whose standing is based on allegations they were deterred

from seeking insurance by their knowledge of defendants’ unlawful practices. 

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A. The Direct Contact Plaintiffs. In opposing American States’ motion to

dismiss, plaintiffs relied on deposition testimony of Coleman McClain that he asked

an independent American States agent about purchasing homeowners insurance on

a new home the McClains were building in an area adjacent to the Community and

was falsely told, “American States does not write insurance in Missouri.” The district

court concluded that the McClains lack standing because this direct contact

concerned insurance on a home located outside the Community: 

Plaintiffs . . . amend[ed] their Complaint to redefine the class as a single

contiguous area. The Complaint does not say that it also includes areas

which are immediately adjacent to the Community. Indeed the census

tract in which the [McClains’s] home is located does not even meet the

definition set out in the Complaint as including those areas where the

resident black population exceeds sixty percent.

We agree. Assuming without deciding that one phone call to an independent agent

is sufficient direct contact for these purposes, the Revised Second Amended

Complaint challenges American States’ policies and practices in the Community, not

elsewhere. Thus, the McClains lack standing because their injury is not “fairly

traceable to the challenged action of the defendant.” See Gladstone Realtors v. Vill.

of Bellwood, 441 U.S. 91, 112 n.25 (1979). Indeed, the McClains are not even

members of the plaintiff class as defined in paragraph 30 of the Complaint.

In opposing Safeco’s motion to dismiss, plaintiffs relied on the deposition

testimony of Sara Kenner. When Kenner purchased a home in the Community, the

realtor obtained homeowners insurance from Safeco as part of the closing. Kenner

did not contact Safeco or a Safeco agent herself and does not recall filling out a policy

application. Two months later, Kenner received a notice from Safeco cancelling the

policy based on “information obtained through a credit report.” Kenner admitted that

“my credit history would keep me from being able to buy a house conventionally.”

The district court concluded that this was not sufficient direct contact to establish

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Kenner’s standing to challenge Safeco’s underwriting and marketing practices in the

Community. On appeal, Kenner argues that the court erred in granting summary

judgment on her wrongful cancellation claim without affording her an opportunity “to

discover facts to support her contention that the cancellation of her policy was

pretextual.” We disagree. The district court properly reviewed the lengthy discovery

record and resolved fact disputes relating to its jurisdiction; plaintiffs fail to

demonstrate that the court’s findings were clearly erroneous. See Faibisch v. Univ.

of Minn., 304 F.3d 797, 801 (8th Cir. 2002). On this record, Kenner failed to

establish standing by demonstrating that her alleged injury is “fairly traceable to the

challenged action of the defendant.” 

In opposing Chubb’s motion to dismiss, plaintiffs relied on allegations in the

Revised Second Amended Complaint that three Canady plaintiffs made “recent”

phone calls to Chubb agents who told them they could not qualify for homeowners

insurance because they did not meet Chubb’s “objective underwriting selection

criteria, rules, guidelines and policies.” The district court found these allegations “too

speculative to support any showing of direct contact.” Alternatively, the court

concluded that these plaintiffs “cannot at this late stage in the proceedings attempt to

create direct contact where none previously existed.” We agree. See Steger, 228 F.3d

at 892 (“standing is determined as of the lawsuit’s commencement”); accord Perry v.

Vill. of Arlington Heights, 186 F.3d 826, 830 (7th Cir. 1999).

B. The Deterrence Plaintiffs. The remaining plaintiffs allege a “deterrence”

or “futile gesture” theory of injury-in-fact, arguing that they obtained knowledge of

the defendants’ discriminatory underwriting policies from unspecified sources, and

this knowledge “deterred” them from making “futile” applications for homeowners

insurance, thereby causing direct injury. 

In Teamsters v. United States, 431 U.S. 324, 364 (1977), the Supreme Court

held that employees who did not apply for jobs could obtain Title VII relief from a

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discriminatory seniority system if they satisfied the “difficult task” of showing that

their knowledge of the employer’s discriminatory practices deterred them from

applying. The Fourth Circuit adapted this principle to a Fair Housing Act claim of

race discrimination in the sale of a dwelling: 

the following elements must be satisfied to establish a violation of fair

housing law by reliance on the futile gesture theory: the plaintiff must

be a member of a racial minority who was a potential bona fide buyer of

the property and financially able to purchase it at the time it was offered

for sale; the owner discriminated against people of the plaintiff’s race;

the plaintiff was reliably informed of this policy of discrimination and

would have taken steps to buy the property but for the discrimination;

and the owner would have discriminated against the plaintiff had the

plaintiff disclosed an interest in the property. 

Pinchback v. Armistead Homes Corp., 907 F.2d 1447, 1452 (4th Cir.), cert. denied,

498 U.S. 983 (1990). We adopted a similar fact-intensive approach in applying this

principle to decide an issue of standing under the ADA:

Although plaintiffs need not engage in the ‘futile gesture’ of visiting a

building containing known barriers that the owner has no intention of

remedying . . . they must at least prove knowledge of the barriers and

that they would visit the building in the imminent future but for those

barriers.

Steger, 228 F.3d at 892, citing Laidlaw, 528 U.S. at 180-84.

The district court concluded that the deterrence plaintiffs lack standing because

they did not have the direct contact needed to establish a direct injury. Plaintiffs

argue that the court erred in requiring a showing of direct contact to establish direct

injury under the futile gesture theory. Given the many intangible factors that impact

an insurer’s decision to issue a homeowners policy, we are inclined to agree with the

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The Canady plaintiffs argue for the first time in their reply brief that the

district court was required to hold an evidentiary hearing to resolve disputed fact

issues. “Claims not raised in an initial brief are waived.” Mahaney v. Warren

County, 206 F.3d 770, 771 n.2 (8th Cir. 2000).

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district court that direct contact with the insurer, or at least with its authorized agent,

is a prerequisite to showing that an allegedly deterred plaintiff was “reliably

informed” of the discriminatory policies. 

Even if it might be possible in another case to establish standing based on the

futile gesture theory without proof of direct contact, the deterrence plaintiffs have

failed to satisfy their burden to show standing in these cases. They rely on bare

allegations in the Revised Second Amended Complaints that defendants erected

barriers to obtaining insurance that caused plaintiffs “who have experienced or

otherwise acquired knowledge of those barriers, to conclude that attempts to acquire

insurance . . . would be futile.” But in earlier depositions, these plaintiffs testified

that they had no personal knowledge of defendants’ practices. On this record, after

lengthy earlier proceedings, the district court was entirely justified in requiring a

showing of direct contact. 

Plaintiffs argue at length that the district court was required to accept the bare

allegations in the Revised Second Amended Complaints. We disagree. Defendants

moved to dismiss for lack of subject matter jurisdiction pursuant to Rule 12(b)(1) of

the Federal Rules of Civil Procedure. When plaintiffs relied on materials outside the

pleadings in opposing the motions, defendants properly replied that the district court

was entitled to resolve fact issues in determining its jurisdiction. See Osborn v.

United States, 918 F.2d 724, 728 & n.4 (8th Cir. 1990). The district court did not rule

on the motions until fourteen months after defendants served their replies. Thus,

plaintiffs had more than sufficient notice of the need to support the bare futile gesture

allegations in the Revised Second Amended Complaints. Instead, plaintiffs

disclaimed any interest in submitting further evidence.2

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After nearly a decade of litigation and plaintiffs’ repeated failure to establish

standing by adequately alleging and proving injury-in-fact, the district court did not

abuse its discretion in dismissing the Revised Second Amended Complaints with

prejudice. See Jaramillo v. Burkhart, 59 F.3d 78, 79 (8th Cir. 1995) (standard of

review). Accordingly, the judgments of the district court are affirmed. 

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