FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
PATRICK O. OJO, Attorney, on
behalf of himself and all others
similarly situated,
Plaintiff-Appellant,
No. 06-55522
v.
FARMERS GROUP, INC.; FIRE D.C. No.
CV-05-05818-JFW
UNDERWRITERS ASSOCIATION; FIRE
OPINION
INSURANCE EXCHANGE; FARMERS
UNDERWRITERS ASSOCIATION;
FARMERS INSURANCE EXCHANGE,
Defendants-Appellees.
Appeal from the United States District Court
for the Central District of California
John F. Walter, District Judge, Presiding
Filed April 9, 2010
Before: Alex Kozinski, Chief Judge, Pamela Ann Rymer,
Michael Daly Hawkins, Susan P. Graber,
M. Margaret McKeown, William A. Fletcher,
Ronald M. Gould, Richard R. Clifton, Milan D. Smith, Jr.,
Sandra S. Ikuta and N. Randy Smith, Circuit Judges.
Per Curiam Opinion
5395
OJO v. FARMERS GROUP 5397
COUNSEL
Sanford Svetcov, Susan K. Alexander, Maria V. Morris,
Coughlin Stoia Geller Rudman & Robbins LLP, San Fran-
cisco, California; Andrew S. Friedman, Wendy J. Harrison,
Gustave A. Hanson, Bonnett Fairbourn Friedman & Balint,
P.C., Phoenix, Arizona, for the plaintiffs-appellants.
Harriet S. Posner, Whitney Walters, Carl Alan Roth, Skadden,
Arps, Slate, Meagher & Flom LLP, Los Angeles, California,
for the defendants-appellees.
5398 OJO v. FARMERS GROUP
Linda F. Thome, Civil Rights Division, United States Depart-
ment of Justice, Washington, D.C., for amicus curiae the
United States.
D. Scott Chang, Stephen M. Dane, John P. Relman, Relman
& Dane PLLC, Washington, D.C.; Joseph D. Rich, Lawyers’
Committee for Civil Rights Under Law, Washington, D.C.,
for amici curiae National Fair Housing Alliance, Lawyers’
Committee for Civil Rights Under Law, Greater Houston Fair
Housing Center, Austin Tenants’ Council, and Fair Housing
Council of Greater San Antonio.
OPINION
PER CURIAM:
In this appeal we are asked to determine whether a dispa-
rate impact suit alleging the discriminatory provision of
homeowner’s insurance in violation of the federal Fair Hous-
ing Act (“FHA”), 42 U.S.C. §§ 3601-19, is reverse-preempted
by the McCarran-Ferguson Act, 15 U.S.C. § 1012, because it
invalidates, impairs, or supersedes Texas insurance law. In
order to do so, we must answer two preliminary questions.
First, we must decide whether the FHA prohibits discrimina-
tion in the denial and pricing of homeowner’s insurance. Sec-
ond, we must determine whether the reverse-preemption
standard set forth in the McCarran-Ferguson Act applies to
claims brought under latter-enacted civil rights statutes such
as the FHA. We answer yes to both questions. Having
resolved these issues, in a separate order filed concurrently
with this opinion we certify to the Supreme Court of Texas
the dispositive question of whether Texas law permits an
insurance company to price insurance by using credit-score
factors that have a racially disparate impact that, were it not
for the McCarran-Ferguson Act, would violate the FHA.
OJO v. FARMERS GROUP 5399
I
Plaintiff-Appellant Patrick O. Ojo is an African-American
resident of Texas and the owner of a homeowner’s property-
and-casualty policy issued by Farmers Group, Inc.
(“Farmers”). Ojo sued Farmers and its affiliates, subsidiaries,
and reinsurers (collectively “Defendants”) in federal court on
behalf of himself and other minorities. He claims that Defen-
dants, acting in concert, use a number of “undisclosed fac-
tors” in their credit-scoring system that disparately impact
minorities, in violation of the federal Fair Housing Act
(“FHA”), 42 U.S.C. §§ 3601-19. Ojo does not claim that
Defendants intentionally discriminated against any members
of the putative plaintiff class.
Defendants moved to dismiss all claims pursuant to Federal
Rules of Civil Procedure 12(b)(1) and 12(b)(6). The district
court concluded that the Texas Insurance Code preempted
Ojo’s FHA claims under the reverse-preemption standard set
forth in the McCarran-Ferguson Act, 15 U.S.C. § 1012. Ojo
appealed, and a divided three-judge panel of our court initially
reversed the district court, holding that Texas law does not
reverse-preempt Ojo’s FHA claim. Ojo v. Farmers Group,
Inc., 565 F.3d 1175 (9th Cir. 2009). We ordered the case
reheard en banc pursuant to Ninth Circuit Rule 35-3, and it is
now pending before us.
II
[1] It is unlawful under the FHA “[t]o discriminate against
any person in the terms, conditions, or privileges of sale or
rental of a dwelling, or in the provision of services or facilities
in connection therewith, because of race.” 42 U.S.C.
§ 3604(b). This provision has been interpreted to prohibit not
just intentional discrimination but also actions that have a dis-
criminatory effect based on race (disparate-impact discrimina-
tion). See Pfaff v. U.S. Dep’t of Hous. & Urban Dev., 88 F.3d
739, 745-46 (9th Cir. 1996). Where a plaintiff raises a prima
5400 OJO v. FARMERS GROUP
facie case of disparate-impact discrimination under the FHA,
the burden shifts to the defendant to either rebut the facts
underpinning the prima facie case or to demonstrate a “legally
sufficient, nondiscriminatory reason” for the practices causing
the disparate impact. Affordable Hous. Dev. Corp. v. City of
Fresno, 433 F.3d 1182, 1194-95 (9th Cir. 2006) (internal quo-
tation marks omitted).
We have not yet had occasion to decide whether or not the
FHA applies to homeowner’s insurance. We now hold that the
FHA prohibits racial discrimination in both the denial and
pricing of homeowner’s insurance.
Although there is a circuit split on the issue, we conclude
that the Sixth and Seventh Circuits have the better of the argu-
ment. See Nationwide Mut. Ins. Co. v. Cisneros, 52 F.3d
1351, 1359-60 (6th Cir. 1995) (giving Chevron deference to
the Secretary of Housing and Urban Development’s interpre-
tation of the FHA and holding that the FHA applies to home-
owner’s insurance); NAACP v. Am. Family Mut. Ins. Co., 978
F.2d 287, 300-01 (7th Cir. 1992) (same). Section 3604(a) of
the FHA makes it unlawful to “otherwise make unavailable or
deny” a dwelling because of race. 42 U.S.C. § 3604(a). Simi-
larly, Section 3604(b) makes it unlawful to discriminate
because of race “in the provision of services or facilities” in
connection with “the terms, conditions, or privileges of sale
or rental of a dwelling.” Id. § 3604(b). The terms “make
unavailable” and “service” are ambiguous. See NAACP, 978
F.2d at 298.
[2] When statutory language is ambiguous, we defer to a
“permissible construction” of that statute by the agency
charged with administering that statute. Chevron U.S.A., Inc.
v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842-43
(1984). Here, Congress has charged the Department of Hous-
ing and Urban Development (“HUD”) with the duty to make
rules to carry out the FHA. See 42 U.S.C. § 3614a. HUD in
turn has determined explicitly that the FHA does indeed pro-
OJO v. FARMERS GROUP 5401
hibit discrimination in the provision of homeowner’s insur-
ance. See 24 C.F.R. § 100.70(d)(4). The terms of the FHA
reasonably can bear this construction. For example, the denial
of homeowner’s insurance can make housing unavailable:
Mortgage lenders require prospective borrowers to obtain
homeowner’s insurance, so without insurance, there may be
no loan, and without a loan, there may be no home available
to a person who wants to buy the home. Homeowner’s insur-
ance can also be seen as a “service” connected to the sale of
a dwelling. In sum, HUD’s construction of the FHA is reason-
able and Chevron requires us to defer to it.
The Fourth Circuit has held that the FHA does not apply to
homeowner’s insurance. Mackey v. Nationwide Ins. Cos., 724
F.2d 419, 424-25 (4th Cir. 1984). However, it is the only cir-
cuit to have done so, and its decision pre-dated a regulation
promulgated by HUD that interprets the FHA to apply to
homeowner’s insurance. See 24 C.F.R. § 100.70(d)(4); Imple-
mentation of the Fair Housing Amendments Act of 1988, 54
Fed. Reg. 3232-01 (January 23, 1989) (effective date March
12, 1989). As Judge Easterbrook observed, “Events have
bypassed Mackey. . . . No matter how a court should have
understood the Fair Housing Act in 1984, . . . the question
today is whether the Secretary’s regulations are tenable. They
are.” NAACP, 978 F.2d at 301.
III
[3] The outcome of Ojo’s appeal also depends on whether
the McCarran-Ferguson Act is capable of “reverse-
preempting” claims brought under latter-enacted civil rights
statutes such as the FHA. The McCarran-Ferguson Act states
the following:
No Act of Congress shall be construed to invalidate,
impair, or supersede any law enacted by any State
for the purpose of regulating the business of insur-
ance, or which imposes a fee or tax upon such busi-
5402 OJO v. FARMERS GROUP
ness, unless such Act specifically relates to the
business of insurance . . . .
15 U.S.C. § 1012(b). Under the McCarran-Ferguson Act, state
law preempts a federal statute if (1) the federal law does not
specifically relate to insurance; (2) the state law is enacted for
the purpose of regulating insurance; and (3) the application of
federal law to the case might invalidate, impair, or supersede
the state law. Humana Inc. v. Forsyth, 525 U.S. 299, 307
(1999). Here, it is undisputed that the FHA does not specifi-
cally relate to insurance and that the relevant provisions of
Texas law are enacted for the purpose of insurance regulation.
[4] We hold that the FHA can indeed be reverse-preempted
by the McCarran-Ferguson Act. By using the phrase “No Act
of Congress,” the text of McCarran-Ferguson could not be
clearer. “ ‘No Act of Congress’ differs from ‘no act on the
books in 1946’ or ‘no act other than a civil rights statute.’ ”
NAACP, 978 F.2d at 294. By its plain terms, the McCarran-
Ferguson Act applies to the FHA.
Precedents are in accord with our interpretation. Although
the McCarran-Ferguson Act predates Title VII of the Civil
Rights Act of 1964, the Supreme Court has never expressed
reluctance in applying McCarran-Ferguson to latter-enacted
statutes. See, e.g., Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41
(1987) (applying McCarran-Feguson to the Employee Retire-
ment Income Security Act of 1974). Four justices of the
Supreme Court have once already concluded that the
McCarran-Ferguson Act applies to Title VII. Ariz. Governing
Comm. for Tax Deferred Annuity and Deferred Comp. Plans
v. Norris, 463 U.S. 1073, 1099-1103 (1983) (Powell J., joined
by Burger, C.J., Blackmun and Rehnquist, JJ., concurring in
part and dissenting in part). And the majority of our sister cir-
cuits to address the question have determined that the
McCarran-Ferguson Act applies to civil rights statutes. See
Saunders v. Farmers Ins. Exchange, 537 F.3d 961, 963 n.1
(8th Cir. 2008); Dehoyos v. Allstate Corp., 345 F.3d 290, 297
OJO v. FARMERS GROUP 5403
(5th Cir. 2003); Cisneros, 52 F.3d at 1360-61; NAACP, 978
F.2d at 295.
Only the Second Circuit has held that the McCarran-
Ferguson Act does not apply to Title VII, and that decision
predates Norris, Pilot Life, and the decisions of the other cir-
cuits. See Spirt v. Teachers Ins. and Annuity Ass’n, 691 F.2d
1054, 1065 (2d Cir. 1982), vacated on other grounds, 463
U.S. 1223 (1983). The Second Circuit’s decision is also based
on the incorrect assumption that interpreting McCarran-
Ferguson to apply to Title VII would “prevent” Congress
from requiring insurers to comply with civil rights statutes.
See id. at 1066. Such is not the case. “Congress did not tie its
hands; instead it prescribed the consequences of silence and
specificity in other acts past and future.” NAACP, 978 F.2d at
295. The McCarran-Ferguson Act is merely the default; if
Congress does not want McCarran-Ferguson to operate on a
particular statute, it need only say so directly.
IV
[5] Having determined that the FHA applies to homeown-
er’s insurance and that the McCarran-Ferguson Act can
reverse-preempt the FHA, the remaining dispositive question
is whether application of the FHA to Ojo’s case might invali-
date, impair, or supersede the provisions of the Texas Insur-
ance Code that authorize insurance companies to use credit
scoring in setting insurance rates. If Texas law permits insur-
ance companies to use credit scores even if the factors used
to compute scores may have a racially disparate impact, then
allowing Ojo to sue Defendants under the FHA for this prac-
tice would impair Texas law. On the other hand, if Texas law
prohibits the use of credit-score factors that would violate the
FHA on the basis of a disparate-impact theory, then the FHA
would complement—rather than displace and impair—Texas
law, and Ojo’s FHA disparate-impact suit would not be
reverse-preempted by the MFA. See Humana, 525 U.S. at
310-14. Because this question of Texas law is unsettled, and
5404 OJO v. FARMERS GROUP
because the issue’s resolution will have pervasive implica-
tions for future claims brought against Texas insurers, we
have concluded that the appropriate course of action is to cer-
tify this issue to the Supreme Court of Texas. We stay further
proceedings in this case pending resolution of our certified
question.
FURTHER PROCEEDINGS STAYED.