# Petition for Writ of Certiorari — Nationwide Mutual Insurance v. Cisneros > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386002_0738%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1996 - **Citation:** 516 U.S. 1140 ## Text SUpreme Court, U.S. FILED OB e711 4 Nov 2- 1995 NO: __QEFICE-OF THE CLERK In The Supreme Court of the United States October Term, 1995 # NATIONWIDE MUTUAL INSURANCE COMPANY and NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, Petitioners, HENRY CISNEROS, Secretary of the United States Department of Housing & Urban Development; JERALD L. STEED, Executive Director, Dayton Human Relations Council; CHARLES W. BROWN, Chairperson, Dayton Human Relations Council; and CITY OF DAYTON, Respondents. . Petition For A Writ Of Certiorari To The United States Court Of Appeals For The Sixth Circuit $ PETITION FOR A WRIT OF CERTIORARI ¢ JEFFREY S. GOLDMAN LAWRENCE M. COHEN Counsel of Record Joe. W. Rice Fox AND GROVE, CHARTERED 311 S. Wacker Dr., Suite 6200 Chicago, Illinois 60606 312/876-0500 Counsel for Petitioners COCKLE LAW BRIEF PRINTING CO., (800) 225-6964 OR CALL COLLECT (402) 342-2831 QUESTIONS PRESENTED 1. Whether the Fair Housing Act (“the Act”), 42 U.S.C. § 3601, et seq., regulates the provision of property insurance despite the abseiice of any reference to insurance in either the Act’s language or legislative history, the repeated refusal by Congress to amend the Act to expressly include insur- ance, the inverse state preemption backdrop of the McCar- ran-Ferguson Act, 15 U.S.C. § 1011, et seq., and Congress’ enactment, in the same year as the Act, of another statute — the Urban Property Protection and Reinsurance Act (“UPPRA”), 12 U.S.C. § 1749bbb, et seg. - to specifically address the problem of property insurance availability. 2. Whether the interpretive regulations of the United States Department of Housing & Urban Development (“HUD”), which construe the Fair Housing Act to cover the business of insurance, are entitled to substantial deference under Chevron, U.S.A., Inc. v. Natural Resources Defense Coun- cil, Inc., 467 U.S. 837 (1984), notwithstanding that a contrary Congressional intent can be ascertained “through traditional tools of statutory construction” (Judge Kennedy dissenting below, 52 F.3d at 1364; App. 29). 3. Whether the ripeness doctrine precludes pre- enforcement judicial review of a question that has an imme- diate and direct effect on the day-to-day business of property insurance: the legitimacy of HUD’s definitive pronounce- ment that it will engage in the disparate impact regulation of property insurance under the Fair Housing Act. 4. Whether the Court of Appeals correctly concluded “that the presence of additional remedies in the Fair Housing Act does not cause the Act to invalidate, impair or supersede [state] insurance law” (52 F.3d at 1363; App. 27) in contra- vention of the McCarran-Ferguson Act. li PARTIES TO THE PROCEEDING AND RULE 29.6 LIST All parties to the proceeding below are reflected in the case caption. Petitioners have no parent companies or nonwholly owned subsidiaries to list pursuant to Supreme Court Rule 29.6. lh waren Se E ter Ee CELE I EES, Petts AE Nabe wt WON 2 | — eee TABLE OF CONTENTS Page TABLE OF AUTHORITIES ..........---eeeeeeeeeee: iv OCPTITIOING BELOW. 0. cccccsvcccvcccccccceserceres 1 SEEM EMUIEY 5 besa ceveescccccrceccevesesesecenses 1 STATUTORY AND REGULATORY PROVISIONS CE cece ede eh evesd hr cesesteeesnsecccesens 2 STATEMENT OF THE CASE.........-.--seeeeeeeee 2 REASONS FOR GRANTING THE WRIT ........... 6 A. This Court Should Resolve The Conflict Among The Courts Of Appeal Over Whether The Fair Housing Act Applies To The Business a5 ok adhe vis 4h ¥ v0 062 Bev ere ses 6 B. This Court Should Resolve The Confusion In The Lower Courts Over The Proper Applica- CE SPE ET Pe Terre eer ee 13 C. The Court Of Appeals’ Refusal To Address Nationwide’s Argument That Disparate Impact Enforcement Of The Fair Housing Act Is Pre- empted By The McCarran-Ferguson Act Con- flicts With This Court’s Decision In Abbott Laboratories And Other Circuit Court Precedent DRUURCUCS cae SOR Nad see ev erisoweviveseeverde 16 D. The Court Of Appeals’ Rejection Of McCarran- Ferguson Act Preemption Is Contrary To The Plain Language Of The Statute And Prior Pre- cedent Of This Court..... eed ee rea ear te 20 CNG edad niu eb ee eee sti ¥evewscceuves 22 eg ee eV ewe bes ebis oveven App. 1 iv TABLE OF AUTHORITIES Page CASES A.R.F.A.P.S. v. Regulations and Permits Admin., 740 F. Supp. 95 (D. Puerto Rico 1990).................. 9 Abbott Laboratories v. Gardner, 387 U.S. 136 (1967) OE OL rt Pr Pa hy ee ge 3, 5, 6, 16, 18 Adams Fruit Co. v. Barrett, 494 U.S. 638 (1990)....... 15 Ambrose v. Blue Cross & Blue Shield of Virginia, 891 P. See. TESS GGA. Ws BOWe cece vcnsevencsevesens 21 Arthur v. City of Toledo, 782 F.2d 565 (6th Cir. 1986) ..... 9 Barnett Bank of Marion County v. Gallagher, 43 F.3d 631 (11th Cir.), cert. granted, __ U.S. __, 132 L.Ed.2d 920 (Sept. 27, 1995) (No. 94-1837)....... 8, 22 Chamber of Commerce v. Reich, 57 F.3d 1099 (D.C. | re eee ee PP Prey ey ee Tee 17, 19 Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).......... » @, 33, 35 Ciba-Geigy Corp. v. U.S. EPA, 801 F.2d 430 (D.C. COR: TH 6 SUS ison eee iets ce ee amen ease anes 17, 19 Clifton Terrace Associates, Ltd. v. United Technologies Covp., Sie Va Fi6: CO. GA TR) occ cepcnvssccss 14 Federal Maritime Comm'n v. Seatrain Lines, Inc., 411 ee 8): Pee eras re ere ero ee ee 15 FMC Corp. v. Holliday, 498 U.S. 52 (1990)............ 20 Franklin Federal Savings Bank v. Director, Office of Thrift Supervision, 927 F.2d 1332 (6th Cir.), cert. Mend Sie UD. Fae Ga oo cc kee enweecucesiuns 17, 19 i EAA Rh 8 TED oe TABLE OF AUTHORITIES - Continued Page Halet v. Wend Inv. Co., 672 F.2d 1305 (9th Cir. 1982) ..... ) Huntington Branch, NAACP v. Town of Huntington, 844 F.2d 926 (2d Cir.), aff'd, 488 U.S. 15 (1988)..... 9 INS v. Cardoza-Fonseca, 480 U.S. 421 (1987) ....6, 14, 15 International Union, U.A.W. v. Brock, 816 F.2d 761 CRE, Ce, SHG e co cenenenscesnecsccvadoesedenreess 14 Johnson City Medical Center v. U.S., 999 F.2d 973 (Gt Cie. 1993). oc ccccccccccvscesccccceserrecseces 15 Mackey v. Nationwide Insurance Companies, 724 F.2d 419 (4th Cir. 1984)......---cccccccccsccseee 2, 4, 9, 14 Mountain Side Mobile Estates v. Secretary, HUD, 56 F.3d 1243 (10th Cir. 1995).......-ccceeeccreccveeee 18 NAACP v. American Family Mut. Ins. Co., 978 F.2d 287 (7th Cir. 1992), cert. denied, _. U.S. __U 113 Cie ZI (IGS. 2 ccc cscvccvcecceunneduaderoneatgs: 4 Nationwide Mutual Ins. Co. v. Cisneros, 52 F.3d 1351 (6th Cir. 1995)....-.-ccccccccccscrccccceseces 4, 7, 21 NLRB v. United Food and Commercial Workers Union, 484 U.S. 112 (1987) .........- eee eee rere eees 14 Potomac Group Home Corp. v. Montgomery County, 823 F. Supp. 1285 (D. Md. 1993).....-.--------++: 10 Resident Advisory Board v. Rizzo, 564 F.2d 126 (3d Cir. 1977), cert. denied, 435 U.S. 908 (1978) ......-.. 9 Silver v. Garcia, 760 F.2d 33 (1st Cir. 1985)........... 13 U.S. v. City of Parma, 661 F.2d 562 (6th Cir. 1981), cert. denied, 456 U.S. 926 (1982) .....------ seer cere 9 vi TABLE OF AUTHORITIES - Continued Page United States v. Badgett, 976 F.2d 1176 (8th Cir. DOE oa.c cc Saduccccocsodevove ceunauanesacdagaseees 10 United States v. Schuylkill Township, 1991 U.S. Dist. LEME 2 C.D. Pa. TORE ccc vase ccrcescasctaecsnses 10 Wexco, Inc. v. IMC, Inc., 820 F. Supp. 194 (M.D. Pa. SFTOD . cc cccccscccestonscenusécdewsstestresareyeunes 21 STATUTES AND REGULATIONS Declaratory Judgment Act, 28 U.S.C. §§ 2201-02...... 2 Administrative Procedure Act, 5 U.S.C. §§ 701-06..... 3 Fair Housing Act, 42 U.S.C. § 3601, et seq............ 2 Section 3604(a), 42 U.S.C. § 3604(a) ........... 3, 13, 14 Section 3604(b), 42 U.S.C. § 3604(b)...............4.. 14 Oe DOC. © OOD. vs veksceccseeunesess eee 3 Fed. Reg., Vol. 59, No. 157, pp. 41995-41996......... 11 McCarran-Ferguson Act, 15 U.S.C. § 1011, et seq...2, 20 Ohio Insurance Code, O.R.C. § 3901.01, et seq........ 2 Urban Property Protection and Reinsurance Act, 12 USL. | Treeeee. 6 OF... cnwvncusseccnsesvesse. 2 oe LE. © POR FWe) wh ctcvccocevgevusveusess 2, 3, 14 ae WBA. B TROUIE) onc ouscccivcncenys obs ue eeseeeea et 1 yp Bik ae Be rer errr re mre 3 vil TABLE OF AUTHORITIES - Continued Page MIscELLANEOUS A.M. Best’s Annual Aggregates & Averages, Property-Casualty, p. 100 (1995 ed.).............005. 7 ACORN, 1993, A Policy of Discrimination?: Home- owners Insurance Redlining in 14 Cities............. 10 American Insurance Association, 1993, Availability and Use of Homeowners Insurance in the Urban Core of Major American Cities...........+++20eee08: 10 Comment, Chevron Deference To Agency Interpreta- tions That Delimit The Scope of the Agency’s Juris- diction, 61 U. Cnr. L. Rev. 957 (1994).............. 16 Cong. Rec. S. 2272-2284 (daily ed. Feb. 6, 1968)...... 2 H.R. 2099, 104th Cong., Ist Sess. (1995)............. 12 Illinois Department of Insurance, 1994, Status of Homeowners Insurance in Illinois ...............00. 11 Insurance Information Institute, The Fact Book SE Sa nig toe esac be CCCE ERE SOUS CoE Capweteneene ches 7 Klein, Urban Homeowners Insurance Markets: Prob- lems and Possible Solutions, Aug. 11, 1995........... Y Minnesota Department of Commerce, 1994, Home- owners Insurance: An Investigation Into Possible Pe IN ss vn vteuundavesteusesevneeecess 11 Missouri Department of Insurance, 1993, Home- re 11 Moseley-Braun Gets GOP to Spare Fair Housing Rule, Chicago Sun-Times, Sept. 28, 1995, at 22.......... 12 Vili TABLE OF AUTHORITIES — Continued Page Press Release of the National Fair Housing Alli- a, SONG B14 BORE 6660 6k 0 bone hee vtonss ves 11 S. 1917, 103rd Cong., 2nd Sess. (1994), the Anti- Redlining in Insurance Disclosure Act of 1994 .... 12 Sunstein, Law and Administration After Chevron, 90 Co, 2, Se Cs ic cccns bedeceeeevecess 15 Vol. XI, No. 10 Fair Housing-Fair Lending Bulletin, Aspen Law & Business, p. 4 (Oct. 1, 1995)........... 6 PETITION FOR A WRIT OF CERTIORARI Petitioners Nationwide Mutual Insurance Company and Nationwide Mutual Fire Insurance Company (collec- tively “Nationwide”) respectfully pray that a writ of cer- tiorari issue to review the judgment of the United States Court of Appeals for the Sixth Circuit entered in this case on May 1, 1995. OPINIONS BELOW The divided opinion of the Court of Appeals is reported at 52 F.3d 1351. App. 1-29.! The District Court's memorandum and order adopting the Magistrate Judge’s Report and Recommendations is not reported. App. 85-92. The Magistrate Judge’s Report and Recommenda- tions is also unreported. App. 30-79. aa JURISDICTION The judgment of the Court of Appeals was entered on May 1, 1995. App. 29a. A timely petition for rehearing was denied, Judge Kennedy dissenting, on August 4, 1995. App. 94-95. This petition is filed within ninety (90) days of that date. The jurisdiction of this Court is invoked under 28 U.S.C. § 1254(1). 1 References to the Appendix filed with this Petition will be abbreviated as “App.” followed by the page numbers. Refer- ences to the Joint Appendix filed with the Court of Appeals will be abbreviated as “JA” followed by the page number. STATUTORY AND REGULATORY PROVISIONS INVOLVED The relevant provisions of the Fair Housing Act, 42 U.S.C. § 3601, et seq., the McCarran-Ferguson Act, 15 U.S.C. § 1011, et seq., the Urban Property Protection and Reinsurance Act, 12 U.S.C. § 1749 bbb, et seq., the Declara- tory Judgment Act, 28 U.S.C. §§ 2201-02, the Ohio Insur- ance Code, O.R.C. § 3901.01, et seq., and the regulations issued by HUD, 24 C.FR. § 100.70(d)(4), are set forth in the Appendix. App. 96-107. ¢ STATEMENT OF THE CASE Nationwide provides property insurance to many thousands of customers throughout the United States. JA 82-83. Respondent HUD? administers the Fair Housing Act, enacted in 1968, which prohibits “discriminatory practices of property owners, real estate brokers, builders and home financers.” Mackey v. Nationwide Insurance Com- panies, 724 F.2d 419, 423 (4th Cir. 1984), citing Senator Mondale, the Act’s sponsor, at Cong. Rec. S. 2272-2284 (daily ed. Feb. 6, 1968). There is no reference in either the text of the Act or in its legislative history to insurance. Id. at 424. Since 1968, as dissenting Judge Kennedy noted below, “repeated attempts to amend the Fair Housing Act to expressly include insurance practices have failed, * Respondents Jerald Steed and Charles Brown are the Executive Director and Chairperson, respectively, of the Day- ton, Ohio Human Relations Council (the “DHRC”), an agency of the Respondent City of Dayton which assists HUD in the local administration of Fair Housing Act complaints. App. 3. a ter cn lier: ee Lon a Se ah A Sine A although the Act has been amended to prohibit other discriminatory activities.” 52 F.3d at 1364; App. 29, citing 42 U.S.C. § 3605 (e.g., adding discrimination by appraisers). Nevertheless, in 1989, HUD issued regula- tions that interpreted the “otherwise make unavailable or deny” prohibition of Section 3604(a, of the Act to encom- pass the discriminatory provision of property insurance. 24 C.F.R. § 100.70(d)(4). When administrative complaints of alleged discriminatory insurance practices were subse- quently filed against Nationwide, pursuant to that regu- lation, HUD and the DHRC asserted jurisdiction and commenced extensive discovery. App. 4-5. Nationwide then filed this action seeking declaratory and injunctive relief on the ground that Respondents lacked authority under the Act to regulate insurance. Jurisdiction in the District Court was predicated upon 28 U.S.C. § 1331, the Declaratory Judgment Act and the Administrative Pro- cedure Act, 5 U.S.C. §§ 701-06. App. 31; JA 82. The Magistrate Judge who initially heard the matter concluded, contrary to HUD’s motion to dismiss, that, based on Abbott Laboratories v. Gardner, 387 U.S. 136 (1967), this case was ripe for review. His Report and Recommendations found that “the issues presen- ted .. . are purely legal and fit for judicial resolution”; that HUD’s regulation constituted “a final agency action”; and that because that regulation directly affected Nationwide’s primary business - its “daily decisions whether to insure and at what rate to insure” — there was “sufficient hardship [to Nationwide] to make the issues ripe for pre-enforcement review.” App. 37, 41. Having surmounted the ripeness procedural barrier, the Magis- trate Judge then recommended that Respondents’ summary judgment motion be granted and that Nation- wide’s summary judgment motion be denied. App. 79. Nationwide objected to the Magistrate Judge’s recom- mendations on the merits. HUD did not object to his recommended denial of its motion to dismiss. The District Court adopted the Magistrate Judge’s recommendations in their entirety. App. 92. Nationwide appealed. HUD did not cross-appeal. A divided Court of Appeals affirmed. Nationwide Mutual Ins. Co. v. Cisneros, 52 F.3d 1351 (6th Cir. 1995); App. 1-29. The majority initially concluded, over the dissent of Judge Kennedy, that Mackey, which had concluded that the Fair Housing Act did not regulate insurance, was wrong in its three major premises: (1) HUD’s construction of the Act did not, as the Fourth Circuit had held (724 F.2d at 423), render other statutory language “super- fluous”; (2) silence in the Act and its legislative history, even when considered in light of the “insistent position of Congress that regulation of the insurance industry be left to the states,” and the concurrent enactment in 1968 of UPPRA which adopted a “very different” approach to the problem of unavailable property insurance, did not “strongly indicate,” as Mackey opined (id. at 423-24), that Congress intended to exclude any regulation by the Act of insurance practices; and (3) subsequent unsuccessful attempts to extend the Act to encompass insurance, did not, as Mackey had concluded (id. at 424), demonstrate an intent to preclude application of the Act to the business of insurance. 52 F.3d at 1356-59; App. 10-15. Instead, relying on NAACP v. American Family Mut. Ins. Co., 978 F.2d 287 (7th Cir. 1992), cert. denied, __ U.S. ___, 113 S.Ct. 2335 (1993), the Court of Appeals concluded that “HUD’s interpretation of the Fair Housing Act is reasonable” and entitled to substantial deference under Chevron. 52 F.3d at 1359-60; App. 17. The court next turned to Nationwide’s argument that the McCarran-Ferguson Act preempts the regulation of insurance under the Fair Housing Act. The court con- ceded that, as a result of the McCarran Act, “the Fair Housing Act. . . cannot be construed in such a way as to invalidate, impair or supersede any state law enacted to regulate the business of insurance.” Id. at 1361; App. 20. Nonetheless, the court never reached Nationwide’s argu- ment that disparate impact enforcement of the Fair Hous- ing Act — the finding of a violation based upon its effect on a protected group regardless of intent - would have precisely that result. The court held, sua sponte, that this issue was not ripe for review because it failed to meet the ripeness criteria set forth in Abbott Laboratories. Id. at 1361-63; App. 22-26. The Court of Appeals did address and reject Nationwide’s disparate treatment (intentional discrimination) McCarran Act argument. Relying again primarily upon American Family, the court concluded that “the presence of additional remedies in the Fair Housing Act does not cause the Act to invalidate, impair or super- sede Ohio insurance law.” Id. at 1363; App. 27. Nationwide filed a petition for rehearing and sugges- tion of rehearing en banc with respect to the Court of Appeals’ determination that Nationwide’s disparate impact McCarran-Ferguson Act preemption argument was not ripe for review. After requesting and receiving a brief from HUD, the Court of Appeals denied Nation- wide’s petition, Judge Kennedy again dissenting, in an order entered on August 4, 1995. App. 94-95. S REASONS FOR GRANTING THE WRIT This case presents an appropriate vehicle for the Court to resolve one or more important unsettled, recur- rent questions: first, whether, as the court below and the Seventh Circuit have held, contrary to the Fourth Circuit and the dissenting opinion of Judge Kennedy, the Fair Housing Act applies to the business of insurance; second, whether Chevron requires heightened deference to inter- pretive agency regulations that admittedly do not involve “technical determinations requiring agency expertise” (52 F.3d at 1360; App. 18) but which, instead, concern only “pure questions of statutory construction” (INS v. Car- doza-Fonseca, 480 U.S. 421, 446 (1987)); third, whether dis- parate impact enforcement of the Fair Housing Act, with its day-to-day impact on the underwriting decisions of property insurers throughout the United States, is a ques- tion ripe for review under Abbott Laboratories; and, finally, whether Fair Housing Act insurance regulation would “invalidate, impair or supersede” state insurance law in contravention of the McCarran-Ferguson Act. A. This Court Should Resolve The Conflict Among The Courts Of Appeal Over Whether The Fair Housing Act Applies To The Business Of Insurance Continuing uncertainty as to whether HUD and its approximately 85 “substantially equivalent” local agen- cies,? such as the DHRC, may regulate insurance practices 3 Vol. XI, No. 10 Fair Housing-Fair Lending Bulletin, Aspen Law & Business, p. 4 (Oct. 1, 1995). is a matter of substantial national importance to the prop- erty insurance industry, homeowners and prospective homeowners, state insurance commissions, and numerous civil rights organizations. As an independent federal agency, the Federal Mediation and Conciliation Service (“FMCS”), recently concluded, “[s]Jeveral courts have dealt with the issue, but there has been no definitive ruling to date. The most recent case, Nationwide Mutual Insurance Co. v. Cisneros (6th Cir., 1995) may be appealed and may give greater guidance on the jurisdiction ques- tion.”4 FMCS is right. Guidance from this Court is needed. 1. There are in excess of one thousand insurance companies in the United States which offer property insurance. More than 96% of homeowners purchase some form of property or fire insurance.° Homeowners pay nearly thirty billion dollars annually in premiums for homeowners and/or fire insurance policies. Each day thousands of underwriting decisions involving those pol- icies have to be made. Those determinations, such as 4 Convening Report for Regulatory Negotiations on Possi- ble Regulatory Negotiations for Insurance and Fair Housing Act (“the Report”), July 21, 1995, p. 5. App. 120-134. The Report was prepared by the FMCS, at HUD’s request, to evaluate the fea- sibility of utilizing negotiated rulemaking to develop a pro- posed rule applying the Fair Housing Act to property insurance. The Report concluded, after study and interview of more than twenty-five organizational representatives, that negotiated rulemaking would not be appropriate. 5 Insurance Information Institute, The Fact Book, p. 14 (1993). 6 A.M. Best’s Annual Aggregates & Averages, Property- Casualty, p. 100 (1995 ed.). what risks to insure and what rate to apply, constitute the core component of the business of insurance. See, e.g., Barnett Bank of Marion County v. Gallagher, 43 F.3d 631, 634-36 (11th Cir.), cert. granted, __ U.S. __, 132 L.Ed.2d 920 (Sept. 27, 1995) (No. 94-1837). As the uncontroverted record in this case demonstrates, application of the Fair Housing Act would significantly affect these underwrit- ing practices. Risks will then be insured that otherwise would be declined — for instance, properties that involve neutral environmental hazards (e.g., exposure to adjacent properties with a high risk of burning, lack of proximity to fire protection facilities or historical loss experience for similar properties) w’). be insured where declining the risk could have a disper%te impact upon a protected group. This increased assumption of risks by insurers will concomitantly increase the rates of all of their insureds. Better risks will then drop out of the insurance pool as they are forced to subsidize higher risk properties. The result will be increased underwriting losses and eventual insurance company insolvency.” This significant federal intrusion into the traditional state-regulated clas- sification of insurance risks cannot be justified 7 This scenario is not simply unfounded speculation. The likelihood of its occurrence was demonstrated in uncon- troverted affidavits submitted by Nationwide to the District Court from Professor Spencer Kimball, a nationally recognized authority in the field of insurance regulation, Richard Stewart, a former Superintendent of Insurance for the State of New York, Ellen Leslie, Vice President/Operations for the Ohio FAIR Plan Underwriting Association, and Robert White, Nationwide’s Vice President Personal Lines Insurance Services. JA 300-312, 340-349, 384-390 and 394-397. absent a clear Congressional intent - an intent which Mackey, in conflict with the decision below, found absent. >. As the Court of Appeals noted, since at least 1978, “HUD has interpreted the Fair Housing Act as prohibiting discriminatory practices relating to property and hazard insurance.” 52 F.3d at 1354; App. 3. Its legal authority to assert that jurisdiction remains, however, as the Director of Research, National Association of Insur- ance Commissioners, recently stated, “disputed by insurers, many insurance regulators, and many members of Congress.”® This “continuous debate”? intensified after American Family upheld the applicability of the Fair Housing Act to a claim alleging intentional discrimina- tion in the provision of property insurance. It was exacer- bated further when more and more courts applied a disparate impact approach to other Fair Housing Act provisions.'? Even the existence of insurance “redlining,” 8 Klein, Urban Homeowners Insurance Markets: Problems and Possible Solutions, Aug. 11, 1995, p. 5, 0. 2, which also noted that the National Association of Insurance Commissioners “has not yet taken a formal position on this question.” 9 Report, supra, n. 4, at p. 5. App. 127. 10 See Arthur v. City of Toledo, 782 F.2d 565, 575 (6th Cir 1986) (upholding disparate impact analysis of Fair Housing Act claims); U.S. v. City of Parma, 661 F.2d 562, 575-76 (6th Cir. 1981), cert. denied, 456 U.S. 926 (1982); Huntington Branch, NAACP v Town of Huntington, 844 F.2d 926, 934 (2d Cir.), aff'd, 485 U.S. 15 (1988); Halet v. Wend Inv. Co., 672 F.2d 1305, 1311 (9th Cir. 1982) Resident Advisory Board v. Rizzo, 564 F.2d 126, 146-48 (3d Cir 1977), cert denied, 435 U.S. 908 (1978). Fair Housing Act dispa- rate impact analysis has been applied in recent years to a \ ariety of protected groups, not just racial minorities See, €.2 A.R.F.A.PS. v. Regulations and Permits Admin., 740 F. Supp 95 (D 10 the basis for Fair Housing Act insurance discrimination complaints, is controversial. The Association of Commu- nity Organizations for Reform Now (“ACORN”) and the National Fair Housing Alliance, supported by a variety of civil rights organizations,'! contend that insurance “red- lining” practices are widespread.'? Insurance industry studies fail to support that conclusion.’ Insurance departments in Illinois, Missouri, Minnesota and other states have joined the debate with recent studies of their Puerto Rico 1990) (denial of special use permit disparately impacted “handicapped” AIDS patients); United States v. Schuyl- kill Township, 1991 U.S. Dist. LEXIS 2 (E.D. Pa. 1991) (zoning ordinance restricting “community living arrangements” had disparate impact on mentally handicapped); Potomac Group Home Corp. v. Montgomery County, 823 F. Supp. 1285 (D. Md. 1993) (zoning requirement disparately impacted group home for disabled elderly persons); United States v. Badgett, 976 F.2d | 1176 (8th Cir. 1992) (facially neutral landlord’s policy has a | disparate impact on families). | 1! According to a September 11, 1995 press release by the Alliance, p. 3, its lobbying efforts before Congress to address insurance discrimination under the Fair Housing Act were joined by the Leadership Conference on Civil Rights, the NAACP, NAACP-Legal Defense and Educational Fund, the National Puerto Rican Coalition, the National Council of La Raza, People for the American Way, Center for Community Change, the ACLU and other “supporting organizations.” App 112. ‘2 ACORN, 1993, A Policy of Discrimination?: Homeowners Insurance Redlining in 14 Cities. 3 American Insurance Association, 1993, Availability and Use of Homeowners Insurance in the Urban Core of Major American Cities. ES 11 own.'4 At least twenty-eight administrative complaints alleging insurance discrimination have been filed with HUD,'5 including complaints brought by the National Fair Housing Alliance challenging the underwriting prac- tices of three major property insurers — Allstate, State Farm and Nationwide.!* HUD recently awarded grants of over two million dollars to private groups to encourage them to initiate similar enforcement actions. !” 3. Application of the Fair Housing Act to insurance also has been the subject of controversy within the execu- tive and legislative branches. In response to an Executive Order signed on January 17, 1994, HUD last year announced its intention to issue new regulations on the subject of property insurance. See Fed. Reg., Vol. 59, No. 157, pp. 41995-41996. HUD then held a series of public meetings across the United States attended by numerous 14 See, e.g., Illinois Department of Insurance, 1994, Status of Homeowners Insurance in Illinois; Missouri Department of Insur- ance, 1993, Homeowners Insurance in Missouri; Minnesota Department of Commerce, 1994, Homeowners Insurance: An Investigation Into Possible Illegal Discrimination iS Press Release of the National Fair Housing Alliance, supra n. 11, at p. 3. App. 112. 16 E.g., Case No. 03-94-0529-8, filed May 11, 1994, at HUD’s Regional Office in Philadelphia, PA. 17 Press Release of the National Association of Independent Insurers, an organization representing approximately 570 prop- erty and casualty insurers, Sept. 11, 1995, p. 1 (App. 114), rely- ing on an April 28, 1995 letter to Hon. Rick Lazro, Chairman of the House Subcommittee on Housing and Community Oppor- tunity, from Respondent Cisneros 12 community organizations, insurance industry representa- tives, state regulators and other interested parties. More than $435,000 was spent by HUD in contract services to assist the agency in the proposed rulemaking.'* Upon the conclusion of the public meetings, however, HUD decided against additional rulemaking in this area.'9 Congress also has been unable to take action on this divisive issue. In 1994, a bill was introduced in the Senate to require property insurers to report underwriting activ- ities by zip code. S. 1917, 103rd Cong., 2nd Sess. (1994), the Anti-Redlining in Insurance Disclosure Act of 1994. The Senate held hearings in May 1994, but the bill never made it to a vote. By contrast, more recently, an appro- priations bill which passed the House contained a provi- sion withdrawing all HUD funding for the regulation of property insurance. H.R. 2099, 104th Cong., Ist Sess. (1995). That provision, however, was deleted last month from the Senate’s version of the House bill. Jd. Congress’ failure to act reflects the deep political divisions over the insurance “redlining” issue which has taken on racially charged overtones. Moseley-Braun Gets GOP to Spare Fair Housing Rule, Chicago Sun-Times, Sept. 28, 1995, at 22 (Senator Moseley-Braun, according to an aide, stated that, 18 Jd 19 Letter from HUD Acting Deputy Assistant Secretary Elizabeth K. Julian to John Lobert, Senior Vice President of the National Association of Independent Insurers, August 17, 1995 Julian concluded that HUD’s “Office of Fair Housing and Equal Opportunity intends... to await further development of the law applying the Fair Housing Act to property insurance and to use future court decisions to evaluate the need for rulemaking.” App. 117 13 if the House funding prohibition was not withdrawn, “Iwle’ll be riding on the back of the bus again.”). The disagreement over whether the Fair Housing Act regulates insurance has caused a critical dislocation in the administration of an important area of federal policy. If HUD is correct in its construction of the Act to cover insurance, its enforcement efforts should not be thwarted by threshold litigation over its jurisdiction. If HUD is incorrect, it should cease expending its limited funds in defiance of Congressional intent and leave property insurance regulation to the states “(T]he field of insur ance,” after all, “has long been recognized as a proper subject for extensive state regulation because of its critical role in the protection of local personal and property interests.” Silver v. Garcia, 760 F.2d 33, 36 (1st Cir. 1985) The ongoing partisan debate over whether dual federal- state or exclusive state regulation is appropriate needs to be terminated. It has become far too costly both emo tionally and economically for too many parties Review by this Court to resolve the conflict among the circuits ts therefore, warranted B This Court Should Resolve The Confusion In The Lower Courts Over The Proper Application Of Chevron This case also is illustrative of the confusion that exists in the lower courts as to the correct interpretatior of Chevron. The Court of Appeais majority held that Che ron deference was required even though the issu¢ addressed by HUD be regulation whether the otherw sé make unavailable or deny language of Section 3604(a) ot 14 the Fair Housing Act encompasses the discriminatory refusal “to provide . . . property or hazard insurance” (24 C.F.R. § 100.70(d)(4))?° - does not involve an agency’s application of legal standards “to a particular set of facts” but, instead, raises a “pure question of statutory con- struction” that is “well within the province of the judici- ary.” Cardoza-Fonseca, 480 U.S. at 446, 448.2) Dissenting Judge Kennedy reached an opposite conclusion. In her opinion, because the court could “ascertain Congres- sional intent through traditional tools of statutory con- struction, deference to . . . [HUD’s] interpretation is 20 Although HUD’s regulation also purports to be based upon Section 3604(b) of the Act (see the opinion below, 52 F.3d at 1356; App. 7-8), HUD and the lower courts have relied pri- marily upon Section 3604(a). The reason is evident. Section 3604(b) does not apply to the provision of property insurance. See Mackey, 724 F.2d at 424 (the provision of services under Section 3604(b) “encompasses such things as garbage collection and other services of the kind usually provided by munici- palities .. . what the [hazard insurance] industry does cannot reasonably be described as the provision of services in connec- tion with dwellings”) and Clifton Terrace Associates, Ltd. v. United Technologies Corp., 929 F.2d 714, 720 (D.C. Cir. 1991) (§ 3604(b) is “directed at those who provide housing and then discriminate in the provision of attendant services or facilities, or those who otherwise control the provision of housing services and facili- ties”). 21 See, to the same effect, NLRB v. United Food and Commer- cial Workers Union, 484 U.S. 112, 123 (1987) (“On a pure question of statutory construction, our first job is to try to determine congressional intent, using ‘traditional tools of statutory con- struction.’ ”) and International Union, U.A.W. v. Brock, 816 F.2d 761, 765 (D.C. Cir. 1987) (court refused to defer to the agency's interpretation of the term “employment” found in the Trade Act which the court characterized as a “pure question of statutory construction”). 15 unnecessary.” 52 F.3d at 1356; App. 29. There is, as this divided decision reflects, an undesirable tension between Chevron and Cardoza-Fonseca. This “Court itself has engaged in a serious debate as to whether Chevron defer- ence applies at all to a ‘pure question of statutory con- struction.’ ” Johnson City Medical Center v. U.S., 999 F.2d 973, 981 (6th Cir. 1993) (Batchelder, J., dissenting). See aiso Sunstein, Law and Administration After Chevron, 90 CoLuM. L. Rev. 2071, 2084 (1990) (“since Chevron itself, the general principle of deference has been invoked on numerous occasions and produced considerable controversy the Supreme Court has rejected a number of agency inter- pretations of law even in the aftermath of Chevron’) Resolution of the proper application of Chevron is particularly apropos where, as here, an agency seeks to expand its own jurisdiction. As this Court has observed “lajithough agency determinations within the scope of delegated authority are entitled to deference, it is funda mental ‘that an agency may not bootstrap itself into an area in which it has no jurisdiction. “ Adams Fruit Co Barrett, 494 U.S. 638, 650 (1990) citing Federal Maritime Comm'n v. Seatrain Lines, Inc., 411 U.S. 726, 745 (1973). See also Sunstein, supra, 90 Covum. L. Rev. at 2099 (“Congress would be unlikely to want agencies to have the authority to decide the extent of their own powers. To accord such powers to agencies would be to allow them to be judges of their own cause, in which they are of course suscept- ible to bias.”). The question of Chevron's application to agency jurisdictional interpretations, however, has been subject to varying approaches in the appellate courts “Some circuit court decisions have granted deference to an agency’s jurisdictional interpretation while others ne ne a 16 have stated that deference is not appropriate. Some cir- cuits have vacillated on the question while others have acknowledged the issue as unresolved by the Court and have explicitly reserved the question.” Comment, Chev- ron Deference To Agency Interpretations That Delimit The Scope of the Agency’s Jurisdiction, 61 U. Cu. L. Rev. 957, 965 (1994) (footnotes omitted). This case presents the Court with a desirable opportunity to delineate the proper interpretation of Chevron. C. The Court Of Appeals’ Refusal To Address Nationwide’s Argument That Disparate Impact Enforcement Of The Fair Housing Act Is Pre- empted By The McCarran-Ferguson Act Con- flicts With This Court’s Decision In Abbott Laboratories And Other Circuit Court Prece- dent The Court of Appeals concluded that the question of whether a “disparate impact approach to insurers” (52 F.3d at 1361; App. 21) contravenes the McCarran-Fer- guson Act was not ripe for review. That decision mis- construes Abbott Laboratories and disregards the opinion of other Circuits. In Abbott Laboratories, this Court reversed a lower court opinion that there was no jurisdiction to review a challenge to agency regulations that imposed new drug labeling requirements. That issue was fit for judicial review, the Court reasoned, because the regulations con- stituted “final agency action,” i.e., they were neither “informal [nJjor tentative,” and the regulations had “a direct effect on [the plaintiffs’] day-to-day business,” /.e., soviet. gs ltl taser % “exc he a ttl ihe las aati alanis Mei ta tas Wiinihiteiieied icin... they confronted the plaintiffs with the dilemma of incur- ring the costs of changing their current labeling practices or “follow their present course and risk prosecution ” 387 U.S. at 151-52. That decision was followed by the District of Columbia Circuit’s opinions in Chamber of Commerce ¢ Reich, 57 F.3d 1099, 1101 (D.C. Cir. 1995) (“[TJhe [Execu- tive] Order confronts employers with the difficult choice between surrendering their right to hire permanent replacements and risking the loss of current and future government contracts.” ) and Ciba-Geigy Corp. v. U.S. EPA 801 F.2d 430, 438-39 (D.C. Cir. 1986) (“The Company's only alternative to costly compliance with [the agency’ s| regulatory directive would be to run the risk of serious civil and criminal penalties [for its violation].”). See also Franklin Federal Savings Bank v. Director, Office of Thrift Supervision, 927 F.2d 1332, 1336 (6th Cir.), cert. denied, 502 U.S. 937 (1991). Here, as the Magistrate Judge recognized (App 37-41), the situation is no different. Nationwide is sim- ilarly challenging agency action that is neither “informal” nor “tentative.” HUD has stated definitively its intent to enforce the Fair Housing Act under a disparate impact approach and to apply that approach to complaints against property insurers.22 These pronouncements have 22 HUD’s Assistant Secretary, in a December 17, 1993 mem- orandum to all HUD Regional Directors which is still in effect, advised that Fair Housing Act cases should be analyzed “using a disparate impact analysis.” App. 135. HUD has subsequently repeated that unequivocal view. At Congressional hearings on the subject of insurance discrimination, HUD’s Assistant Secre- tary testified that “(t]he standards to determine discrimination in [insurance] — as in all other covered areas — will be based on 18 been reiterated by HUD in other cases and, when it did not seek review of the Magistrate Judge’s denial of its motion to dismiss, even implicitly in this case. The HUD regulation at issue is not limited, nor has it ever been interpreted as being limited, to only disparate treatment cases. As in Abbott Laboratories and the other decisions cited above, there has been final agency action. And, no less than in Abbott Laboratories and the other cases cited above, Nationwide cannot, as the Court of Appeals sug- gested (52 F.3d at 1363; App. 26), simply wait until the administrative process eventually concludes. Nationwide faces the “very real” dilemma (Abbott Laboratories, 387 U.S. at 153) of either complying with HU)D’s regulation at the principles of overt discrimination, disparate treatment, and disparate impact.” Statement Before the Senate Banking Commit- tee, Hearing on Insurance Discrimination, May 11, 1994; App. 139 (emphasis added). HUD reiterated that position in a notice of proposed rulemaking for property insurance discrimination. Fed. Reg., Vol. 59, No. 157, 41996 (“The standards for determin- ing discrimination in this area are those utilized in all other areas covered by the Act.”) And, at a public meeting on discrim- ination in property insurance, HUD’s Assistant Secretary stated that it was not debatable whether “disparate impact .. . [is] cognizable under the federal Fair Housing Act... [I]t is not a question. That question has been answered definitively by vir- tually every court of competent jurisdiction that has entertained the question.” App. 141. 23 See, e.g., HUD’s brief to the Tenth Circuit in Mountain Side Mobile Estates v. Secretary, HUD, 56 F.3d 1243 (10th Cir. 1995), pp. 16-25 (contending that a disparate impact analysis applies gen- erally to complaints under the Act and “is a reasonable con- struction of the Act that is supported by the statutory language, the overwhelming weight of the caselaw, the legislative history and the public policy interests underlying the Act”). App. 144. 19 substantial cost (and at the risk of violating state insur- ance laws requiring “fair discrimination”) or running the risk of future prosecution by HUD and the imposition of substantial penalties. See Chamber of Commerce, 57 F.3d at 1101 (the “choice between taking immediate action to [plaintiff's] detriment and risking substantial penalties for non-compliance presents a paradigm case of ‘hard- ship’ ”) and Ciba-Geigy, 801 F.2d at 439 n. 11 (plaintiff need not await a specific enforcement proceeding where the agency has put plaintiff to the “ ‘hard choice between compliance certain to be disadvantageous and a high probability of strong sanctions’ ”) (citation omitted) The refusal to review Nationwide’s disparate impact challenge has pernicious, far-reaching consequences Judicial review, providing an “authoritative interpreta- tion of statutory language,” would “enhance rather than undermine the statutory scheme.” Franklin Federal, 927 F.2d at 1338. Additionally, as the Magistrate Judge below observed, “[{i]f HUD is correct, not only Nationwide, but all insurers who provide homeowner's coverage must alter any standards inconsistent with HUD’s policies.” App. 41. A decision by this Court is necessary to clarify the application of ripeness jurisprudence and obviate the enormous expense that insurers will otherwise face in altering their underwriting standards to address the liti- gation concerns created by the specter of disparate impact suits. 20 D. The Court Of Appeals’ Rejection Of McCarran- Ferguson Act Preemption Is Contrary To The Plain Language Of The Statute And Prior Pre- cedent Of This Court The Court of Appeals held that, while Nationwide’s challenge to HUD’s regulation under a disparate treat- ment approach was ripe for review, “the McCarran-Fer- guson Act does not preclude HUD’s interpretation of the Fair Housing Act.” 52 F.3d at 1363; App. 27. The court rejected Nationwide’s arguments that ” ‘the availability of private civil actions under the Fair Housing Act, with access to jury trials and unlimited punitive damages, will impair or supersede Ohio insurance law which does not afford such remedies’ ” and that “the availability of pri- vate civil remedies under the Fair Housing Act would allow a claimant to bypass the administrative procedures outlined in the Ohio Insurance Code.” Id. The Court of Appeals’ opinion is at odds with the language of Section 2(b) of the McCarran-Ferguson Act as well as the under- lying Congressional “desire to reserve to the States the regulation of the ‘business of insurance.’ ” FMC Corp. v. Holliday, 498 U.S. 52, 63 (1990). The crux of the lower court’s reasoning, following American Family, is that the existence of additional tederal remedies does not “invali- date, impair or supersede” state law where there is no direct conflict between the substantive provisions of the state and federal law. 52 F.3d at 1363; App. 27. The “inverse preemption” (American Family, 978 F.2d at 293) required by the McCarran-Ferguson Act, however, occurs even if the federal statute “duplicates” the state proscrip- tions where that “duplication” causes the state regulation of insurance to be “impaired” or “superseded.” It was for 21 this reason that the court in Ambrose v. Blue Cross & Blue Shield of Virginia, 891 F. Supp. 1153, 1164-68 (E.D. Va 1995), recently declined to follow Nationwide and Ameri can Family when it concluded that the additional federal remedies permitted under RICO results in the impair- ment of state insurance law under the McCarran-Fer- guson Act. See also, Wexco, Inc. v. IMC, Inc., 820 F. Supp 194, 204 (M.D. Pa. 1993) (availability of federal RICO remedies “cannot help but upset the balance of relation- ships between insurance entities and insureds which are established and regulated by [state law]”) The question of whether additional duplicative fed- eral remedies contravene the McCarran Act, and its corol- lary inquiry into the appropriate role of federal and state authority in regulating insurance, presents a recurrent matter of substantial importance. For over 50 years, since the enactment of the McCarran Act, insurers have assumed that Congress intended the states to play the primary role in the regulation of insurance. State insur- ance departments are typically staffed by professionals who are experts in the insurance field and knowledgeable about the workings of the insurance market. JA 387. The federal remedies permitted by the court below, including jury trials, punitive damages and disparate impact suits, will inevitably displace those state regulators — regulators who are closer to the issues in their respective states and in the best position to reconcile competing state interests in both insurer solvency and fair access to insurance products. JA 388-389. The McCarran Act preemption issue, accordingly, also compels review by this Court. The Court, it should be noted, has recently granted review In on 22 another McCarran Act case. Barnett Bank of Marion County v. Gallagher, supra. CONCLUSION For the foregoing reasons, this petition for writ of certiorari should be granted. Dated: November 1, 1995 Respectfully submitted, JEFFREY S. GOLDMAN LAWRENCE M. COHEN Counsel of Record Joe. W. Rice Fox AND GROvE, CHARTERED 311 South Wacker Drive Suite 6200 ) Chicago, Illinois 60606 | (312) 876-0500 Counsel for Petitioners APPENDIX App APPENDIX Table of Contents Opinion of the | nited States Court of Appeals for the Sixth Circuit App Judgment Entry of the United States Court of Appeals for the Sixth Circuit App Magistrate Judge Michael Merz’s Report and Rec- ommendations Concerning Motions to Dismiss and for Summary Judgment and Decision and Order as to Remaining Pending Motions App Errata to Report and Recommendations App Corrections to Report and Recommendations ...App Memorandum and Order of the United States Dis- trict Court for the Southern District of Ohio App Judgment in a Civil Case entered by the United States District Court for the Southern District of Ohio... App Order denying Petition for Rehearing App Statutory and Regulatory Provisions Involved 12 U.S.C. §1749bbb-3 App 15 U.S.C. §1012 App 42 U.S.C. §3604(a) and (b) App. 42 U.S.C. §3605(a) and (b) App. 42 U.S.C. §36148....... , errr, 28 U.S.C. §§2201-2202...... Perr eT App. . Ya ~ App. i Table of Contents -— Continued Ohio Rev. Code, §3901.21(M). ... App. 103 Ohio Rev. Code, §3929.43 (A)-(E). rrccce ep. 1G 24 C.F.R. §100.70(d)(4) .. 00.0.0. 00cc0000....-App. 107 Other Miscellaneous Material: Press Release, National Fair Housing Alliance, September 11, 1996... cccvcccesesvesscnetns App. 108 Press Release, National Association of Indepen- dent Insurers, September 11, 1995........... App. 114 Letter, HUD Acting Assistant Secretary Eliz- abeth Julian, August 17, 1995............... App. 116 Letter to HUD from Federal Mediation and Conciliation Service, August 3, 1995........ App. 118 Convening Report for Regulatory Negotiations on Possible Regulatory Negotiations for Insur- ance and Fair Housing Act, June 21, 1995...App. 120 Memorandum, United States Department of Housing and Urban Development, December EF, BOOP en tenceccveveunssueeeeee Tae ene App. 135 Excerpts from Statement of Assistant Secretary Roberta Achtenberg before the Senate Banking Cognition, Bimy Th, BOG. cccccccceessecara App. 138 Excerpted Statements from HUD Public Meet- ing, San Francisco, California, September 22, BOOS vc ccc ccevecercsesevcetadpasdediaeanan App. 140 Excerpts from HUD Brief before United States Court of Appeals for the Tenth Circuit...... App. 143 ee et, STE. Siw he 688 CAA RE AEDES ae PM BD PR re alow - ee App. | Nig 94 3296 UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT NATIONWIDE Mutua. INSURANCI COMPANY and NatTrionwipe M Fire INSURANCE COMPANY Plaintiffs-Appellants Henry Cisneros, Secretary of the United States Department of Housing & Urban Development; JeraALD L. Streep, Executive Director,’ Dayton Human Relations Council; ’ CrHarites W. Brown, Chairperson, Dayton Human Relations Council and Criry or Dayton, Defendants-Appellees } Decided and Filed May On Appeat from the United States District Court for the Southern District of Ohio 1995 Before: KENNEDY and MILBURN, Circuit Judge WISEMAN,” District Judge * The Honorable Thomas A. Wiseman, |r, United State District Judge for the Middle District of Tennessee, sitting by designation App. 2 MILBURN, J., delivered the opinion of the court, in which WISEMAN, D.J., joined. KENNEDY, J. (p. 25), delivered a separate dissenting opinion. MILBURN, Circuit Judge. Plaintiffs Nationwide Mutual Insurance Company and Nationwide Mutual Fire Insurance Company appeal the district court’s grant of summary judgment to defendants Henry Cisneros, Secre- tary of the United States Department of Housing and Urban Development; Jerald L. Steed and Charles W. Brown, Executive Director and Chairperson, respectively, of the Dayton, Ohio Human Relations Council; and the City of Dayton, Ohio, in this action for declaratory judg- ment and injunctive relief in which plaintiffs challenged defendants’ authority to regulate the issuance and can- cellation of homeowner’s insurance policies under the Fair Housing Act. On appeal, the issues are (1) whether the district court erred in finding that the Fair Housing Act governs the business of property insurance, (2) whether the district court erred in finding that the McCarran-Ferguson Act does not preempt the regulation of the business of insurance under the Fair Housing Act, and (3) whether the district court erred in dismissing plaintiffs’ state law claims. For the reasons that follow, we affirm. I. A. Plaintiffs Nationwide Mutual Insurance Company and Nationwide Mutual Fire Insurance Company (collec- tively “Nationwide”), Ohio corporations, seek declara- tory and injunctive relief from attempts by the App. 3 Department of Housing and Urban Development (“HUD”) to regulate plaintiffs’ property insurance under- writing practices under the Fair Housing Act (“the Act”), 42 U.S.C. § 3601, et seq. The insurance underwriting prac- tices in question involve “redlining,” in which the insurer charges higher rates or declines to write insurance for people who live in particular areas Defendant HUD is responsible for the administration of the Fair Housing Act. Plaintiffs also seek declaratory and injunctive relief from attempts by defendants Jerald L. Steed, Charles Brown, and the City of Dayton (“the Dayton defendants”) to regulate plaintiffs’ property insurance underwriting practices under Ohio state law and Dayton municipal law. As earlier stated, Jerald L. Steed and Charles Brown are the Executive Director and the Chairperson, respec- tively, of the Dayton Human Relations Council (“DHRC”). In addition to enforcing fair housing provi- sions of Dayton ordinances, DHRC also assists HUD in the local administration of housing discrimination com- plaints under the Fair Housing Act. Under the Fair Housing Act, HUD is responsible for receiving and investigating charges of discrimination in housing. Because mortgage lenders require borrowers to obtain and maintain property and hazard insurance on mortgaged property as a condition of obtaining a loan, HUD has interpreted the Fair Housing Act as prohibiting discriminatory practices relating to property and hazard insurance. HUD has adhered to this interpretation of the Act since at least 1978, when HUD’s General Counsel App. 4 wrote in a memorandum to the Assistant Secretary for Equal Opportunity: Adequate insurance coverage is often a prereq- uisite to obtaining financing. Insurance redlin- ing, by denying or impeding coverage makes mortgage money unavailable, rendering dwell- ings “unavailable” as effectively as the denial of financial assistance on other grounds{.] Memorandum to the Assistant Secretary for Equal Oppor- tunity, dated August 25, 1978 (quoted in defendant HUD’s brief at 10). Furthermore, in 1988, the Fair Hous- ing Act was amended to authorize HUD to issue rules to implement the Act. 42 U.S.C. § 3614a. At that time, HUD issued a regulation reflecting its interpretation of the Act and its application to insurance companies. This regula- tion defined “other prohibited sale and rental conduct” to include: Refusing to provide municipal services or 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. 24 C.F.R. § 100.70(d)(4). In May 1990, HUD received a complaint from Steven and Jennifer Beavers alleging that Nationwide had can- celled their homeowner’s insurance because of their race and/or place of residence. HUD referred this complaint to the DHRC, which determined that it was “probable” that Nationwide had violated the City of Dayton’s fair housing ordinances. In addition, on September 28, 1990, Sarah Wilson filed a housing discrimination complaint with HUD, alleging that Nationwide had refused, App. 5 because of her sex, race, and the racial make-up of the area, to reinstate her insurance policy on a residential building that was located in a predominantly black area of Toledo, Ohio. HUD and the DHRC were in the process of investigating these complaints when Nationwide filed this action. Both investigations have been held in abey- ance pending the conclusion of this case. B. Plaintiffs commenced this action for declaratory and injunctive relief on May 6, 1991, in the United States District Court for the District of Columbia. Plaintiffs named as defendants Jack Kemp, then Secretary of HUD; Jerald L. Steed and the Reverend Charles Brown, the Executive Director and Chairperson, respectively, of the Dayton Human Relations Committee; and the City of Dayton, Ohio. The Dayton defendants moved for a change of venue, and on December 13, 1991, pursuant to 28 U.S.C. 1404(a), the action was transferred to the United States District Court for the Southern District of Ohio. In May 1992, defendants moved to dismiss plaintiffs’ complaint on jurisdictional grounds. Thereafter, on December 1, 1992, plaintiffs moved for summary judg- ment. The Dayton defendants and HUD filed cross- motions for summary judgment on January 14 and 15, 1993, respectively. On September 27, 1993, the magistrate judge issued his Report and Recommendation in which he concluded that the issues presented in the case were ripe for review and thus recommended that the district court deny HUD’s motion to dismiss. In addition, the magistrate judge recommended that the district court App. 6 grant defendants’ cross-motions for summary judgment and deny plaintiffs’ motion for summary judgment upon concluding (1) that HUD’s interpretation of the Fair Housing Act was entitled to judicial deference; (2) that, in any event, it was a correct interpretation of the Fair Housing Act; and (3) that the regulation was not barred by the McCarran-Ferguson Act. Finally, the magistrate judge granted HUD’s motion for a protective order bar- ring certain discovery and recommended that the district court decline to exercise jurisdiction over plaintiffs’ state law claims. Plaintiffs filed timely objections to the magistrate judge’s report and recommendation. On February 24, 1994, the district court adopted the magistrate judge’s report and recommendation and dismissed this action. This timely appeal followed. II. A. Plaintiffs argue that the district court erred in grant- ing defendants’ cross-motions for summary judgment and denying their motion for summary judgment.’ We review a district court’s grant of a motion for summary judgment de novo. Michigan Protection & Advocacy Serv., 1 Plaintiffs also argue in a footnote in their brief that the magistrate judge abused his discretion in granting HUD’s motion for a protective order. However, plaintiffs failed to object to this ruling before the district court and thus have not preserved this issue for appeal. United States v. Walters, 638 F.2d 947, 949-50 (6th Cir. 1981). App. 7 Inc. v. Babin, 18 F.3d 337, 341 (6th Cir. 1994). “This court will affirm the district court’s order only if we determine that the pleadings, affidavits, and other submissions show ‘that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.’ ” Babin, 18 F.3d at 341 (quoting Fed- eral Rule of Civil Procedure (“Fed. R. Civ. P.”) 56(c)). All evidence must be viewed in the light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). However, “(t]he moving party need not support its motion with evidence disproving the non-moving party’s claim, but need only show that ‘there is an absence of evidence to support the non-moving party’s case.’ ” Babin, 18 F.3d at 341 (quoting Celotex Corp v. Catrett, 477 U.S. 317, 325 (1986)). Plaintiffs argue that the district court erred in finding that defendants have delegated authority, under the Fair Housing Act, or under “substantially equivalent” local ordinances, to regulate plaintiffs’ property insurance underwriting practices. Specifically, plaintiffs assert that the plain language, structure, and legislative history of § 3604(a) and (b) of the Fair Housing Act preclude this finding. Section 3604(a) and (b) of the Fair Housing Act state that it shall be unlawful: (a) To refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin. (b) To discriminate against any person in the terms, conditions, or privileges of sale or rental App. 8 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. 42 U.S.C. § 3604(a) and (b) (emphasis added). HUD has interpreted these provisions of the Fair Housing Act to prohibit “[rjefusing to provide . . . property or hazard insurance for dwellings or providing such . . . insurance differently because of race...” 24 C.FR. § 100.70(d)(4). Plaintiffs argue that HUD, in promulgating this regula- tion, has exceeded the authority delegated to it by Con- gress under the Fair Housing Act, and therefore the Dayton defendants lack the authority to investigate claims of discriminatory insurance underwriting prac- tices. The district court rejected plaintiffs’ argument and adopted the reasoning of the magistrate judge in his report and recommendation, which concluded that HUD had “not exceeded its statutory authority in enacting its regulations because the interpretation of the Fair Housing Act embodied in that regulation is one to which judicial deference is to be accorded under [Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984)]. Furthermore, even in the absence of Chevron def- erence, HUD’s interpretation of the Fair Housing Act is correct.” J.A. 178. We are confronted with two questions when we review an agency’s construction of a statute. In Lansing Dairy, Inc. v. Espy, 39 F.3d 1339 (6th Cir. 1994), we stated: First and foremost is the question whether Con- gress has directly spoken to the matter at hand. Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842 (1984). “If the App. 9 intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.” Id. at 842-43. If, however, the court decides that Congress has not directly addressed the precise question at issue, the court may not simply impose its own construc- tion of the statute. Id. at 843. “Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a per- missible construction of the statute.” Id. Lansing Dairy, 39 F.3d at 1349-50 (parallei citations omit- ted). In Chevron, the Court also stated that in determining whether an agency’s answer is based on a permissible construction of a statute, a reviewing “court need not conclude that the agency construction was the only one it permissibly could have adopted to uphold the construc- tion, or even the reading the court would have reached if the question initially had arisen in a judicial proceeding.” Chevron, 467 U.S. at 843 n. 11. However, the Court also noted that “[t]he judiciary is the final authority on issues of statutory construction and must reject administrative constructions which are contrary to clear congressional intent.” Chevron, 467 U.S. at 843 n. 9. Thus, we must first determine whether the text of the Fair Housing Act addresses the precise issue in this case, i.e., whether § 3604(a) and/or (b) govern the issuance and cancellation of property insurance policies. In N.A.A.C.P. v. American Family Mut. Ins. Co., 978 F.2d 287 (7th Cir. 1992), cert. denied, 113 S.Ct. 2335 (1993), App. 10 the Seventh Circuit held that Congressional intent regard- ing the application of § 3604 of the Fair Housing Act to insurance practices is unclear: The Fair Housing Act does not define key terms such as “service” and “make unavailable”. [sic] By writing its statute in the passive voice - banning an outcome while not saying who the actor is, or how such actors bring about the forbidden consequence —- Congress created ambiguity. American Family, 978 F.2d at 298 (emphasis in original). On the other hand, plaintiffs argue that the plain language and structure of § 3604(a) preclude its applica- tion to insurance providers. Specifically, plaintiffs rely on the canons of statutory interpretation of “ejusdem gen- eris” and “expressio unius est exclusio alterius” in sup- port of their contention that insurance underwriting practices are not governed by the Fair Housing Act. First, plaintiffs argue that HUD’s interpretation of § 3604 con- flicts with the principle of “ejusdem generis,” which states that where general words follow specific words in a statutory enumeration, the general words are construed to embrace only objects similar in nature to those objects enumerated by the preceding specific words. See Otis Elevator Co. v. Secretary of Labor, 921 F.2d 1285, 1289 (D.C. Cir. 1990). Thus, plaintiffs argue that in § 3604(a), because the general phrase “otherwise make unavailable or deny” follows the specific examples of failure “to sell or rent” or refusal “to negotiate for the sale or rental” of a dwelling, the phrase “otherwise make unavailable or deny” does not include any activities that do not directly affect the App. 11 availability of a dwelling. We disagree. Plaintiffs’ argu- ment that the phrase “otherwise make unavailable or deny” must only include activities that directly affect the availability of a dwelling does not clarify Congressional intent as to whether the availability of property insurance falls within this category. Therefore, we conclude that the canon of “ejusdem generis” does not preclude HUD’s interpretation of § 3604(a). Second, plaintiffs argue that the maxim “expressio unius est exclusio alterius,” which states that the mention of one thing implies exclusion of another, also precludes HUD’s interpretation of § 3604. Specifically, plaintiffs note that § 3604(b) proscribes discrimination in the “terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection therewith,” and that § 3605 bars discrimina- tion in mortgage financing. Therefore, plaintiffs assert that the fact that the statute proscribes some conduct that indirectly affects housing, i.e., services and mortgage financing, suggests that property insurance is not covered by the Act. Relying on the Fourth Circuit’s decision in Mackey v. Nationwide Ins. Cos., 724 F.2d 419 (4th Cir. 1984), plaintiffs argue that this result is necessary to avoid ren- dering §§ 3604(b) and 3605 of the Act superfluous. In Mackey, the Fourth Circuit concluded § 3605 shows that § 3604 must be read narrowly. “If § 804 [§ 3604] was designed to reach every discriminatory act that might conceivably affect the availability of housing, § 805’s [§ 3605] specific prohibition of discrimination in the pro- vision of financing would have been superfluous.” Mackey, 724 F.2d at 423. The Seventh Circuit rejected this App. 12 argument in American Family, holding that §§ 3604 and 3605 overlap and that [clonveying meaning to diverse interpreters for an uncertain future is a difficult business. A wise drafter may state a principle in one section and list some applications of that principle in another, to make pellucid what ought to be apparent but which some judges (and many lay persons) will miss unless spelled out. Using the instance to restrict the principle would gum up the process of communication, inverting every effort to clarify. American Family, 978 F.2d at 298. We agree with the conclusion in American Family that §§ 3604 and 3605 overlap and are not mutually exclusive. We note that many courts have applied § 3604 to a number of parties and practices not mentioned in §§ 3604(b) and 3605. See United States v. City of Parma, 661 F.2d 562 (6th Cir. 1981) (imposition of building height limitations), cert. denied, 456 U.S. 926 (1982); Metropolitan Hous. Dev. Corp. v. Village of Arlington Heights, 558 F.2d 1283 (7th Cir. 1977) (issuance of zoning permits), cert. denied, 434 U.S. 1025 (1978); Kennedy Park Homes Ass‘n, Inc. v. City of Lackawanna, 436 F.2d 108 (2d Cir. 1970) (rezoning property plaintiff picked for low-income hous- ing project and denying sewer hook-ups), cert. denied, 401 U.S. 1010 (1971). Furthermore, plaintiffs’ argument seems confused. Plaintiffs assert that the phrase “otherwise makes unavailable or denies” is “a catch-all for other activities which, like selling or renting, directly affect the availability of a dwelling. The fact that Congress did not expressly identify each of those other activities does not App. 13 render § 3604(a) ‘vague.’” Plaintiffs’ Brief at 15. This argument seems to contradict plaintiffs’ argument that by listing proscribed behavior in § 3604(b) and 3605, Con- gress intended for all other activity affecting the avail- ability of housing to be outside the gambit of the Fair Housing Act. Therefore, we conclude that the principle of “expressio unius est exclusio alterius” does not preclude HUD’s interpretation of the Act. Plaintiffs further argue that the legislative history of the Fair Housing Act reflects the Congressional intent that the Fair Housing Act not govern insurance under- writing practices. Relying on Mackey, plaintiffs argue that although Congress did not directly address the Act's application to insurance practic€s, it is implausible that Congress intended the Fair Housing Act to reach insur- ance practices in light of the fact that (1) Congress enacted the Urban Property Protection and Reinsurance Act of 1968 (“UPPRA”), see 12 U.S.C. § 1749bbb, et seq., in the same year it enacted the Fair Housing Act, and (2) subsequent attempts to amend the Fair Housing Act to expressly prohibit discrimination in insurance have failed. Plaintiffs assert that “[t]he fact that hazard insurance was not mentioned in the [Fair Housing Act] or its legis- lative history strongly indicates that [Congress did not intend to proscribe discrimination in hazard insurance].” Mackey, 724 F.2d at 423. Plaintiffs note that Congress enacted UPPRA in 1968, the same year the Fair Housing Act was enacted, to handle the problem of the unavailability of hazard insurance in some urban areas. However, in Dunn v. Midwestern Indem. Mid-American Fire & Casualty Co., 472 F. Supp. 1106, 1111 (S.D.Ohio 1979), App. 14 the court found that the purposes of the Fair Housing Act and UPPRA were different. The court noted that UPPRA “was enacted to protect private insurance companies from the risk of catastrophic losses which resulted from riots or civil disorders[,]” but did not “expressly address the issue of discriminatory insurance redlining based on race.” Dunn, 472 F. Supp. at 1111. We agree that the purposes of the two acts are different and that the enact- ment of UPPRA does not shed light on Congress’ intent regarding the application of the Fair Housing Act to insurance undetwriting practices. In American Family, the Seventh Circuit noted: Silence in the legislative history could imply that Members of Congress did not anticipate that the law would apply to insurers. Silence equally could imply that the debate was about the principle of nondiscrimination, leaving details to the future. The backwards phraseol- ogy of § 3604 suggests the latter possibility. American Family, 978 F.2d at 299. Therefore, we conclude that the legislative history of the Fair Housing Act does not preclude HUD’s interpretation of the Act. Next, plaintiffs argue that the failure of subsequent attempts by Congress to amend the Fair Housing Act to expressly prohibit discrimination in insurance supports their contention that Congress did not intend for the Act to govern insurance underwriting practices. Plaintiffs stress that attempts to amend the Act failed after the Fourth Circuit’s decision in Mackey, which squarely rejected the proposition that §§ 3604(a) or (b) implicitly encompassed the regulation of insurance. However, in American Family, the Seventh Circuit held that Mackey’s App. 15 conclusion that unsuccessful attempts to amend the Fair Housing Act to explicitly address discriminatory insur- ance practices reflected Congress’ disapproval of this reading was unwarranted. American Family, 978 F.2d at 299. The Seventh Circuit explained: Proposed legislation can fail for many reasons. Some Members of Congress may oppose the proposal on the merits; others may think it unnecessary and therefore not worth the politi- cal capital needed to write the “clarification” into the statute over opposition; still others may be indifferent, or seek to use the bill as a vehicle for some unrelated change. Congress may run out of time, as a noncontroversial bill sits in a queue while a contentious proposal is debated. No surprise, therefore, that the Supreme Court repeatedly reminds us that unsuccessful pro- posals to amend a law, in the years following its passage, carry no significance. Id. See also McDiarmid v. Economy Fire & Casualty Co., 604 F. Supp. 105, 107-08 (S.D.Ohio 1984); Pension Benefit Guar. Corp. v. LTV Corp., 496 U.S. 633, 650 (1990). Thus, we conclude that subsequent failed attempts to amend the Fair Housing Act are not helpful in determin- ing the intent of the Congress that enacted the Act. Fur- thermore, Congress gave HUD the authority to promulgate regulations knowing that HUD had consis- tently interpreted the Act as governing insurance under- writing practices. American Family, 978 F.2d at 300. Therefore, we conclude that plaintiffs have failed to show any evidence of Congressional intent to preclude the application of the Fair Housing Act to insurance under- writing practices. App. 16 We next turn to the second question under a Chevron analysis - whether the agency’s interpretation of the Fair Housing Act is reasonable.? Under Chevron, “if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute.” Chevron, 467 U.S. at 843. “However, this deference does have its limits. Courts may invalidate agency adjudica- tion or rulemaking which is ‘inconsistent with the statu- tory mandate or that frustrate[s] the policy that Congress sought to implement.’ ” Lansing Dairy, 39 F.3d at 1350 (quoting Federal Election Comm‘n v. Democratic Senatorial Campaign Comm., 454 U.S. 27, 32 (1981)). “Similarly, where the court determines that, given the intention of Congress to achieve some goal, ‘ “there are compelling reasons that [the agency interpretation] is wrong,” ’ “the court may invalidate the agency’s action.” Id. (quoting 2 Plaintiffs argue that Chevron is irrelevant to a dispute involving a pure question of statutory construction. Plaintiffs rely on INS v. Cardoza-Fonseca, 480 U.S. 421 (1987) and NLRB v. United Food and Commercial Workers Union, Local 23, 484 U.S. 112 (1987). However, plaintiffs’ reliance on these cases is misplaced. These cases explain that “on a pure question of statutory construction” a court should not defer to an agency’s interpretation of a statute if “ ‘using traditional tools of statutory construction’ ” a court can determine congressional intent. NLRB, 484 U.S. at 123 (quoting Cardoza-Fonseca, 480 U.S. at 446-48). However, if the statute is ambiguous, then “ ‘the question for the court is whether the agency’s answer is based on a permissible construction of the statute.’” NLRB, 484 U.S. at 123 (quoting Chevron, 467 U.S. at 843). Therefore, because we conclude that the Fair Housing Act is ambiguous regarding its application to insurance underwriting practices, we only determine whether HUD’s interpretation of the Act is permissible. App. 17 Boettger v. Bowen, 923 F.2d 1183, 1186 (6th Cir. 1991) (quoting Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 381 (1969)). In American Family, the court found that “Section 3604 is sufficiently pliable that its text can bear the Secre- tary’s construction [interpreting § 3604 as prohibiting insurance redlining].” American Family, 978 F.2d at 300. We agree. The purpose of the Fair Housing Act as a whole is “to eliminate the discriminatory business prac- tices which might prevent a person economically able to do so from purchasing a house regardless of his race.” Dunn, 472 F. Supp. at 1109. Moreover, “[t]he language of the Act is broad and inclusive.” Trafficante v. Metropolitan Life Ins. Co., 409 U.S. 205, 209 (1972); See Babin, 18 F.3d at 344 (“Congress intended § 3604 to reach a broad range of activities that have the effect of denying housing oppor- tunities to a member of a protected class.”). Thus, we conclude that HUD’s interpretation of the Fair Housing Act is reasonable in light of the direct connection of availability of property insurance and ability to purchase a house. See Dunn, 472 F. Supp. at 1109; American Family, 978 F.2d at 298, 300-01. Plaintiffs argue, however, that the “[dJenial of prop- erty insurance, even if discriminatory, is simply not akin to denying or making unavailable a dwelling.” Plaintiffs’ Brief at 13. Therefore, plaintiffs argue that the provision of insurance is too attenuated to the availability of hous- ing for insurance providers to be governed by the Fair Housing Act. Plaintiffs rely on Babin, in which we addressed the question of the extent to which “the phrase ‘otherwise make unavailable’ reaches out to make unlaw- ful actions that are removed from the central event of App. 18 purchasing or leasing a dwelling but nonetheless have some effect on a person’s ability to acquire housing” in interpreting a similar provision of the Fair Housing Act that prohibits discrimination on the basis of a person's handicap. Babin, 18 F.3d at 344. In Babin, the plaintiffs alleged that neighbors who bought a house to prevent its use as a group home for mentally handicapped adults violated the Fair Housing Act by making housing “unavailable” to a protected class of people. In holding that the Fair Housing Act could not be read so broadly so as to encompass “normal economic competition,” we refused to interpret the Act to prohibit “any action that results in the unavailability of housing for protected classes.” Babin, 18 F.3d at 344-45. However, in Babin, we also acknowledged that the phrase “otherwise make unavailable” might extend to “other actors who, though not owners or agents, are in a position directly to deny a member of a protected group housing rights.” Id. at 344. Babin is distinguishable from the present case. Unlike Babin, the availability of property insurance has a direct and immediate affect on a person’s ability to obtain hous- ing. See American Family, 978 F.2d at 298, 300-01; Dunn, 472 F. Supp. at 1109. Accordingly, we conclude that HUD’s interpretation of the Fair Housing Act is consis- tent with goals of the Fair Housing Act and a reasonable interpretation of the statute. Plaintiffs argue that the district court erred in apply- ing Chevron to this case. Specifically, plaintiffs assert that Chevron is limited to agency regulations that address technical determinations requiring agency expertise. In support of this contention, plaintiffs rely on Bowen v. American Hospital Ass'n, 476 U.S. 610 (1986). However, the App. 19 regulation at issue in Bowen was promulgated under the authority of a general delegation of power to any agency head, “regardless of his agency’s mission or expertise” to issue regulations to implement the Rehabilitation Act. Bowen, 476 U.S. at 642. Under these circumstances, the Court found that there was “not the same basis for defer- ence predicated on expertise as we found [in Chev- ron]...” Id. at 642 n. 30. In this case, however, we are faced with the reasonableness of HUD’s interpretation of the Fair Housing Act, which it administers. We agree with the district court’s holding that Chevron provides no indi- cation that its holding is to be limited to its facts. See Chevron, 467 U.S. at 865-66 (holding that it is “entirely appropriate” for an agency to “resolv[e] the competing interests which Congress itself either inadvertently did not resolve or intentionally left to be resolved by the agency charged with the administration of the statute in light of everyday realities”). Thus, we conclude that Chev- ron analysis was appropriate in this case and that the district court did not err in finding that insurance under- writing practices are governed by the Fair Housing Act. B. Plaintiffs argue that district court erred in finding that the McCarran-Ferguson Act does not preempt the regulation of insurance underwriting practices under the Fair Housing Act. The McCarran-Ferguson Act, 15 U.S.C. § 1012(b), provides in relevant part: No Act of Congress shall be construed to invali- date, impair, or supersede any law enacted by App. 20 any State for the purpose of regulating the busi- ness of insurance . . . unless such Act speci- fically relates to the business of insurancef[.] The primary purpose of the McCarran-Ferguson Act was to ensure to the states the continued ability to regulate and to tax the business of insurance. McDiarmid, 604 F. Supp. at 108. In American Family, the Seventh Circuit explained that “[t]he McCarran-Ferguson Act establishes a form of inverse preemption, letting state law prevail over general federal rules — those that do not ‘specifically relate[ ] to the business of insurance.” American Family, 978 F.2d at 295. Thus, because the Fair Housing Act does not mention insurance, it is covered by the McCarran- Ferguson Act and cannot be construed in such a way as to invalidate, impair, or supersede any state law enacted to regulate the business of insurance. Plaintiffs argue that HUD’s interpretation of the Fair Housing Act conflicts with Ohio insurance law. Speci- fically, plaintiffs assert that Ohio law prohibits insurers from “[mJaking or permitting any unfair discrimination between individuals of the same class” involving “essen- tially the same hazard in the amount of premium, policy fees, or rates charged.” Ohio Rev.Code, § 3901.21(M). Thus, plaintiffs argue that “insurers may not charge dif- ferent rates for risks of the same hazard or charge the same rate for risks of different hazards.” Plaintiffs’ Brief at 30. Plaintiffs assert that “the threat of disparate impact suits under the Act, which require no proof of discriminatory intent, [together with the availability of federal jury trials] impairs neutral risk discernment in violation of the ‘fair discrimination’ principle.” Plaintiffs’ Brief at 31 (emphasis in original). App. 21 Plaintiffs also argue that HUD’s interpretation of the Fair Housing Act impairs the Ohio FAIR Plan, which was enacted, pursuant to UPPRA, to make property insurance available to individuals unable to obtain insurance in the private market because of the location of their property. Plaintiffs argue that if HUD applies a disparate impact approach to the Fair Housing Act, then this application would impair or supersede the Plan’s allocation of the risk of loss due to environmental hazards and would interfere with the private insurance market which the Plan intentionally left alone. In their reply brief, plaintiffs concede that they do not argue that the FAIR Plan autho- rizes discrimination on the basis of race or any other impermissible factor. Plaintiffs’ Reply Brief at 14. Thus, plaintiffs’ argument hinges on HUD’s hypothetical appli- cation of a disparate impact approach to insurers. Defendant HUD responds that plaintiffs may not challenge the validity of the HUD’s regulation interpret- ing the Fair Housing Act on the ground that HUD might apply some form of disparate impact analysis to them in the future. In other words, HUD argues that because it has never applied a disparate impact approach to insur- ance providers, this issue is not ripe for review. We note that in his report and recommendation, the magistrate judge concluded that plaintiffs’ action was ripe and that HUD did not object to the magistrate judge’s report and recommendation. Generally, the failure to object to a magistrate’s report and recommendation precludes appellate review of an issue. United States v. Walters, 638 F.2d 947, 949-50 (6th Cir. 1981). However, we have held that “this general rule is subject to the familiar exception that parties can neither waive objections nor consent to App. 22 subject matter jurisdiction.” United Liberty Life Ins. Co. v. Ryan, 985 F.2d 1320, 1325 (6th Cir. 1993). We review a district court’s finding of subject matter jurisdiction de novo. Greater Detroit Resource Recovery Authority v. United States EPA, 916 F.2d 317, 319 (6th Cir. 1990). Furthermore, we have held that “ ‘every federal appellate court has a special obligation to “satisfy itself not only of its own jurisdiction, but also that of the lower courts in a cause under review”.’ ” Id. (quoting Bender v. Williamsport Area School Dist., 475 U.S. 534, 541 (1986) (quoting Mitchell v. Maurer, 293 U.S. 237, 244 (1934)); see Bigelow v. Michigan Dep’t of Natural Resources, 970 F.2d 154, 157 (6th Cir. 1992) (“ ‘Ripeness is more than a mere procedural question; it is determinative of jurisdiction. If a claim is unripe, federal courts lack subject matter jurisdiction and the complaint must be dismissed. This deficiency may be raised sua sponte if not raised by the parties.’ ”) (quoting Southern Pac. Transp. Co. v. City of Los Angeles, 922 F.2d 498, 502 (9th Cir. 1990), cert. denied, 502 U.S. 943 (1991) (citation omitted)). Therefore, we will sua sponte consider for jurisdictional purposes HUD’s claim that the application of its regulation under a disparate impact approach was not ripe for review. The Supreme Court has outlined the ripeness doc- trine in Abbott Laboratories v. Gardner, 387 U.S. 136 (1967), and two companion cases, Toilet Goods Association, Inc. v. Gardner, 387 U.S. 158 (1967) and Gardner v. Toilet Goods Association, Inc., 387 U.S. 167 (1967). In those cases, the Court explained as follows: The injunctive and declarative judgment remedies are discretionary, and courts tradi- tionally have been reluctant to apply them to App. 23 administrative determinations unless these arise in the context of a controversy “ripe” for judicial resolution. Without undertaking to survey the intricacies of the ripeness doctrine it is fair to say that its basic rationale is to prevent the courts, through avoidance of premature adjudi- cation, from entangling themselves in abstract disagreements over administrative policies, and also to protect agencies from judicial interfer- ence until an administrative decision has been formalized and its effects felt in a concrete way by the challenging parties. Abbott Laboratories, 387 U.S. at 148-49. The Court also explained that the ripeness requirement involves a two- part test: “The problem is best seen in a twofold aspect, requiring us to evaluate both the fitness of the issues for judicial decision and the hardship to the parties of with- holding court consideration.” Id. at 148. “In order to be ripe for review, a dispute must satisfy both prongs of the ripeness test.” Franklin Federal Savings Bank v. Director, Office of Thrift Supervision, 927 F.2d 1332, 1336 (6th Cir. 1991). Thus, we must first determine whether HUD’s appli- cation of its regulation under a disparate impact analysis is fit for judicial decision. The Supreme Court set forth several factors to consider when analyzing whether issues are appropriate for judicial resolution in Abbott Laboratories. In this regard, the Court considered whether the regulations at issue constituted “final agency action.” Abbott Laboratories, 387 U.S. at 149. The Court explained that the “cases dealing with judicial review of administrative App. 24 actions have interpreted the ‘finality’ requirement in a pragmatic way.” Id. Furthermore, we have explained: As a general rule, final agency action includes “interpretive decisions that crystalize or modify private legal rights.” Federal Trade Commission v. Standard Oil of California, 449 U.S. 232, 247 (1980) (Stevens, J., concurring). The D.C. Circuit has explained the purpose of the finality require- ment as being to determine “if the agency’s position is merely tentative or, on the other hand, whether the agency views its deliberative process as sufficiently final to demand compli- ance with its announced position.” Ciba-Geigy Corp. v. U.S. Environmental Protection Agency, 801 F.2d 430, 436 (D.C. Cir. 1986). While an agency may generally express tentative views without judicial review, “[o]nce the agency publicly articulates an unequivocal position, however, and expects regulated entities to alter their pri- mary conduct to conform to that position, the agency has voluntarily relinquished the benefit of proposed judicial review.” Ibid. Franklin Federal, 927 F.2d at 1337. In this case, the district court concluded that plain- tiffs’ action for declaratory and injunctive relief was ripe because HUD’s regulation was a final agency action. However, the district court did not distinguish between plaintiffs’ challenge to HUD’s regulation under a dispa- rate treatment approach, which requires a showing of intentional discrimination, and plaintiffs’ challenge under a disparate impact approach, which requires no showing of discriminatory intent. In this case, plaintiffs seek to challenge HUD’s regulation by arguing that if HUD were to apply a disparate impact analysis under the Act, then App. 25 insurers could not rely only on neutral environmental risk considerations in their underwriting practices. HUD has never applied a disparate impact analysis to insurers. Plaintiffs rely on the possibility that HUD might so apply its regulation in the future. We note that “[mJjere contem- plation of a course of action does not constitute a final agency action.” First Federal Sav. Bank and Trust v. Ryan, 927 F.2d 1345, 1354 (6th Cir.), cert. denied, 502 U.S. 864 (1991). Moreover, we note that plaintiffs argue that in the event that HUD applies a disparate impact analysis to insurers, the Act will forbid consideration of neutral underwriting criteria where those criteria have a discrim- inatory effect. On the other hand, HUD argues that any application of the disparate impact analysis would depend on the practices alleged to violate the Act and the business necessity put forth to justify them. Thus, we conclude that the issue of HUD’s application of a dispa- rate impact analysis to insurers to show a violation of the Fair Housing Act is not sufficiently final. Furthermore, we do not find that withholding judi- cial review would constitute an undue hardship upon the parties. In Toilet Goods, the Supreme Court addressed a regulation that provided that the Commissioner of Food and Drugs could suspend certification of any manufac- turer upon finding that the manufacturer had refused to permit inspectors adequate access to manufacturing facil- ities. Toilet Goods, 387 U.S. at 161. The Court concluded that the regulation was not ripe for review, noting: The regulation serves notice only that the Com- missioner may under certain circumstances order inspection of certain facilities and data, and that further certification of additives may be App. 26 refused to those who decline to permit a duly authorized inspection until they have complied in that regard. At this juncture we have no idea whether or when such an inspection will be ordered and what reasons the Commissioner will give to justify his order. Toilet Goods, 387 U.S. at 163 (emphasis in original). Sim- ilarly, in this case, it is not clear that HUD will apply a disparate impact analysis to its regulation governing insurance providers in the future, and it is not clear what considerations would violate this analysis. Thus, even though plaintiffs might feel uneasy about potential appli- cations of the regulation, they are not under any present legal obligation to base their insurance underwriting practices on factors other than neutral risk consider- ations. See First Federal, 927 F.2d at 1354-55. Accordingly, we conclude that plaintiffs’ challenge to HUD’s regula- tion as applied under a disparate impact approach is not ripe for review. Thus, plaintiffs may only challenge HUD’s regulation under a disparate treatment approach. Next, plaintiffs argue that “the availability of private civil actions under the Fair Housing Act, with access to jury trials and unlimited punitive damages, will ‘impair or supersede’ Ohio insurance law which does not afford such remedies.” Plaintiffs’ Brief at 33. Plaintiffs assert that the availability of private civil remedies under the Fair Housing Act would allow a claimant to bypass the administrative procedures outlined in the Ohio Insurance Code. In American Family, the Seventh Circuit held that the existence of additional remedies does not cause App. 27 HUD’s interpretation of the Fair Housing Act to violate the McCarran-Ferguson Act. In the main, federal regulation of a subject - even thoroughgoing federal regulation — does not prevent states from adding remedies to the arsenal established by federal law. The McCar- ran-Ferguson Act is a form of inverse preemp- tion, so principles defining when state remedies conflict (and so are preempted by) federal law are pertinent in deciding when federal rules “invalidate, impair, or supersede” state rules. American Family, 978 F.2d at 296; see Merchants Home Delivery Suc., Inc. v. Reliance Group Holding, Inc., 1995 WL 129169, *5-*6 (9th Cir. March 28, 1995) (following Ameri- can Family and holding that federal regulation that pro- vides additional remedies than those provided under state insurance plan does not violate McCarran-Ferguson Act). Moreover, in Mackey, the Fourth Circuit held that “t]he 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...” Mackey, 724 F.2d at 421. Therefore, we conclude that the presence of additional remedies in the Fair Housing Act does not cause the Act to invalidate, impair or supersede Ohio insurance law. Accordingly, we hold that the McCarran-Ferguson Act does not preclude HUD’s interpretation of the Fair Housing Act. c. Finally, plaintiffs argue that the district court erred in dismissing plaintiffs’ state law claims against the Dayton defendants. We have held that ” ‘generally, “if the federal App. 28 claims are dismissed before trial . . . the state claims should be dismissed as well.” ’” Landefeld v. Marion Gen- eral Hospital, Inc., 994 F.2d 1178, 1182 (6th Cir. 1993) (quoting Taylor v. First of America Bank-Wayne, 973 F.2d 1284, 1287 (6th Cir. 1992) (citing United Mine Workers v. Gibbs, 383 U.S. 715, 726 (1966)). “A district court should consider the interests of judicial economy and the avoid- ance of multiplicity of litigation and balance those inter- ests against needlessly deciding state law issues. . . . This court will review only for an abuse of discretion by the district court.” Landefeld, 994 F.2d at 1182. In this case, the magistrate judge recommended that the district court should not exercise pendent jurisdiction over the remaining state law claims because plaintiffs’ claim involves a novel issue of state law. Plaintiffs assert that the Dayton Revised Code of General Ordinances conflicts with Ohio insurance and civil rights law. In addition, plaintiffs challenge the validity of a Dayton ordinance forbidding insurance redlining. We agree with the magistrate judge that “a state court is better able to determine whether state law conflicts with and super- sedes an allegedly conflicting ordinance passed by and being enforced by one of the municipalities within its jurisdiction.” J.A. 175. Accordingly, we hold that the dis- trict court did not abuse its discretion in dismissing plain- tiffs’ state law claims. App. 29 For the reasons stated, the judgment of the district court is AFFIRMED. KENNEDY, Circuit Judge, dissenting. I respectfully dissent from the majority’s opinion because I believe that Congress did not intend for the Fair Housing Act to reach the activities of the insurance industry. As the Fourth Circuit wrote in Mackey v. Nation- wide Insurance Companies, 724 F.2d 419, 423 (4th Cir. 1984), “liJf [§ 3604] was designed to reach every discriminatory act that might conceivably affect the availability of hous- ing, [§ 3605's] specific prohibition of discrimination in the provision of financing would have been superfluous.” Under the majority’s reasoning, discrimination in financ- ing clearly would violate section 3604. Furthermore, repeated attempts to amend the Fair Housing Act to expressly include insurance practices have failed, although the Act has been amended to pro- hibit other discriminatory activities. See id. at 424; 42 U.S.C. § 3605. (e.g., adding discrimination by appraisers.) Additionally, the legislative history is devoid of refer- ences to the insurance industry. Mackey, 724 F.2d at 424. | do not believe that Congress would have intended to include insurance practices without at least considering the limitations imposed by the McCarran-Ferguson Act. Finally, I disagree with the majority that Chevron applies to this case. Where this Court can ascertain Congressional intent through traditional tools of statutory construction, deference to the agency’s interpretation is unnecessary. See INS v. Cardoza-Fonesca |sic], 480 U.S. 421, 445-48 (1987). App. 29a UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT No: 94-3296 NATIONWIDE MUTUAL INSURANCE COMPANY and NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, Plaintiffs-Appellants, v. HENRY CISNEROS, Secretary of the United States Department of Housing & Urban Development; JERALD L. STEED, Executive Director, Dayton Human Relations Council; CHARLES W. BROWN, Chairperson, Dayton Human Relations Council; and CITY OF DAYTON, Defendants-Appellees. Before: Kennedy and Milburn, Circuit Judges; Wiseman, District Judge JUDGMENT (Filed May 1, 1995) ON APPEAL from the United States District Court for the Southern District of Ohio at Dayton. THIS CAUSE was heard on the record from the dis- trict court and was argued by counsel. ON CONSIDERATION WHEREOF, it is ordered that the judgment of the district court is AFFIRMED. COSTS may be recovered by the defendants-appel- lees as provided by Rule 39, Federal Rules of Appellate Procedure. App. 29b Issued as Mandate: August 15, 1995 COSTS: None PR DOR ces cssaveverers FUGUE ceec¥sidcuceteaes ENTERED BY ORDER OF THE COURT /s/ Leonard Green Leonard Green, Clerk A True Copy Attest: /s/ Velina Fields Deputy Clerk App. 30 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF OHIO WESTERN DIVISION AT DAYTON NATIONWIDE MUTUAL : INSURANCE COMPANY, : et al., Case No. C-3-92-52 Plaintiff(s), District Judge tin ’ Sandra S. Beckwith ' Magistrate Judge HENRY CISNEROS, ‘ Michael R. Merz SECRETARY OF DEPARTMENT OF HOUSING AND URBAN ‘° DEVELOPMENT, et al., Defendant(s). REPORT AND RECOMMENDATIONS CONCERNING MOTIONS TO DISMISS AND FOR SUMMARY JUDGMENT AND DECISION AND ORDER AS TO REMAINING PENDING MOTIONS (Filed Sept. 27, 1993) This case is before the Court on, inter alia, Defendant Henry Cisneros’ (hereinafter “HUD”) Motion to Dismiss and Renewed Motion to Dismiss, joined by Defendants Jerald L. Steed, Charles Brown, and the City of Dayton (“Dayton Defendants”), (Doc. 20, 19; 57, 58, 56), Defen- dants’ Motion to Reconsider leave for Plaintiffs Nation- wide Mutual Insurance Company and Nationwide Mutual Fire Insurance Company (“Nationwide”) to file a App. 31 Fourth Amended Complaint, (Doc. 108), and cross- motions for summary judgment. (Doc. 84, 92, 93). The issues have been fully briefed by the parties, (Doc. 20, 24, 27; 19, 25, 28; 56, 60; 57, 58, 60, 63, 77, 79; 108, 113, 115; 84, 94, 95, 100; 92, 95, 99, 102; 93, 94, 99, 101, 103, 116), and the matters are ripe for decision. Nationwide originally filed this action in the District Court for the District of Columbia, seeking declaratory and injunctive relief from attempts by HUD to enforce certain sections of the Fair Housing Act, 42 U.S.C. Sec. 3601, et seq., and from attempts by the Dayton Defendants to prohibit certain of Nationwide’s practices under Ohio state and Dayton municipal law. The Dayton Defendants sought and were granted a change in venue and the action was transferred to this Court. Nationwide alleges jurisdiction pursuant to 28 U.S.C. Sec. 1331. The controversy arises under the laws of the United States, specifically the Fair Housing Act and the Administrative Procedure Act, 5 U.S.C. Secs. 701-706. Nationwide also alleges jurisdiction under the Due Pro- cess Clauses of the United States Constitution. In essence, this action involves “redlining” in the insurance business. “Redlining” is charging higher rates or declining to write insurance for people who live in particular areas. The Nationwide corporations are insurers incorpo- rated under the laws of Ohio, doing business throughout the nation, including Ohio. Defendant HUD is respons- ible for the administration of the Fair Housing Act. Defendant Steed, as Executive Director of the Dayton Human Relations Council (“DHRC”), and Defendant App. 32 Brown, as Chairperson of the DHRC Board, assist HUD in the local administration of housing discrimination com- plaints. Generally, Nationwide is seeking a declaratory judg- ment that HUD and DHRC lack the authority to regulate the provision and cancellation of homeowners’ insurance. Nationwide also seeks corresponding injunctive relief preventing Defendants’ attempts to enforce insurance regulations. Nationwide’s specific allegations are as follows: (1) HUD has exceeded the statutory authority granted to it by Congress in the Fair Housing Act; (2) HUD’s deter- mination that the Fair Housing Act authorizes it to enforce its homeowner’s insurance regulations in Ohio violates the McCarran-Ferguson Act, 15 U.S.C. Sec. 1001, et seq. on the grounds that the federal anti-discriminatory regulation of homeowner’s insurance is ineffective under McCarran because Ohio has in place the Ohio Insurance Code, O.R.C. Sec. 3901.01, et seq., which includes both a prohibition of “unfair and deceptive acts” connected to underwriting standards and practices or insurance can- cellation, as well as a FAIR plan authorized by the federal Urban Protection Insurance and Property Reinsurance Act, O.R.C. Sec. 3929.41, et seq. which provides for fire insurance coverage for what would otherwise be uninsur- able risks; (3) HUD’s attempts to exercise authority beyond that granted by the Fair Housing Act constitutes an unlawful delegation of authority; (4) HUD’s and DHRC’s attempts to regulate homeowner’s insurance protections violate the United States Constitution, speci- fically the Due Process Clause; (5) the actions of the App. 33 Dayton Defendants in attempting to eliminate discrimina- tory practices exceed the authority granted by Chapter 32 of the Dayton Revised Code of General Ordinances (“Dayton Code”); (6) even if the Dayton Code does regu- late insurance, it is in conflict with O.R.C. Secs. 3901.01 and 3901.0111, which calls for insurers to discriminate fairly in establishing underwriting standards, and there- fore the Dayton Code subjects Nationwide to conflicting regulations; (7) the Dayton Code violates the Ohio Civil Rights Law, O.R.C. Sec. 4112.02(H)(4), which prohibits discrimination in the provision of housing, in that the anti-redlining provision in the Dayton Code calls for dissimilar risks to be treated similarly and it, in effect, calls for reverse discrimination; (8) the Dayton Code’s anti-redlining provision is in conflict with the FAIR plan enacted by Ohio in that the FAIR plan arranges for insurers doing business in Ohio to pool funds payable in insuring risks otherwise uninsurable because of environ- mental hazards such as, according to Nationwide, those found in racially mixed neighborhood and therefore the Dayton Code requires Nationwide to bear a greater bur- den of those risks than those borne by Ohio insurers who have little or no presence in the City of Dayton; (9) the DHRC may not regulate racially discriminatory cancella- tion of homeowner’s policies in the absence of a specific provision in the Dayton Code. I. Defendants’ Motion for Reconsideration The first matter which this Court will consider is the Dayton Defendants’ Motion for Reconsideration of the Court’s granting leave to Nationwide to file its Fourth Amended Complaint. App. 34 The general standard for considering a motion of [sic] amend under Fed.R.Civ.P. 15(a) was enunciated by the United States Supreme Court in Foman v. Davis, 371 U.S. 178, 182 (1962): If the underlying facts or circumstances relied upon by a plaintiff may be a proper subject of relief, he ought to be afforded an opportunity to test his claim on the merits. In the absence of any apparent or declared reason — such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure defi- ciencies by amendments previously allowed, undue prejudice to the opposing party by virtue of any allowance of the amendment, futility of amendment, etc. — the leave sought should, as the rules require, be “freely given”. The Dayton Defendants’ primary objection to allow- ing Nationwide to file a Fourth Amended Complaint is that this case has been pending for over two (2) years, has involved extensive briefing with respect to motions to dismiss and motions for summary judgment, and that a Fourth Amended Complaint will result in the need to again file and brief motions to dismiss and motions for summary judgment. As noted by Nationwide in its response to the Day- ton Defendants’ Motion for Reconsideration, Nation- wide’s Fourth Amended Complaint seeks no additional relief and adds no new cause of action, but merely con- tains additional allegations which reflect arguments developed at greater length in its response to Defendants’ motions for summary judgment. This Court agrees with Nationwide’s analysis that, “the Fourth Amended Com- plaint will neither precipitate a new round of briefing nor App. 35 disturb the parties’ pending dispositive motions which have been fully briefed and remain applicable.” See, Doc. 113 at 2. This Court finds that the Defendants are not and will not be prejudiced by the allowance of Nationwide filing its Fourth Amended Complaint. Therefore, the Dayton Defendants’ motion for reconsideration is DENIED. II. Defendant HUD’s Motions to Dismiss HUD’s several motions to dismiss essentially raise the same issues and are all based on essentially the same arguments as discussed infra. The test for dismissing a complaint under the Federal Rules is a stringent one: [A] complaint should not be dismissed for fail- ure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957); Neitzke v. Williams, 490 U.S. 319, 109 S. Ct. 1827, 104 L. Ed. 2d 338 (1989); Hishon v. King & Spalding, 467 U.S. 69 (1984); Nishiyama v. Dickson Cty., 814 F. 2d 277 (6th Cir. 1987) (en banc); Collins v. Nagle, 892 F. 2d 489 (6th Cir. 1989). For purposes of the motion to dismiss, the complaint must be construed in the light most favorable to the plaintiff and its allegations taken as true. Scheuer v. Rhodes, 416 U.S. 232 (1974); Westlake v. Lucas, 537 F. 2d 857 (6th Cir. 1976); Craighead v. E.F. Hutton & Co., 899 F. 2d 485 (6th Cir. 1990). App. 36 The Declaratory Judgment act [sic] reads in relevant part: In a case of actual controversy within its juris- diction .. . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal obligations of any interested party seeking such declaration, whether or not further relief is or could be sought. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such. 28 U.S.C. Sec. 2201(a) “The procedure for obtaining a declaratory judgment pursuant to Title 28 U.S.C. Sec. 2201 shall be in accor- dance with [the Federal Rules of Civil Procedure]... . ” Fed.R.Civ.P. 57. “The existence of another adequate rem- edy does not preclude a judgment for declaratory relief in cases where it is appropriate.” Id. The injunctive and declaratory judgment remedies are discretionary, and courts traditionally have been reluctant to apply them to administrative determinations unless these arise in the context of a controversy “ripe” for judicial resolution. Abbott Laboratories v. Gardner, 387 U.S. 136, 148 (1967). The ripeness doctrine serves “to prevent the courts, through avoidance of premature adjudication, from entangling themselves in abstract disagreements over administrative policies, and also to protect the agencies from judicial interference until an administrative decision has been finalized and its effects felt in a concrete way by the challenging parties.” Id. at 148-49. A court therefore will not interfere in the resolution of issues unfit for judicial resolution; nor will a court grant declaratory relief when App. 37 the potential hardship to the parties does not merit court consideration. Id. at 149. A court properly interferes in a pre-enforcement con- troversy between a private litigant and an administrative agency only if the issues are fit for judicial decision. An issue is fit for judicial decision when (1) the controversy presents a “purely legal issue” but only (2) if the subject matter of the controversy is a “final agency action.” Id.; see also, 5 U.S.C. Sec. 149. The Court notes that, as in Abbott, both sides in this litigation have moved for summary judgment, thereby evincing their respective beliefs that the issues are non- factual and subject to disposition as a matter of law. The primary issue is whether HUD had exceeded its authority in promulgating its regulations under the Fair Housing Act. The scope of the authority granted an agency by statute is a purely legal issue. Athlone Industries v. Con- sumer Product Safety Commission, 707 F.2d 1485, 1489 (D.C. Cir. 1983). Likewise, the question of whether an adminis- trative agency exceeds its statutory authority in pro- mulgating a given regulation is a purely legal question. Toilet Goods Association v. Gardner, 387 U.S. 158, 163 (1967). Therefore, the issues presented by Nationwide’s com- plaint are purely legal and fit for judicial resolution. In addition, the subject matter of the controversy in this case, as it relates to HUD, is a final agency action. Agency actions in the form of a regulation are final when such regulations have the force of law before their sanctions are invoked as well as after. Columbia Broadcast- ing System v. United States, 316 U.S. 407, 418 (1942). A regulation “promulgated in a formal manner after notice App. 38 and evaluation of written comments . . . is a ‘final agency action.’ ” Toilet Goods, 387 U.S. at 162. In other words, a reviewable agency action has “determinate consequences for the party to the proceeding.” ITT v. Electrical Workers, 419 U.S. 428, 443 (1975). Judicial review, then, is not prevented solely on the ground that the regulation merely explains how the agency would interpret the stat- ute if it should bring an action against one subject to the statute. United States v. Storer Broadcasting Co., 351 US. 192, 198 (1956). The Sixth Circuit has drawn a very fine line between agency actions that are final and those that are not. Com- pare, Franklin Federal Savings Bank v. Director, Office of Thrift Supervision, 927 F.2d 1332, 1336-38 (6th Cir. 1991), with, First Federai Savings Bank and Trust Co. v. Ryan, 927 F.2d 1345, 1352-55 (6th Cir. 1991). In First Federal, the plaintiff sought to prevent the Office of Thrift Supervision from exercising its authority to appoint a receiver for a financial institution when the unstable condition of that institution so warrants. First Federal, 927 F.2d 1345. OTS had yet to appoint a receiver at the time the action was filed; First Federal merely feared that such an appointment was imminent. Id. The Sixth Circuit held that “[mJere contemplation of a course of action does not constitute a final agency action,” rea- soning that “the focus of the Abbott test is on the conse- quence of agency action even absent enforcement action, not on the deleterious effect of possible future enforce- ment action itself. Id. The First Federal Court found the prospective nature of the challenged agency action a bar to judicial review. ——Saaaaaaaaaeeaeae App. 39 In Franklin Federal, on the other hand, the plaintiff bank questioned OTS’ claim that any agreement as to the accounting procedures to be applied to Franklin Federal’s operation constituted a nonbinding statement. Franklin Federal, 927 F.2d at 1334. The bank also questioned the OTS interpretation of the Financial Institutions Reform Recovery and Enforcement Act of 1989. The Franklin Fed- eral court noted that the purpose of the finality require- ment was “to determine ‘if the agency’s position is merely tentative or, on the other hand, whether the agency views its deliberative process as sufficiently final to demand compliance with its announced position.’ ” Id. at 1337, quoting, Ciba-Geigy Corporation v. United States Environmental Protection Agency, 801 F.2d 430, 436 (D.C.Cir. 1986). The Sixth Circuit then concluded that an agency action sufficiently final to be defended on the basis of Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984), should be treated as a final agency action for the purposes of applying the Abbott test. Franklin Federal, 927 F.2d at 1337. The crucial factual difference between First Federal and Franklin Federal is that First Federal questioned only the applicability of the OTS position to itself; Franklin Federal, on the other hand, questioned the validity of the OTS position as it incidentally applied to Franklin Fed- eral. See, Franklin Federal, 927 F.2d at 1336 (“Here, the plaintiff institution has asked for . . . an injunction against the application of certain rules.”) (emphasis supplied). In First Federal, by contrast, the plaintiff asked for an injunc- tion preventing the OTS from taking a particular action.” Franklin Federal, 927 F.2d at 1338 (emphasis supplied). App. 40 The issues raised by Nationwide’s complaint are more similar to the issues raised in Franklin Federal than to those raised in First Federal. Here Nationwide is asking for a statement clarifying the legal applicability to HUD’s regulation to the insurance industry as a whole. Nation- wide is not asking for a determination as to the factual application of the regulation to its particular underwrit- ing standards. Nationwide’s complaint seeks a declara- tory judgment on a purely legal issue as to a final agency action. In addition, the potential hardship to the parties is sufficient to merit a court’s consideration. A regulation that “purport[s] to give an authoritative interpretation that has a direct effect on the day-to-day business” of members of the regulated industry has an “impact . . . sufficiently direct and immediate as to render the issue appropriate for judicial review” at the pre- enforcement stage. Abbott, 387 U.S. at 152. “Where a regulation requires an immediate and significant change in the plaintiffs’ conduct of their affairs with serious penalties attached to noncompliance, access to the courts under the Administrative Procedure Act and the Declara- tory Judgment Act must be permitted, absent a statutory bar or some other unusual circumstance.” Id. at 153. But when primary conduct is not affected and no advance action is required of members of the regulated industry, judicial review is unnecessary until a member has speci- fically refused to comply and enforcement is sought against that member. Toilet Goods, 387 U.S. at 165. Although “some uncertainty” is not enough, review may be had when “the mere promulgation of administrative regulations would impose “debilitating uncertainties” on App. 41 the parties. Id. The requisite hardship is a dilemma between disadvantageous compliance with final agency action and the risk of prosecution and penalties. Seattle Pacific University v. Haas, 626 F.Supp. 539, 541 (W.D.Wash. 1985). HUD’s regulation affects the underwriting and can- cellation standards of homeowner’s insurance providers. HUD’s position is that it may regulate such insurers; Nationwide’s position is that it may not. If HUD is cor- rect, not only Nationwide, but all insurers who provide homeowner's coverage must alter any standards incon- sistent with HUD’s policies and shall have to continue to do so in the future. An insurer’s underwriting standards provide the foundation for daily decisions whether to insure and at what rate to insure. Clearly, then, HUD’s regulation affects the primary business of insurers. On the other hand, compliance with the HUD regulation, if it is invalid, could cause insurers unnecessarily to bind themselves to cover risks they would otherwise have refused to accept. Nationwide has alleged that uncertainty as to the validity of HUD’s regulation makes insurers unsure about what appropriate underwriting standards are, but goes on to assume that alterations in their standards will be necessary. Nationwide alleges that HUD’s regulation will force insurers to incur significant costs in the revi- sion of their standards and in the retraining of underwri- ters to apply the new standards once they are developed. These expenses, combined with the uncertainty inherent in developing appropriate standards, constitutes suffi- cient hardship to make the issues ripe for pre-enforce- ment review. Nationwide need not be left in a position in App. 42 which it must decide between insuring otherwise accept- able risks and possibly violating the Fair Housing Act. With respect to the issue of exhaustion, this Court concludes that Nationwide has not failed to exhaust any available administrative remedies. As a general matter . . . the exhaustion doctrine provides that challenges to agency action should not be heard until relevant administrative proceedings have been concluded. McKart v. United States, 395 U.S. 185, 194-95 (1969). Ordinarily, no one is entitled to judicial relief for a supposed or threatened injury until the pre- scribed administrative remedy has been exhausted. Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 50-51 (1938). Nonetheless, application of the [exhaustion] doctrine to specific cases requires an understanding of its purposes and of the particular administrative scheme involved. McKart, 395 U.S. at 193. The exhaustion doctrine pro- motes efficiency in both the courts and in the agency by preventing “premature interruption of the administrative process.” Id. The exhaustion doctrine permits the admin- istrative agency to engage in fact finding; to exercise its special competence and correct its errors; and to reach a dispositive solution so as to make judicial intervention unnecessary. City of Mt. Clemens v. United States Environ- mental Protection Agency, 917 F.2d 908, 914 (6th Cir. 1990); see also, Robinson v. Dow, 522 F.2d 855 (6th Cir. 1975). Where pursuit of administrative remedies does not serve the purposes behind the exhaustion doctrine, the courts have allowed a number of exceptions. Shawnee Coal Co. v. Andrus, 661 F.2d 1083, 1093 (6th Cir. 1981). App. 43 One of these exceptions is the futility exception. Since the [exhaustion] doctrine is not linked to the power of the court to entertain actions, but instead implicates prudential considerations, the exhaustion doctrine may be . . . disregarded by the court when application of the doctrine would be futile.” City of Mt. Clemens, 917 F.2d at 914. Certainly, exhaustion is not required where it is highly unlikely that the agency would change its position if the case were remanded to it. Atlantic Richfield Co. v. Department of Energy, 769 F.2d 711, 782 (D.C.Cir. 1983). When an agency has never given an inkling that it would consider a matter afresh, and when the regulations in question have received careful attention within and out- side the agency, exhaustion is not required. City of Mt. Clemens, 917 F.2d at 914. The question whether an agency has exceeded its statutory authority in establishing regu- lations is the type of question that courts have, in the past, been willing to entertain without imposing the requirement that the plaintiff have [sic] exhausted its administrative remedy. Toilet Goods, 387 U.S. at 158. The futility exception, however, is an exception from that set forth in Leedom v. Kyne, 358 U.S. [sic] (1958), where an agency action contrary to an agency’s authoriz- ing statute is subject to immediate judicial review. The Leedom exception is a narrow anomaly reserved for extreme situations, Shawnee Coal, 661 F.2d at 1093, and does not apply here. Merely raising the question of whether the agency exceeded its authority will not ordi- narily confer immediate reviewability; the agency must first have the opportunity to examine the scope [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386002_0738%3A1. Public record. Not legal advice.