IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

__________________________________

CHIKEITHA OWENS, *

 *

Plaintiff, *

 *

v. * Civil No. 3:03-CV-1184-H

 *

NATIONWIDE MUTUAL INSURANCE *

COMPANY *

 *

Defendant. *

 *

MEMORANDUM OPINION AND ORDER

 Before the Court are Defendant’s Renewed Motion for Summary Judgment, filed May

21, 2004; Plaintiff’s Response, filed August 16, 2004; Defendant’s Motion to Strike Plaintiff’s

Proferred Summary Judgment Evidence, filed September 3, 2004; and Plaintiff’s Response, filed

October 1, 2004. Also before the Court are Defendant’s Supplemental Brief in Support of its

Motion for Summary Judgment, filed Jun 1, 2005; Plaintiff’s Supplemental Brief in Opposition,

filed May 16, 2005; Plaintiff’s Supplemental Expert Report, filed June 10, 2005; and

Defendant’s Supplemental Rebuttal Report, filed June 21, 2005. The Court will address the

Motion to Strike as necessary to rule on Defendant’s Motion for Summary Judgment. Upon

review of the pleadings, briefs, and relevant authorities, the Court is of the opinion that

Defendant’s Renewed Motion for Summary Judgment should be GRANTED.

I. BACKGROUND

Plaintiff Chikeitha Owens, an African-American homeowner, applied for homeowners’

insurance with Defendant Nationwide Mutual Insurance Company in August 2002. Defendant

 

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1

 Defendant no longer asserts that Plaintiff has raised her claims against the wrong

company in this Renewed Motion for Summary Judgment . (Def.’s Br. at 1 n.2.) Therefore, the

Court does not consider that ground herein.

2

 Because Plaintiff argues that the use of credit generally is discriminatory, the Court

does not analyze this argument separately.

2

denied Plaintiff’s insurance application, citing Plaintiff’s poor credit. (Pl.’s Compl. at 10; Def.’s

App. at 1.) Plaintiff brings this action alleging that Defendant racially discriminated against her

by using her credit history as a means to deny coverage for which she was otherwise qualified.

(Pl.’s Compl. at 1, 2, 10, 14, 15, 16.) Plaintiff claims that the use of credit information in

determining eligibility for homeowner’s insurance has a disparate impact upon minority

populations and that Defendant uses such credit information to intentionally discriminate against

minorities. (Id. at 16.) Plaintiff claims that Defendant’s denial of her homeowner’s insurance

application violates 42 U.S.C. §§ 1981, 1982, and 3604. Jurisdiction for the case arises under 28

U.S.C. § 1331.

The Court converted Defendant’s Motion to Dismiss Plaintiff’s § 3604 claim into a

Motion for Summary Judgment and continued its consideration of the Motion while the parties

engaged in limited discovery on the issues of whether: (1) Plaintiff had sued the wrong

corporation;1

 (2) Defendant and its affiliate use credit scoring in determining eligibility for

homeowner’s insurance; (3) the credit report of Plaintiff’s husband also rendered Plaintiff

ineligible for homeowner’s insurance;2

 and (4) race played a factor in evaluating Plaintiff

eligibility for homeowner’s insurance. (Mem. Op. & Order, entered Oct. 1, 2003, at 6.) 

The parties then stipulated that Defendant had no knowledge of Plaintiff’s race at the

time it made its decision to deny Plaintiff coverage. (Agreed Order for Discovery, entered Jan.

16, 2004, at 2.) The parties asked the Court to resolve the issue of whether, as a matter of law,

 

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knowledge of an applicant’s race is required for a discrimination claim predicated upon racial

animus to survive summary judgment. (Id.) The Court allowed briefing and oral argument on

the issue, ultimately declining to decide the issue as a matter of law, and directing the parties to

conduct discovery to enable the Court to rule on Defendant’s Motion. (Order, entered Dec. 6,

2004; Order, entered Jan. 27, 2005; Order, entered Feb. 22, 2005; Order, entered Mar. 24, 2005.)

The parties, having conducted the requisite discovery, have submitted their supplemental

documents pertaining to Defendant’s Renewed Motion for Summary Judgment on which the

Court will now rule.

II. SUMMARY JUDGMENT STANDARD

Summary judgment is appropriate where the facts and law as represented in the

pleadings, affidavits, and other summary judgment evidence illustrate that no reasonable trier of

fact could find for the non-moving party as to any material fact. FED. R. CIV. P. 56; Lujan v.

National Wildlife Federation, 497 U.S. 871, 888 (1990); Anderson v. Liberty Lobby, Inc., 477

U.S. 242, 251 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986); Innovative

Database Systs. v. Morales, 990 F.2d 217 (5th Cir. 1993). “The moving party bears the initial

burden of identifying those portions of the pleadings and discovery in the record that it believes

demonstrate the absence of a genuine issue of material fact, but is not required to negate

elements of the nonmoving party’s case.” Lynch Properties, Inc. v. Potomac Ins. Co. of Ill., 140

F.3d 622, 625 (5th Cir. 1998) (citing Celotex, 477 U.S. at 322-25). If the movant fails to meet its

initial burden, the motion must be denied, regardless of the nonmovant’s response. Little v.

Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994). 

If the movant does meet its burden, the nonmovant must go beyond the pleadings and

designate specific facts showing that a genuine issue of material fact exists for trial. Matsushita

 

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Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Edwards v. Your Credit, Inc.,

148 F.3d 427, 431 (5th Cir. 1998). A party opposing summary judgment may not rest on mere

conclusory allegations or denials in its pleadings unsupported by specific facts presented in

affidavits opposing the motion for summary judgment. FED. R. CIV. P. 56(e); Lujan, 497 U.S. at

888; Hightower v. Texas Hosp. Assn., 65 F.3d 443, 447 (5th Cir. 1995); Moody v. Jefferson

Parrish Sch. Bd., 803 F. Supp. 1158, 1163 (E.D. La. 1992). 

In determining whether genuine issues of fact exist, “[f]actual controversies are

construed in the light most favorable to the nonmovant, but only if both parties have introduced

evidence showing that a controversy exists.” Lynch, 140 F.3d at 625; Evans v. City of Houston,

246 F.3d 344, 348 (5th Cir. 2001); see also Eastman Kodak v. Image Technical Services, 504

U.S. 451 (1992). However, in the absence of any proof, the Court will not assume that the nonmoving party could or would prove the necessary facts. Lynch, 140 F.3d at 625. A party must

do more than simply show some “metaphysical doubt as to the material facts.” Matsushita, 475

U.S. at 586. “If the record, taken as a whole, could not lead a rational trier of fact to find for the

non-moving party, there is no genuine issue for trial.” Friou v. Phillips Petroleum Co., 948 F.2d

972, 974 (5th Cir. 1991). 

III. ANALYSIS

Plaintiff sues for insurance discrimination under §§ 1981 and 1982 of Title II of the Civil

Rights Act and § 3604 of the Fair Housing Act (“FHA”). 42 U.S.C. §§ 1981, 1982, 3604 (2003).

Plaintiff alleges that Defendant’s policy of using credit to evaluate the eligibility of

homeowner’s insurance applicants has a disparate discriminatory effect and is a form of

intentional discrimination under the statutes. (Pl.’s Compl. at 10-11, 12.) The Court first

analyzes whether homeowner’s insurance discrimination is actionable under the various statutes.

 

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A. Applicability of §§ 1981, 1982, and 3604 to Insurance Discrimination 

In light of the statutory provisions which are silent with respect to their applicability to

insurance, the first question that must be addressed is whether insurance discrimination creates a

cognizable action under §§ 1981, 1982, and 3604. As discussed more fully below, the consensus

among the circuit courts is that discrimination in the provision or pricing of homeowner’s

insurance related to the purchase of a home is cognizable under §§ 1982 and 3604. 

1. Section 1981 

Section 1981 states that

[a]ll persons within the jurisdiction of the United States shall have the same right

in every State and Territory to make and enforce contracts, to sue, be parties, give

evidence, and to the full and equal benefit of all laws and proceedings for the

security of persons and property as is enjoyed by white citizens, and shall be

subject to like punishment, pains, penalties, taxes, licenses, and exactions of

every kind, and to no other.

Id. § 1981. 

Homeowner’s insurance is a contract and is therefore subject to § 1981. See 42 U.S.C. §

1981; Dehoyos v. Allstate Corp., 345 F.3d 290 (5th Cir. 2003). See also Green v. State Bar of

Texas, 27 F.3d 1083 (5th Cir. 1994) (dismissing claim of racial discrimination in insurance

because plaintiff failed to allege that insurer refused to contract with plaintiff or impeded

plaintiff’s right to enforce a contract).

2. Section 1982 

Section 1982 provides that “[a]ll citizens of the United States shall have the same right,

in every State and Territory, as is enjoyed by white citizens thereof to inherit, purchase, lease,

sell, hold, and convey real and personal property.” Id. § 1982. 

 

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3 Although Riley was an FHA case rather than a § 1982 case, Defendant argues that its

reasoning is equally applicable to § 1982. Defendant’s reliance on Riley, however, is misplaced

as it does not relate to the denial of insurance to an owner or mortgagor of a property and

therefore does not relate to claimant’s right to make or enforce contracts, but only to the payment

on a damages claim. See Riley, 923 F. Supp. at 888; Lindsey v. Allstate Ins. Co., 34 F. Supp. 2d

636, 642 n.1 (W.D. Tenn. 1999) (distinguishing Riley); Burrell v. State Farm and Cas. Co., 226

F. Supp.2d 427, 442 n.1 (S.D.N.Y. 2002) (same). 

4

 The Court agrees with the Seventh Circuit that the distinction between hazard and

homeowner’s insurance is not meaningful for purposes of availability of housing. See United

Farm Bureau Mut. Ins. Co. v. Metro. Human Relations Comm’n, 24 F.3d 1008, 1014 n.8 (7th

Cir. 1994) (rejecting distinction between hazard insurance and homeowner’s insurance noting

that “[b]y refusing to issue a homeowner’s insurance policy, the cost of owning a home or real

property is increased, perhaps prohibitively. The property owners would be required to carry the

risks and bear the costs for all injury, loss, or damage other than for the limited situations

covered by hazard insurance. This undoubtedly could make owning and retaining real property

unavailable . . . .”).

6

Defendant acknowledges that insurance discrimination is unlawful under certain

circumstances (Def.’s Br. at 17), but claims that insurance discrimination is unlawful under §

1982 only to the extent it affects the ability of a minority to inherit, purchase, lease, sell, hold, or

convey a home. See, e.g., Dehoyos v. Allstate Corp., 345 F.3d 290, 295 (5th Cir. 2003); Riley v.

Transamerica Ins. Group Premier Ins. Co., 923 F. Supp. 882, 888 (E.D. La. 1996), aff’d, Riley v.

TIG Ins. Co., 117 F.3d 1416.3

 Contrary to Defendant’s assertions, the Court finds Dehoyos and

Riley inapposite to Plaintiff’s’ § 1982 claims, since § 1982 also includes the right to “hold” and

“sell” a home. See 42 U.S.C. § 1982. It has been recognized widely by courts that the

availability of mortgage financing is often predicated upon the ability to purchase homeowner’s

or hazard insurance. See Nationwide Mut. Ins. Co. v. Cisneros, 52 F.3d 1351, 1354 (6th Cir.

1995), cert. denied, 516 U.S. 1140 (1996); Nat’l Fair Housing Alliance, Inc. v. Prudential Ins.

Co. of Am., 208 F. Supp. 2d 46, 58 (D.D.C. 2002); Lindsey v. Allstate Ins. Co., 34 F. Supp. 2d

636, 642 (W.D. Tenn. 1999).4 (See Pl.’s App. at 445.) Since mortgage financing is necessary

for the purchase of a home, discriminatory denials of insurance affect a prospective

homeowner’s ability to purchase a home. See Cisneros, 52 F.3d at 1354. Furthermore,

 

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mortgage financing is often necessary for the maintenance, or ability to “hold” a home as well,

since homeowners may be required to take out a second mortgage to properly maintain their

property. See United Farm Bureau Mut. Ins. Co. v. Metro. Human Relations Comm’n, 24 F.3d

1008, 1014 n.8 (7th Cir. 1994). The Court therefore concludes that discriminatory denials to

existing homeowners affect the rights enumerated in § 1982, creating a cause of action under the

statute. See Lindsey, 34 F. Supp. 2d at 643-44.

The Court also considers an insurance policy to be personal property for purposes of §

1982. See Harary v. Allstate Ins. Co., 983 F. Supp. 95, 99 (E.D.N.Y. 1997); Sims v. Order of

United Comm. Travelers of Am., 343 F. Supp. 112 (D.C. Mass. 1972). Discriminatory denial of

homeowner’s insurance therefore creates both an indirect and a direct cause of action under §

1982.

3. Section 3604 

Section 3604(b) of the FHA makes it unlawful “[t]o discriminate against any person in

the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services

or facilities in connection therewith, because of race, color, religion, sex, familial status, or

national origin.” Id. § 3604(b). 

Defendant claims that § 3604 does not apply to homeowner’s insurance for reasons

similar to those discussed above related to § 1982. (Def.’s Br. at 17-21.) Although § 3604 has a

more narrow scope than does § 1982, compare 42 U.S.C. § 1982 with 42 U.S.C. § 3604,

Defendant’s position is as untenable in the FHA context as it is in the § 1982 context rejected

above. See generally Lindsey, 34 F. Supp.2d 636. 

Section 3604 is silent and ambiguous with respect to whether the ability to obtain

homeowner’s insurance is related to the ability to convey real and personal property. See

Cisneros, 52 F.3d at 1356-57; N.A.A.C.P. v. Am. Family Mut. Ins. Co., 978 F.2d 287 (7th Cir.

1992), cert. denied, 508 U.S. 907 (1993). “[I]f the statute is silent or ambiguous with respect to

 

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the specific issue, the question for the court is whether the agency’s answer is based on a

permissible construction of the statute.” Chevron, U.S.A., Inc. v. Natural Resources Defense

Council, Inc., 467 U.S. 837, 843 (1984). Therefore, the Court’s determination as to whether the

discriminatory provision of homeowner’s insurance is prohibited under the FHA turns on an

analysis of the Department of Housing and Urban Development’s (HUD) regulations related to

discriminatory provision of insurance. See Prudential, 208 F. Supp. 2d at 55. 

Section 3614(a) of the FHA authorizes HUD to promulgate regulations implementing the

FHA. 42 U.S.C. § 3614(a). The HUD regulations make it unlawful to refuse to provide

“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” where such

services or insurance are in connection with the provision of housing. 24 C.F.R. § 100.70(d)(4). 

Although the Fifth Circuit has not had an opportunity to address the reasonableness of the

HUD regulations, the Sixth Circuit has determined the HUD regulations to be a reasonable

interpretation of the statute and entitled to deference. Cisneros, 52 F.3d at 1358, 1360. The

Sixth Circuit adopted HUD’s interpretation of the statute, finding that “the availability of

property insurance has a direct and immediate affect [sic] on a person’s ability to obtain

housing.” Id. 

The Court adopts the Sixth Circuit’s conclusions in Cisneros that HUD’s regulations

implementing the FHA are reasonable. See Lopez v. City of Dallas, Texas, No. 3:03-CV-2223-

M, at *8-9 (N.D. Tex. Sep. 9, 2004) (slip copy); Burrell v. State Farm and Cas. Co., 226 F.

Supp. 2d 427, 442 (S.D.N.Y. 2002); Prudential, 208 F. Supp. 2d at 57; Wai v. Allstate Ins. Co.,

75 F. Supp. 2d 1, 6 (D.D.C. 1999). This conclusion is consistent with the broad reading afforded

§ 3604 to promote “truly integrated and balanced living patterns” and give effect to the FHA’s

remedial purpose. See Trafficante v. Metropolitan Life Ins. Co., 409 U.S. 205, 211-12 (1972);

 

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Hanson v. Veterans Admin., 800 F.2d 1381, 1386 (5th Cir. 1986); Evans v. Tubbe, 657 F.2d 661,

662 n.2 (5th Cir. 1981). 

Defendant claims that insurance discrimination is unlawful under § 3604 only to the

extent it affects the ability to purchase a home. This reading of the case law would require, for

instance, the Court to limit the liability of insurance companies engaging in discriminatory

redlining to only those individuals who were denied or otherwise received different insurance

when applying to purchase a home. See N.A.A.C.P., 978 F.2d at 290. It would not apply to

individuals who seek insurance associated with the refinancing of a home or otherwise

maintaining the property. Such a limited reading of the case law is not supported by the

redlining cases or by the purpose of the statute noted above. See United Farm Bureau, 24 F.3d

at 1014 n.8.

Furthermore, the reasoning in the cases finding insurance discrimination to be unlawful

under § 3604 seems equally applicable in the context where a policy is sought to insure a home

already purchased by the plaintiff. See, e.g., Lindsey, 34 F. Supp. 2d at 642. Due to the

relationship between homeowner’s insurance and mortgage financing, homeowner’s insurance

may be necessary to restore a property to its previous condition prior to a loss-inflicting event.

Homeowner’s insurance may therefore provide a homeowner the opportunity to rebuild and sell

a home previously damaged. Denial of homeowner’s insurance would therefore restrict the

“terms, conditions, or privileges of sale or rental of a dwelling,” creating a cause of action under

§ 3604. See 42 U.S.C. § 3604.

The Court therefore concludes that discrimination in the provision of homeowner’s

insurance restricts the ability of a homeowner or prospective homeowner to inherit, purchase,

lease, sell, hold, and convey real and personal property for purposes of § 1982 and affects the

 

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5

 The McDonnell Douglas framework is not the exclusive framework for establishing a

prima facie case of intentional discrimination and its requirements are not fixed. Teamsters v.

United States, 431 U.S. 324, 358 & n.44 (1977). However, its burden-shifting framework is

utilized where a plaintiff does not have direct evidence of intentional discrimination and a

defendant is the most likely source of information pertaining to the effect of its decisions and the

reasons behind such decisions. Id. The Fifth Circuit has applied the McDonnell Douglas

10

terms, conditions, and privileges of a sale or rental of a dwelling for purposes of § 3604. See

Lindsey, 34 F. Supp. 2d at 642; Wai, 75 F. Supp. 2d at 6 (citing cases). The Court concludes this

to be true whether the insurance is sought in connection with the maintenance of a previously

purchased home or with an application to purchase a home. Additionally, the Court concludes

that homeowner’s insurance is a contract for purposes of § 1981.

Having established that discrimination in the provision of homeowner’s insurance is

actionable under §§ 1981, 1982, and 3604, the Court now addresses the two means by which

Plaintiff attempts to prove her individual and class discrimination claims. Plaintiff claims that

Defendant: (1) intentionally used a credit evaluation system in determining homeowner’s

insurance eligibility as a means to discriminate against minority applicants; and (2) created a

facially neutral policy of using credit to determine eligibility for homeowner’s insurance which

was not justified by any legitimate business purpose. (Pl.’s Compl. at 10-11, 12.) The first

claim is characterized under law as an intentional discrimination or disparate treatment claim,

while the latter is a disparate impact or disparate effect claim.

B. Intentional Discrimination Claims

1. McDonnell Douglas Framework

The Court evaluates individual discrimination claims that rely on circumstantial

evidence, including insurance discrimination claims arising under §§ 1981, 1982, and § 3604,

using the burden-shifting approach from McDonnell Douglas Corp. v. Green, 411 U.S. 792

(1973).5

 See Simms v. First Gibraltar Bank, 83 F.3d 1546, 1556 (5th Cir. 1996);6 Moore v.

 

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framework to insurance discrimination claims, finding such a burden-shifting approach justified. 

Simms v. First Gibraltar Bank, 83 F.3d 1546, 1556 (5th Cir. 1996) (applying McDonnell

Douglas in discriminatory effects case).

In a class action context, plaintiffs claiming intentional discrimination “must show a

‘pattern or practice’ of discrimination by the [defendant], i.e. that ‘racial discrimination was the

company’s standard operating procedure--the regular rather than the unusual practice.” Munoz,

200 F.3d at 299 (emphasis added) (quoting Teamsters v. United States, 431 U.S. 324, 336

(1977)).

6 Simms was predicated upon age discrimination law, which is analyzed under the

McDonnell Douglas framework. The holding in Simms has since been modified by the Supreme

Court’s recent approach to circumstantial intentional discrimination cases. In Reeves, the

Supreme Court decided that to overcome summary judgment, a plaintiff need not prove an age

animus where a prima facie case is made and plaintiff sufficiently rejects the defendant’s

reasons. Reeves v. Sanderson Plumbing Prods. Inc., 530 U.S. 133, 147 (2000). The McDonnell

Douglas framework and its progeny therefore modifies the holding in Simms such that

intentional insurance discrimination cases resting upon the McDonnell Douglas framework need

not prove racial animus where a prima facie case is made and a genuine issue of material fact

exists as to whether a defendant’s reasons are false, thereby inferring pretext. Throughout this

discussion, for the purposes of establishing the contours of the McDonnell Douglas framework,

the Court relies upon Title VII and other discrimination cases which utilize the McDonnell

Douglas framework as needed.

11

Dep’t of Agric., 55 F.3d 991, 995 (5th Cir. 1995). See also Asbury v. Brougham, 866 F.2d 1276,

1279 (10th Cir. 1989); Reynolds v. Quarter Circle Ranch, Inc., 280 F. Supp. 2d 1235 (D. Colo.

2003). The Supreme Court developed this approach “to deal with cases in which discrimination

can be proved only by circumstantial evidence.” Evans v. City of Houston, 246 F.3d 344, 350

(5th Cir. 2001) (citing Reeves v. Sanderson Plumbing Prods. Inc., 530 U.S. 133 (2000)).

The McDonnell Douglas framework is used to analyze Plaintiff’s individual and class

intentional discrimination claims arising under §§ 1981 and 1982 as well as Plaintiff’s individual

intentional discrimination claim under § 3604. Because intentional discrimination claims arising

under the different statutes are analyzed under the same standards, see Asbury, 866 F.2d at 1279;

Patterson v. Guttman, 225 F.3d 659 (6th Cir. 2000) (Table), the Court, for purposes of economy,

engages in an analysis of the evidence only once.

 

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 Plaintiff seeks to apply a “pattern or practice” analysis to Plaintiff’s class claims of

intentional discrimination. Such an analysis requires a different showing for a plaintiff to make

a prima facie case of discrimination. Cooper v. Fed. Reserve Bank of Richmond, 467 U.S. 867,

875-76 (1984). See Teamsters, 431 U.S. at 358-59; Robinson v. Metro-North Commuter R.R.

Co., 267 F.3d 147, 158-60 (2d Cir. 2001). Under either the McDonnell Douglas or “pattern or

practice” framework, once a defendant provides a legitimate, nondiscriminatory reason for the

policy, the plaintiff must provide evidence refuting the reasons put forth by the defendant. 

Bauer v. Albemarle Corp., 169 F.3d 962, 968 (5th Cir. 1999); Siler-Khodr v. Univ. of Texas

Health Science Center San Antonio, 261 F.3d 542, 546 (5th Cir. 2001). Accordingly, because

the Court assumes arguendo that Plaintiff has presented a prima facie case, the Court need not

elaborate upon the differences between the prima facie cases under the McDonnell Douglas and

“pattern or practice” frameworks.

12

Under the McDonnell Douglas framework, to overcome summary judgment, the plaintiff

is first required to establish a prima facie case of discrimination. Under the statutes, a “prima

facie case is fairly easily made out.” Amburgey, 936 F.2d 805, 812 (5th Cir. 1991); Nichols v.

Loral Vought Sys. Corp., 81 F.3d 38, 41 (5th Cir. 1996) (citing Thornbrough v. Columbus &

Greenville R.R. Co., 760 F.2d 633, 639 (5th Cir. 1985)). 

If the plaintiff establishes a prima facie case, the burden of production shifts to the

defendant to articulate a “legitimate, non-discriminatory reason” for its decision. Tyler v. Union

Oil Co. of California, 304 F.3d 379, 395 (5th Cir. 2002); Medina v. Ramsey Steel Co., 238 F.3d

674, 680 (5th Cir. 2001); Evans, 246 F.3d at 350. Once the defendant provides a legitimate,

non-discriminatory reason for the discharge, the presumption created by the prima facie case

drops out; the plaintiff must then prove that the reason proferred by defendant is a pretext for

discrimination.7

 See Evans, 246 F.3d at 350 (“If the defendant can articulate a reason that, if

believed, would support a finding that the action was nondiscriminatory, the mandatory

inference of discrimination created by the plaintiff’s prima facie case drops out of the picture

and the factfinder must decide the ultimate question: whether the plaintiff has proved intentional

discrimination.”) (internal quotations omitted) (citing St. Mary’s Honor Ctr. v. Hicks, 509 U.S.

502, 511-12 (1993)); Pribila v. Emerson Elec. Co., No. CIV.A.3-00-2742BE, 2002 WL 629528,

 

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 Plaintiff fails to meet the “high evidentiary burden” to establish that Defendant had both

legitimate and illegitimate reasons for the policy under a mixed-motives alternative. See Lepore

v. Lanvision Sys., Inc., 113 Fed. Appx. 449, 453 (3d Cir. 2004); Connors v. Chrysler Fin. Corp.,

160 F.3d 971, 976 (3d Cir. 1998) (evidence must demonstrate that the “decision makers placed

13

at *11 (N.D. Tex. Apr. 16, 2002) (citing Rhodes v. Guiberson Oil Tools, 75 F.3d 989, 992 (5th

Cir. 1996)). 

To rebut defendant’s legitimate non-discriminatory reason, the plaintiff must create a

genuine issue of material fact as to the veracity of the defendant’s reason, thereby inferring that

the reason was a pretext for discrimination. See Evans v. City of Houston, 246 F.3d 344, 350

(5th Cir. 2001). This may include evidence presented as part of plaintiff’s prima facie case. Id.

A showing of pretext, however, requires a more substantial showing than the presumptive prima

facie case. See Cherry v. Ritenour Sch. Dist., 361 F.3d 474, 479 (8th Cir. 2004).

“A plaintiff’s prima facie case, combined with sufficient evidence to find that the

[defendant’s] asserted justification is false, may permit the trier of fact to conclude that the

[defendant] unlawfully discriminated.” Machinchick v. PB Power, Inc., 398 F.3d 345, 350-51

(5th Cir. 2005) (internal quotation omitted). Evidence of both pretext and actual discriminatory

intent is not required. Id. at 350. Indeed, “[e]vidence demonstrating the falsity of the

defendant’s explanation, taken together with the prima facie case, is likely to support an

inference of discrimination even without further evidence of [the] defendant’s true motive.”

Sandstad v. CB Richard Ellis, Inc., 309 F.3d 893, 897 (5th Cir. 2002); but see Reeves, 530 U.S.

at 148 (noting that a showing of pretext may not be sufficient to infer discrimination where

plaintiff creates a weak issue of fact as to the issue of pretext and evidence exists); Laxton v. Gap

Inc., 333 F.3d 572, 578 (5th Cir. 2003) (same). “[A] plaintiff relying upon evidence of pretext to

create a fact issue on discriminatory intent falters if he fails to produce evidence rebutting all of

a defendant’s proffered nondiscriminatory reasons.” Machinchick, 398 F.3d at 351 & n.16.8

 

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substantial negative reliance on an illegitimate criterion in reaching their decision). See also

Machinchick, 398 F.3d at 341. Accordingly, since the parties do not argue the issue, the Court

does not further address a mixed-motives approach to proving discriminatory intent. See id. at

340; Keelan v. Majesco Software, Inc., 407 F.3d 332, 341 (5th Cir. 2005) (adopting the modified

McDonnell Douglas approach where the mixed-motives analysis might apply).

9 Indeed, Plaintiff’s position on the matter of what constitutes a prima facie case has

changed considerably throughout the course of this litigation. Plaintiff’s Response to

Defendant’s Motion to Dismiss/Motion for Summary Judgment, filed September 3, 2003,

indicated, “[t]hat [Defendant] may not have known Plaintiff’s race is irrelevant. Plaintiff alleges

that [Defendant] discriminates through its use of credit information, which enables it to identify

minorities.” (Pl.’s Resp. at 2.) “[Defendant] uses the credit information it obtains to identify

non-Caucasians in order to charge them higher premiums or deny them coverage altogether.” 

(Id. at 3.) “Plaintiff outlines [Defendant’s] use of credit information as a tool to identify and to

place minorities into higher priced policies or deny them coverage altogether.” (Id. at 7.)

“[Defendant] uses credit information to identify minority insurance applicants.” (Id. at 18.) 

Similarly, in Plaintiff’s Response to Defendant’s Renewed Motion for Summary Judgment, filed

August 16, 2004, Plaintiff states, “[Defendant] well knows that Plaintiff’s claim focuses on its

adoption and use of a credit evaluation system that uses credit as a proxy for race.” (Pl.’s 2d

Resp. at 1, 10-11.) Even in oral argument, Plaintiff relied upon a theory that credit is a proxy for

race. (See Transcript, Hearing on Mot. for Summ. Judgment, Dec. 3, 2004, at 17.)

Now, however, Plaintiff sings a different tune. Plaintiff now argues that “the question

14

The Court considers “the strength of the plaintiff’s prima facie case, the probative value

of the proof that the [defendant’s] explanation is false, and any other evidence that supports the

[defendant’s] case and that properly may be considered on a motion for judgment as a matter of

law.” Laxton, 333 F.3d at 579; Evans v. City of Houston, 246 F.3d 344, 350 (5th Cir. 2001). 

In the instant case, to demonstrate pretext in Plaintiff’s intentional discrimination claim,

Plaintiff must present sufficient evidence to allow a factfinder to determine that Defendant’s

reason for utilizing the credit standard was to identify and discriminate against members of a

protected class. See Laxton, 333 F.3d at 579. It is not whether the use of credit is in fact

discriminatory. Id. 

2. Analysis

Assuming arguendo that Plaintiff has made a prima facie case under both the McDonnell

Douglas and the “pattern or practice” frameworks – a matter of significant dispute in the case9

 –

 

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also is not whether [Defendant] knew [Plaintiff’s] race or could decipher her race from her credit

information (acting as a proxy).” (Pl.’s Supp. Br. at 27.) 

10 Defendant also asserts that without the use of credit, its business would suffer from

adverse competitive selection, as other companies are using credit. (Pl.’s App. at 254, 268

(Mallassee Depo.); Pl.’s Supp. App. at 131-32 (Cummins Depo.), 389, 439 (Dusenbury Depo.),

821 (Mabe Depo.).) The effect that the use of credit might have on Defendant’s market position,

however, is dependent upon the predictive value of the nature of credit, and therefore need not be

independently reviewed. (See Pl.’s Supp. App. at 439 (Dusenbury Depo.).)

11 Although Plaintiff has no direct evidence of discrimination, the Court notes that “‘it is

not particularly significant whether [the plaintiff] relies on the McDonnell Douglas presumption

or . . . on direct or circumstantial evidence of discriminatory intent’ because ‘[u]nder either

approach, [the plaintiff] must produce some evidence suggesting that [the defendant’s decision]

was due in part or whole to discriminatory intent, and so must counter the [defendant’s

legitimate, nondiscriminatory reason].’” Roberson v. Alltel Info. Sys., 373 F.3d 647, 652 (5th

Cir. 2004) (quoting McGinest v. GTE Serv. Corp., 360 F.3d 1103, 1123 (9th Cir. 2004)).

12 While many of Plaintiff’s arguments relate more clearly to establishing an inference of

discrimination necessary for a prima facie case in the traditional discrimination framework (not

McDonnell Douglas), see Walther v. Lone Star Gas Co., 977 F.2d 161, 162 (5th Cir. 1992)

(discussing the use of statistical evidence and other circumstantial evidence of discrimination as

a means to establish a prima facie case of intentional discrimination); Siler-Khodr v. Univ. of

Texas Health Science Center San Antonio, 261 F.3d 542, 546 (5th Cir. 2001) (concluding that

statistical evidence does not create an inference of pretext), in an abundance of caution, the

Court considers these arguments as they relate to Defendant’s legitimate business reason.

15

Defendant must present a legitimate business reason for the practice. Defendant asserts that

credit is a predictor of expected loss in homeowner’s insurance.10 Plaintiff must therefore rebut

Defendant’s proffered reason to overcome summary judgment under both the McDonnell

Douglas and “pattern or practice” frameworks.11 Plaintiff attempts to rebut Defendant’s reason

in a number of ways. For the following reasons, the Court concludes that Plaintiff has failed to

do so.12

a. Shifting and Unclear Explanations

Plaintiff argues that Defendant’s explanation(s) have shifted, thereby creating an

inference of discriminatory purpose. (Pl.’s Supp. Br. at 35.) However, unlike Plaintiff’s cited

cases, Defendant here has not shifted its explanations, but consistently claimed that credit is a

 

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16

known predictor of loss. (Pl.’s Supp. App. at 100, 126, 128, 151 (Cummins Depo.), 254, 263

(Mallassee Depo.), 440 (Dusenbury Depo.), 847, 854-56, 868, 869-70, 895 (Mabe Depo.), 1033,

1081-82 (Baum Depo.).) Whether this predictive ability is predicated upon moral hazard (the

willingness of an insured to commit insurance fraud) (Id. at 56, 58, 60-63 (Cummins Depo.), 870

(Mabe Depo.)), morale hazard (the possibility that an insured will not properly maintain or

protect a home against avoidable loss) (id. at 61-62 (Cummins Depo.), 1121 (Baum Depo.)), or

an individual insured’s likelihood of filing a claim (id. at 1115-16 (Baum Depo.)), these differing

explanations do not dispute the underlying proffered reason that credit is predictive of loss.

Further, unlike Plaintiff’s cited cases, Defendant’s proferred reason and explanations for that

reason are not arguably inconsistent. See EEOC v. Sears Roebuck & Co., 243 F.3d 846, 853 (4th

Cir. 2001). Accordingly, Plaintiff’s argument regarding the inconsistency of Defendant’s

proffered reason is wholly without merit. 

Plaintiff further claims that Defendant’s reason lacks sufficient clarity to allow an

adequate rebuttal. (Pl.’s Supp. Br. at 35.) The Court’s review of the record reveals this to be

patently not the case. Plaintiff certainly was aware of the proferred reason and explanations and

could prepare accordingly. That Plaintiff failed to do so does not make Defendant’s reasons any

less clear. Accordingly, Plaintiff’s argument that Defendant’s reason shifted and is unclear is

without support and fails to raise an inference of pretext.

b. Credit Committee

Plaintiff attempts to raise an inference of discrimination because the Credit Advisory

Committee never conducted an evaluation of the use of credit in underwriting homeowner’s

insurance. (E.g., Pl.’s Supp. Br. at 20-21, 39.) This argument lacks any merit whatsoever.

There is no evidence that the Credit Advisory Committee had the responsibility for reviewing

 

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13 Plaintiff’s citations on this point do not support Plaintiff’s proposition that the

Committee had any responsibility for the use of credit in determining eligibility for

homeowner’s insurance. (See Pl.’s Supp. Br. at 20.)

14 Further, Plaintiff attempts to infer discrimination because Katherine Mabe, chair and

founder of the Committee (Pl.’s Supp. App. at 820, 831), could not identify any support for the

proposition that credit is predictive of loss in homeowner’s insurance. (Pl.’s Supp. Br. at 37

n.23.) Plaintiff misstates the evidence. Ms. Mabe was not responsible for homeowner’s

insurance. (Id. at 811, 813, 820, 833, 880, 904-05) (indicating that in her role as Vice President

of Auto Product, she created a Credit Advisory Committee in 2001 to deal with issues related to

credit in auto insurance pricing.) Further, upon questioning, Ms. Mabe indicated that she

believed major financial events, such as bankruptcies and things on a credit report, would be

predictive of loss in homeowner’s insurance. (Pl.’s Supp. App. at 847, 868, 869, 870.) 

17

the substantive use of credit in the differing lines of insurance;13 rather, the evidence establishes

that the Committee was established to ensure that privacy and reporting concerns were met,

including that credit information was used consistently and fairly in accordance with state laws

and the Fair Credit Reporting Act.14 (Pl.’s Supp. App. at 820, 822, 823, 826-27, 852, 897, 903

(Mabe Depo.), 76-77, 94, 97, 113-14, 118 (Cummins Depo.), 1156 (Baum Depo.).)

Accordingly, that the Committee did not conduct a study out of its area of responsibility cannot

serve as evidence of pretext.

c. Credit Evaluation System is Arbitrary

Plaintiff next argues that Defendant’s credit evaluation system is arbitrary because no

one could identify why the particular credit factors were selected or how the cut-off levels for

each credit factor were established. (Pl.’s Supp. Br. at 36.) Plaintiff argues that Defendant has

not “done any studies or analyses to determine whether or not there is a correlation between

credit information and loss ratios in homeowners insurance in Texas.” (Pl.’s App. at 463.) 

The Court, in its review of the documents, concludes that ample evidence exists in the

record to support Defendant’s use of the factors and the general cut-off levels used. The Court is

not willing to second-guess Defendant’s use of a particular factor in that it may be too restrictive

 

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15 Plaintiff contends that Defendant did not conduct its own studies regarding the

correlation between credit and loss expectancy in homeowner’s insurance in Texas. (Pl.’s Supp.

Br. at 16.) While this may be accurate, Plaintiff has failed to produce any evidence to rebut

Defendant’s claim that its multistate retroactive analysis conducted prior to Plaintiff’s

application for insurance may be applied, at least “directionally,” to Texas data. (See Pl.’s App.

at 1102-04, 1190-97 (Baum Depo.).) 

18

or too lenient. The Court recognizes that Defendant has modified the cut-off values for its

factors over time to maintain competitiveness and adjust to new data from the fields. (See Pl.’s

Supp. App. at 255, 260, 277, 278 (Mallassee Depo.); 379, 380, 381, 387, 407, 434-35

(Dunesbury Depo.), 1074-77, 1116, 1154, 1190-97 (Baum Depo.).)

Further, Plaintiff argues that the reports relied upon by Defendant relate to auto insurance

and credit scores, which are not applicable to a credit evaluation system based upon credit events

in a homeowner’s insurance context. (Id. at 38.) Plaintiff seeks to support this assertion by

citing to the deposition testimony of Phil Baum, Defendant’s designated actuary. (See Pl.’s

Supp. App. at 1083-84.) However, Mr. Baum’s testimony reveals that auto insurance studies

may relate to the homeowner’s insurance context. (Id. at 1081-82.) Further, Mr. Baum testified

that a variety of studies exist, both internally conducted by Defendant and externally

conducted,15 validating the relationship between credit and risk of loss in homeowner’s

insurance, including the credit factors used by Defendant in its credit evaluation system. (Id. at

1033, 1066, 1068-69, 1079, 1082-83, 1095, 1100-01, 1102-04, 1106, 1115, 1116, 1118, 1120-21,

1167, 1190-97. See also id. at 123-24, 191-92 (Cummins Depo.)) Further, Defendant has

conducted a study comparing its loss experience between customers who failed to meet its credit

requirements but received waivers of the credit requirements (for having completed a credit

counseling program) and customers who passed its credit requirements, the results of which

indicate that customers receiving waivers are a significantly greater risk pool than are customers

without credit issues. (Id. at 276-77 (Mallassee Depo.).)

 

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19

The Court concludes that Plaintiff has failed to present sufficient summary judgment

evidence to rebut Defendant’s evidence that its credit evaluation system is not arbitrary.

Accordingly, Plaintiff has failed to establish any inference of pretext based upon its argument

that Defendant’s system is arbitrary.

d. Ex Post Justification

Plaintiff argues that Defendant could not produce evidence that the proffered reason was

relied upon by the decisionmakers. (Pl.’s Supp. Br. at 36.) Plaintiff claims that any ex post

justification for the reason should not be sufficient to overcome Defendant’s burden of

presenting a legitimate business reason for the policy. See Halfond v. Legal Aid Soc’y, 70 F.

Supp. 2d 155, 163 (E.D.N.Y. 1998). Plaintiff further argues that the reports existing prior to the

time when Plaintiff’s claim accrued may not have been reviewed by Defendant until after

Plaintiff’s claim. (Pl.’s Supp. Br. at 38-39.) 

Upon the Court’s review of the evidence, the Court concludes that Defendant has met its

burden. Although Plaintiff is correct that Defendant did not produce documentation concerning

the reasons behind the initial decision to implement the credit evaluation system, Defendant has

produced evidence, relating to times prior to when Plaintiff’s cause of action accrued, justifying

the continued existence of the credit evaluation system. (E.g., Pl.’s Supp. App. at 1560-67.)

Accordingly, in relation to Plaintiff’s claim, Defendant has met its burden to put forth a

legitimate business reason.

Plaintiff further argues that the absence of documentary evidence pertaining to the

decisionmaking process infers that Defendant’s reason is false (i.e., a discriminatory purpose, in

the words of the Plaintiff). (Pl.’s Supp. Br. at 36.) Plaintiff cites Wilson v. AM General Corp.,

167 F.3d 1114, 1121-22 (7th Cir. 1999), for the proposition. However, Wilson related to a

 

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20

number of factors which when combined created such an inference. While the Court agrees that

in some situations the absence of documentary evidence can infer that Defendant’s proffered

reason is false, the Court concludes that the evidence provided by the Defendant is sufficient to

meet its burden to present a legitimate nondiscriminatory reason. Plaintiff’s arguments are

insufficient to overcome Defendant’s stated reason and explanations, made prior to 2002,

justifying Defendant’s continued use of the credit evaluation system’s use.

Plaintiff further argues that the studies referred to by Defendant do not support the initial

decision to use the credit evaluation system by Defendant. (Pl.’s Supp. Br. at 37.) Plaintiff is

mistaken; the studies show that credit is correlated to loss in homeowner’s insurance. (See Pl.’s

Supp. App. at 1033, 1066, 1068-69, 1079, 1082-83, 1095, 1100-01, 1102-04, 1106, 1115, 1116,

1118, 1120-21, 1167, 1190-97 (Baum Depo.).) Accordingly, Plaintiff’s claim lacks merit and no

inference of pretext may be inferred.

e. Failure to Study Disparate Impact or Implement Safeguards

Plaintiff argues that Defendant was aware of possible disparate impact prior to Plaintiff’s

claim but did not study the possible effects. (Pl.’s Supp. Br. at 16.) Plaintiff suggests that this

infers discrimination. (Pl.’s Supp. Br. at .) 

First, the evidence Plaintiff points to does not suggest knowledge of an actual disparate

impact prior to Plaintiff’s claim. (See Pl.’s Supp. App. at 1430 (1996 report inconclusive); Pl.’s

Supp. App. at 347-48 (vague reference).) Indeed, Plaintiff relies upon Defendant’s knowledge

of consumer and regulatory noise and concern about credit for the proposition that Defendant

was aware of the disparate impact of the use of credit. However, the consumer and regulatory

noise identified by Defendant was that related to privacy (id. at 76, 97, 127 (Cummins Depo.).),

which Defendant addressed through the creation of the Credit Advisory Committee, discussed

 

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16 Although not a direct study on the impact Defendant’s credit evaluation system has

upon minority populations, it is designed to study similar redlining effects and is accomplished

without compiling racial information. The Court cannot infer pretext or discriminatory purpose

from Defendant’s study.

21

supra. To the extent that Defendant may have been aware of the possible disparate impact of the

use of credit prior to Plaintiff’s application, Plaintiff’s evidence establishes that studies were

done on the impact to “Consent Decree” markets.16 (Id. at 274 (Mallassee Depo.).) 

Plaintiff nevertheless argues that Defendant’s failure to implement any safeguards to

ensure that its use of credit did not adversely impact minorities, as required by the Consent

Decree, infers a discriminatory purpose. (Pl.’s App. at 88.) However, the only evidence on this

issue indicates that Defendant did implement some safeguards as required by the Consent

Decree. (See Pl.’s Supp. App. at 273-74.) These safeguards included a study of the impact of

Defendant’s credit evaluation system upon various markets, including urban markets and

“Consent Decree” markets. (Id. at 274.) The Court will not inquire whether the safeguards

undertaken by Defendant were sufficient under the terms of the Consent Decree. That

Defendant did engage in some safeguards in response to the Consent Decree negates any

inference of a discriminatory purpose as proposed by Plaintiff.

Finally, the Court is unwilling to place Defendant into a Catch-22 dilemma whereby in

order to avoid one inference of discrimination, Defendant must gather information about an

applicant’s race and analyze its policies impact upon racial minorities, when such data gathering

and study itself may yield an inference of discrimination. Indeed, Plaintiff’s evidence indicates

that the industry considers credit to be a valuable underwriting tool precisely because it is blind

to race and other factors which, if known, might encourage discrimination. (See Pl.’s Supp.

App. at 269.)

 

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17 Defendant moves to strike Plaintiff’s proferred published, summary judgment evidence

related to geographic redlining and credit scoring. The Court GRANTS the Motion, finding

such documents hearsay. FED. R. EVID. 802; 29A AM. JUR.2D EVID. § 1412 (“[P]rivately printed

books or other publications, when offered for the purpose of proving the truth of the matters

stated therein, are excludable from evidence on hearsay grounds.”). 

18 Plaintiff cites a number of cases which support the proposition that “suspicious timing”

may infer pretext or discriminatory intent. (See Pl.’s Supp. Br. at 34 (citing cases).) The Court

finds these employment-related cases inapposite to the instant case where, according to

Plaintiff’s version of the facts, Defendant was required to implement a new policy for

determining eligibility for homeowner’s insurance. Indeed, under Plaintiff’s theory, any system

Defendant implemented as a result of the deadline imposed by the Consent Decree would infer

discriminatory purpose. The Court finds this proposition untenable.

22

f. Genesis in Discrimination

Plaintiff argues that the credit evaluation system employed by Defendant has its genesis

in discrimination, which infers a discriminatory purpose. See James v. Stockham Valves &

Fittings Co., 559 F.2d 310, 351-52 (5th Cir. 1977) (internal citation omitted). To this end,

Plaintiff claims that Defendant engaged in redlining activities prior to the creation of the credit

evaluation system. (Pl.’s Br. at 2-4.) As evidence of this, Plaintiff relies on various published

articles and a Consent Decree between Defendant and the United States Department of Justice

which refer to redlining.17 The Consent Decree, however, does not assert that Defendant actually

engaged in redlining. (Pl.’s Supp. App. at 345.) Accordingly, Plaintiff has no summary

judgment evidence that Defendant engaged in discrimination at or about the time the credit

evaluation system was initially implemented.18

Plaintiff claims that Defendant’s credit evaluation system was established on April 15,

1997, the date the Consent Decree prohibited the use of redlining. (Pl.’s Supp. App. at 346.)

The only basis Plaintiff has in asserting the inception date of the allegedly offending credit

evaluation system is the deposition testimony of Phil Baum and a letter from Defendant to the

Texas Department of Insurance. (Pl.’s Supp. App. at 1078-79, 1205-09.) 

 

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23

Mr. Baum, an actuary and corporate designee on the issue of studies (as opposed to

development of credit) stated directly that he did not know when credit was first used in

underwriting homeowner’s insurance policies, but could not disagree with an inception date of

April 15, 1997, when confronted with the letter to the Texas Department of Insurance. (Id. at

1025, 1072-73, 1078-79.) This, however, only establishes that Mr. Baum could not disprove the

1997 date, not that he had affirmative knowledge of when the credit system was first

implemented.

In reviewing the letter, the Court notes that Defendant “has been using the above credit

factors as an eligibility factor since April 15, 1997.” (Id. at 1208.) This does not establish that

the credit system itself was established on that date, only that the specific credit factors listed by

Defendant on the letter were in use that date. Indeed, in Plaintiff’s Brief in Opposition to

Defendant’s Renewed Motion, Plaintiff claimed that Defendant “began ordering consumer credit

information on applicants in the early 1990s.” (Pl.’s Br. at 7 n.9.)

All other evidence presented by Plaintiff indicates that the credit evaluation system did

not have its genesis at 1997. (See, e.g., Pl.’s Supp. App. at 55-56 (Cummins Depo.) (early

1980s); id. at 376 (Dusenbury Depo.) (mid-1980s); id. at 828, 846, 920 (Mabe Depo.) (for a long

time, at least as early as the mid-1990s); id. at 245, 246, 252, 262 (Mallassee Depo.) (credit used

in auto insurance as least as early as 1984, used in homeowner’s insurance at least as early as

1997); id. at 1287, 1301 (Baggaley Depo.) (based on review of documents believed credit was

used by the industry in homeowners’ insurance beginning in 2000 or 2001).) Without assessing

the credibility of each piece of evidence, Plaintiff does not provide any summary judgment

evidence that during these different time periods the policy had its genesis in discrimination.

 

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19 The Court already granted Defendant’s Motion for Summary Judgment as to Plaintiff’s

disparate impact claims arising under §§ 1981 and 1982. (Order, entered Dec. 6, 2004, at 2.)

24

Furthermore, even if Plaintiff did prove that Defendant had discriminated in 1997 or

some other time period and that at the end of that era of discrimination the credit evaluation

system was borne, Plaintiff has failed to provide any summary judgment evidence that the credit

evaluation system was established because of racial animus. The Court refuses to infer any

discriminatory purpose as to the credit evaluation system merely because it may or may not have

been initially implemented (without regard to later justifications and support) upon the

conclusion of a discriminatory practice. Accordingly, Plaintiff’s evidence is insufficient to raise

a valid inference of pretext.

Because Plaintiff’s summary judgment evidence fails to sufficiently rebut Defendant’s

proffered legitimate business reason, Defendant’s Motion for Summary Judgment as to

Plaintiff’s individual intentional discrimination claims arising under §§ 1981, 1982, and 3604 is

GRANTED. 

B. Disparate Impact Claim

A claim of disparate discriminatory effect is actionable under § 3604 of the FHA.19

Hanson, 800 F.2d at 1386 (“A finding of intentional racial discrimination is necessary for

recovery against a defendant under the Civil Rights Act. . . . However, a violation of section 804

of the Fair Housing Act [§ 3604] may be established not only by proof of discriminatory intent,

but also by a showing of a significant discriminatory effect.”); Dews, 109 F. Supp. 2d at 530 &

n.3, 563-64 & n.91 (citing cases); see Langlois v. Abington Housing Auth., 207 F.3d 43, 49 (1st

Cir. 2000) (noting consensus among the circuit courts that the FHA provides a cause of action

for disparate impacts); Prudential, 208 F. Supp. 2d at 58 & n.6 (citing cases); Arlington Heights,

 

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25

558 F.2d at 1290 (same). Plaintiff’s “[d]isparate impact claims may be brought by either

individual plaintiffs or a class.” See Munoz, 200 F.3d at 300. 

1. Standard

To establish a prima facie case supporting a disparate impact or effect claim related to

the discriminatory provision of insurance under § 3604, a plaintiff must prove that a specific

facially neutral policy or practice created statistical disparities so great as to be “functionally

equivalent to intentional discrimination,” thereby disadvantaging members of a protected group. 

Frank v. Xerox Corp., 347 F.3d 130, 135 (5th Cir. 2003); Dews, 109 F. Supp. 2d at 530-32;

Munoz v. Orr, 200 F.3d 291, 299 (5th Cir. 1999) (Title VII); Int’l Brotherhood of Teamsters v.

United States, 431 U.S. 324, 335 n.15 (1977) (Disparate impact claims involve practices “that

are facially neutral in their treatment of different groups but that in fact fall more harshly on one

group than another and cannot be justified by business necessity.”); see Johnson v. Uncle Ben’s,

Inc., 965 F.2d 1363, 1367 (5th Cir. 1992) (Title VII). See also See Gonzales v. City of New

Braunfels, Tx., 176 F.3d 834, 839 n.26 (5th Cir. 1999) (To make out a prima facie claim of

disparate impact discrimination, “a plaintiff must (1) identify the challenged . . . practice or

policy, and pinpoint the defendant’s use of it; (2) demonstrate a disparate impact on a group that

falls within the protective ambit of [the applicable statute]; and (3) demonstrate a causal

relationship between the identified practice and the disparate impact.”) (internal citations

omitted). 

The relevant question in a discriminatory effects claim against a private defendant

. . . is not whether a single act or decision by that defendant has a significantly

greater impact on members of a protected class, but instead the question is

whether a policy, procedure, or practice specifically identified by the plaintiff has

a significantly greater discriminatory impact on members of a protected class.

Simms, 83 F.3d at 1555. 

 

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26

Evidence must be provided indicating that the specifically identified policy is responsible

for the disparate impact, controlling for other factors and policies. See Wards Cove Packing Co.

v. Atonio, 490 U.S. 642, 656 (1989). To prove a disparate impact, the plaintiffs must undertake a

“systematic analysis” of the policy or practice. See Munoz, 200 F.3d at 299. This analysis will,

“of necessity, rely heavily on statistical proof.” Id. at 300. Plaintiffs need not provide proof of

discriminatory intent, motive, or animus. See id., citing Griggs v. Duke Power Co., 401 U.S. 424

(1971). Therefore, “the evidence will focus on the degree of statistical disparity between

protected and non-protected.” Id. “Ordinarily, a prima facie disparate impact case requires a

showing of a substantial statistical disparity between protected and non-protected [individuals].”

Stout v. Baxter Healthcare Corp., 282 F.3d 856, 860 (5th Cir. 2002) (internal quotation omitted).

Determining whether a prima facie case has been made depends upon the entirety of the

factual support available. See Teamsters, 431 U.S. at 339. Some factors have been identified:

(1) the extent of the racially disparate impacts or the extent to which the decision will perpetuate

segregation; (2) whether some discriminatory intent is shown, but not in an amount sufficient to

support an intentional discrimination claim under Washington v. Davis, 426 U.S. 229 (1976);

and (3) the nature of the relief sought. See Arlington Heights, 558 F.2d at 1290 (noting also that

the importance of the interest of the defendant in taking the allegedly discriminatory action must

be considered in determining ultimate liability).

“Discriminatory effect under the Fair Housing Act may be proven by showing either (1)

‘adverse impact on a particular minority group’ or (2) ‘harm to the community generally by the

perpetuation of segregation.’” Dews, 109 F. Supp. 2d at 564 (quoting Huntington Branch

NAACP v. Town of Huntington, 844 F.2d 926, 937 (2d Cir. 1988), aff’d, 488 U.S. 15). 

 

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27

A defendant may rebut the presumption of discrimination which is established by the

plaintiff’s prima facie case by presenting evidence that the challenged practice is related to

legitimate business goals (i.e., the underwriting process) and is consistent with business

necessity. See Allison v. Citgo Petroleum Corp., 151 F.3d 402, 424 (5th Cir. 1998); Frazier v.

Garrison I.S.D., 980 F.2d 1514, 1525 (5th Cir. 1993); see also 42 U.S.C. § 2000e-2(k)(1)(A)(I).

To this end, the Court “would have to consider, first, the [defendant’s] justification for the use of

the[ allegedly offending practices], and, second, the availability of alternative practices to

achieve the same business ends, with less racial impact. Frazier, 980 F.2d at 1525-26 (internal

citations omitted). 

This yields a three-part burden-shifting test whereby (1) the plaintiff must prove up a

prima facie case; (2) if the plaintiff does so, the burden shifts to the defendant to prove that the

discriminatory effect is justified by business necessity; (3) if the defendant does so, the plaintiff

must “show that other tests or selection protocols would serve the [defendant’s] interest without

creating the undesirable discriminatory effect” and that defendant refused to adopt them. Isabel

v. City of Memphis, 404 F.3d 404, 411 (6th Cir. 2005); Banos v. City of Chicago, 398 F.3d 889,

892 (7th Cir. 2005); Lanning v. Southeastern Penn. Transp. Auth. (SEPTA), 181 F.3d 478, 485

(3d Cir. 1999); Bullington v. United Air Lines, Inc., 186 F.3d 1301, 1312 (10th Cir. 1999).

2. Analysis

Again, assuming arguendo that Plaintiff has met her burden of proving up a prima facie

case of disparate impact, Defendant must present a business necessity for the policy. See

Teamsters, 431 U.S. at 335 n.15; Price Waterhouse, 490 U.S. at 242-43; Munoz, 200 F.3d at 295.

To prove Defendant’s business necessity defense, Defendant’s use of credit information

must be “predictive of or significantly correlated with important elements” of underwriting. See

 

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20 Plaintiff argues that “Nationwide cannot, at this time, allege a business justification

defense because it is not at issue in the present motion for summary judgment. In fact, the

Court’s December 6, 2004 Order did not authorize Plaintiff to undertake discovery into

[Defendant’s] business justifications for using credit criteria and [Defendant] refused to turn

over many documents requested by Plaintiff on the basis that the business justification defense

was not at issue.” (Pl.’s Supp. Br. at 26.)

However, Plaintiff’s argument is contradicted by the evidence. Plaintiff submits

evidence indicating that on December 30, 2004, Defendant stated by letter its position that the

issue of business justification was not part of the Court’s Order directing discovery. (Pl.’s Supp.

App. at 1766.) Plaintiff subsequently filed a Motion to Compel on January 25, 2005, asking the

Court to compel Defendant to produce documents responsive to her request number 8, which

reads: “All documents relating to any studies, analyses, or reviews completed regarding the use

of credit information or credit scoring in underwriting your policies, including all documents

regarding the relationship or correlation, if any, between credit and risk of future claims...” 

(Pl.’s App. Cited in JSR dated January 27, 2005, filed Feb. 4, 2005, Ex. C, at 7.) On February 4,

2005, the parties filed a Joint Status Report indicating that the parties resolved their disputes

regarding request number 8 so that “Defendant has agreed to search for and produce documents

responsive to document requests numbered 8 and 18, with the exception of documents relating to

‘low income individuals.’” (JSR, filed Feb. 4, 2005, at 4.) 

The Court concludes: (1) that the issue of business necessity is a matter of dispute in the

Motion for Summary Judgment; (2) that the Court’s December 6, 2004, Order authorized

discovery on Defendant’s business necessity (“limited discovery related to the disparate impact

28

Isabel, 404 F.3d at 413 (internal citations omitted). As discussed in Part III.B.2 supra,

Defendant has met its burden with respect to underwriting. Defendant also asserts that absent its

ability to determine risk using credit, its position in the market would suffer from competitive

adverse selection. (Pl.’s App. at 254, 268 (Mallassee Depo.); Pl.’s Supp. App. at 131-32

(Cummins Depo.), 389, 439 (Dusenbury Depo.), 821 (Mabe Depo.).) The Court concludes that

Defendant has sufficiently established that the use of credit is correlated with Defendant’s

competitiveness in the homeowner’s insurance industry. Accordingly, the burden shifts to

Plaintiff to refute Defendant’s necessity defense or provide alternate, less discriminatory means

by which Defendant can achieve the same legitimate business goals.

Plaintiff has provided no means by which Defendant can achieve the same business goals

(reducing risk of loss and maintaining competitiveness) in a less discriminatory way and has

presented no evidence that credit is not predictive of loss.20 See Isabel, 404 F.3d at 411; Banos,

 

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of Defendant’s use of credit history in Texas as it pertains to Plaintiff”); (3) that the Court’s

March 24, 2005, Order authorized discovery on the issue of pretext which is sufficiently fungible

to the business necessity issue; ; (4) that discovery in fact proceeded on the issue of business

necessity and/or pretext; and (5) Plaintiff’s ability to rebut Defendant’s business necessity

argument was not dependent upon Defendant’s compliance with the Joint Status Report, filed

February 4, 2005.

29

398 F.3d at 892; Lanning, 181 F.3d at 485; Bullington, 186 F.3d at 1312. (See Pl.’s Argument,

Transcript, at 16 (“A regular disparate impact case is where you can’t prove intent, that

[defendant] didn’t impose this neutral policy to discriminate; it just happens to have the affect

[sic] of discriminating. And so the reasoning goes that if it has a legitimate business purpose,

even though it affects, for example, minorities more severely than others, that that is the defense,

and the only thing the plaintiff can say in response in a disparate impact case is, “Well, you can

achieve your same business goals in a less discriminatory way.”)

Accordingly, Plaintiff has failed to meet her burden to overcome summary judgment as

to her individual disparate impact claims under § 3604. Therefore, Defendant’s Motion for

Summary Judgment as to those claims is GRANTED.

 

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30

IV. CONCLUSION

For the foregoing reasons, Plaintiff’s individual and class claims of disparate treatment

(intentional discrimination) and disparate impact (disparate effect) claims arising under §§ 1981,

1982, and 3604, are DISMISSED and Defendant’s Motion for Summary Judgment is

GRANTED.

Judgment will be entered accordingly.

SO ORDERED.

DATED: August 2, 2005.

 /s/ Barefoot Sanders 

BAREFOOT SANDERS, SENIOR JUDGE

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF TEXAS

 

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