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NATIONWIDE MUTUAL INSURANCE CO., et al. v. HOUSING OPPORTUNITIES MADE EQUAL, INC.

VA Supreme Court



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NATIONWIDE MUTUAL
INSURANCE CO., et al.

v.

HOUSING OPPORTUNITIES
MADE EQUAL, INC.


January 14, 2000

Record No. 990733

NATIONWIDE MUTUAL INSURANCE COMPANY, ET AL.

v.

HOUSING OPPORTUNITIES MADE EQUAL, INC.

FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND

OPINION BY CHIEF JUSTICE HARRY L. CARRICO

Present: All the Justices

Randall G. Johnson, Judge


The Virginia Fair Housing Law, Code
?? 36-96.1 through –96.23, makes it "unlawful
for any person or other entity . . . to discriminate
against any person in making available [a residential real
estate-related] transaction, or in the terms or conditions of
such a transaction, . . . because of race, color,
religion, national origin, sex, elderliness, familial status, or
handicap." Code ? 36-96.4(A). A residential real
estate-related transaction means, inter alia,
"[t]he . . . insuring . . . of
residential real property." Code ? 36-96.4(B)(2).

In an amended motion for judgment filed March
21, 1997, Housing Opportunities Made Equal, Inc. (HOME), a fair
housing organization, sought damages from Nationwide Mutual
Insurance Company and Nationwide Mutual Fire Insurance Company
(collectively, Nationwide) for discriminatory practices allegedly
employed by Nationwide in the provision of homeowners insurance
to African-Americans in the Richmond area. A jury awarded HOME a
verdict of $500,000 in compensatory damages and $100,000,000 in
punitive damages. The trial court entered judgment on the
verdict, and we awarded Nationwide this appeal.

The Parties

HOME is a nonprofit Virginia corporation formed
in 1971 with the mission of promoting fair housing in Central
Virginia, including the Richmond metropolitan area. In carrying
out its mission, HOME’s first priority is counseling,
education is second, and advocacy, which includes litigation, is
third. HOME counsels clients about their housing needs or
problems. HOME trains the housing industry "to make sure
[its members] don’t violate the fair housing laws" and
also educates "housing consumers about what their rights
. . . and . . . responsibilities are."
HOME resorts to litigation if counseling and education "are
not enough to ensure equal access."

Nationwide writes insurance. It states on brief
that it "has long been one of the leading providers of
homeowners’ insurance in the Richmond metropolitan area,
[insuring] thousands of houses throughout the city and the
surrounding suburbs."

The Nature of the Controversy

HOME charged in its amended motion for judgment
that "Nationwide has, for many years, intentionally pursued
a strategy whereby the company avoids providing insurance in
African-American neighborhoods" and "has followed an
express policy of not targeting urban areas, containing
significant minority populations, for the marketing of homeowners
policies." In its grounds of defense, Nationwide denied
HOME’s allegations.

HOME submitted the following evidence
concerning the discriminatory practices allegedly employed by
Nationwide.

Marketing Activities

In the late 1980s, Nationwide was "in a
position of stagnant market share growth, and if [it] did not
make some significant change, [it] would begin losing [its] market share." Accordingly, in 1990, Nationwide developed a
"Marketing Strategy" for the Richmond area which stated
that "after reviewing household growth, median income,
median home value, 13+ years of schooling, and median age,"
the nearby counties of Henrico, Hanover, and Chesterfield
"were identified as grow fast areas" and as
"targeted counties." The City of Richmond was mentioned
in the strategy only tangentially; it was not included as a
targeted market.

The strategy identified eleven zip codes in the
three counties as representing "the profile of
Nationwide’s select risk market." However, 23227, a
Henrico zip code bordering the northern edge of the City of
Richmond, was singled out for this comment:

We have no data to support identification of
emerging ethnic or minority groups. However, of our targeted
counties, only one zip code was discovered to have greater than
the statewide average for minority groups — this was zip
code 23227 (Henrico).

Following development of the marketing
strategy, Nationwide implemented a marketing tool known as
"MicroVision," which "is produced on a zip code
basis [and] characterizes zip codes by particular lifestyle
categories. . . . [T]hese lifestyle segments
purport to describe various homogeneous populations
. . . by their race, by the kinds of things they read,
. . . by their income."
[1] The segments were assigned designations with such names
as "Lap of Luxury," "Established Wealth,"
"Metro Minority Families," "Struggling Minority
Mix," and "Difficult Times." The segments were
then placed into one of five marketing groups:
"Affluent"; "Mainstream"; "Mature";
"Country Living"; and "Remaining Diverse."
The first four groups were considered desirable markets. The
fifth, "Remaining Diverse," was considered undesirable.
MicroVision placed every predominantly minority neighborhood of
the City of Richmond, i.e., those with minority population
of 50% or more, in the "Remaining Diverse" group.

Nationwide’s marketing activities also
included the production of a "Local Area Market Plan"
(LAMP), which divided a given geographic area into zip codes and
ranked them as "Best in State," "Best in
Market," "Next Best in Market," and
"Remaining." The first three zip codes were considered
desirable markets. The fourth, "Remaining," was
considered undesirable. Like MicroVision, LAMP placed every
predominantly minority neighborhood of the City of Richmond in
the "Remaining" group.

Further, Nationwide performed a
"geographic realignment" to "identify where [it
wanted its] markets to be, and which populations [it wanted] to
target." Among the "natural geographic boundaries"
to be considered in "planning the ideal geographic
market" were "cultural or ethnic areas." In
Nationwide memoranda dated March 25, 1996, and April 3, 1996,
recommending realignment of marketing districts in Central
Virginia, the population of the City of Richmond was not included
in any marketing district, although rural jurisdictions with
smaller populations were included.
[2]

Finally, HOME highlights Nationwide’s
treatment of zip code 23227 in Henrico County. This was one of
the eleven zip codes identified by Nationwide in its 1990
Marketing Strategy as representing the profile of its select risk
market. HOME says that "[e]ach of the 11 areas was
overwhelmingly white, but . . . 23227 . . .
had a minority percentage in excess of the state average,"
and Nationwide over the years has consistently ignored "this
one zip code, while devoting extra attention to the other
10." The differential treatment consisted of excluding 23227
from Nationwide’s targeted zip codes and placing it in the
undesirable "Remaining" category in every LAMP and
MicroVision listing.

Location of Agents

An expert witness called by HOME testified that
Nationwide followed "a consistent pattern . . . of
placing [its] agents in the target markets." Nationwide
encouraged existing agents to move their offices, or to change
their focus, from a non-targeted to a targeted area and, if they
refused, the company would "ultimately [remove their] binding authority if necessary." Without binding authority,
an agent cannot deliver a policy to a customer "until
it’s gone through the whole underwriting process."
While Nationwide had four agency offices in predominantly
minority areas of the City of Richmond in 1990, it had none at
the time of trial.

HOME again highlights Nationwide’s
treatment of zip code 23227. In 1990, three of the eleven zip
codes targeted in Henrico, Hanover, and Chesterfield Counties,
including 23227, had no agents. By the time of trial, however,
Nationwide had placed agents in every one of the eleven zip codes
except 23227, despite the fact that 23227 had one of the best
loss ratios of the eleven zip codes in 1990.

Hiring and Training Policies

Nationwide instructed its managers to
"search for the agent candidate and staff within the target
market." One manager testified that of thirty-two agents he
supervised in an area including the City of Richmond prior to the
time this proceeding was filed, none was African-American.
Another manager in the Richmond area testified that he had hired
thirteen new agents in the period from 1991 to the time this
proceeding was filed, and none was African-American.

Nationwide required its new agents to undergo
extensive instruction, but the course did not include
anti-redlining training, i.e., instruction on the
necessity to avoid the unlawful exclusion of geographical areas
from consideration for homeowners insurance. An early version of
LAMP cautioned against redlining, but Nationwide later removed
the cautionary language.

Underwriting Standards

Nationwide’s underwriting standards were
described as having "a disproportionate effect on people who
live in minority neighborhoods." Nationwide offered two
types of homeowners policies, the "Golden Blanket"
policy, providing for replacement of a dwelling and its contents
regardless of actual replacement cost, and the "Elite
II" policy, providing for replacement limited to the face
value of the policy. Nationwide called Golden Blanket its
"Cadillac" policy and Elite II its
"weak-sister" policy. Golden Blanket policies were not
available for dwellings that were more than 30 years of age or
valued at less than $90,000. Elite II policies were available for
older dwellings, but if they were more than fifty years old and
located in the "inner city," agents were "required
to carefully inspect each home inside and out before actually
writing the application." It was established that "the
minority population lives . . . predominantly in the
areas with older housing much more so than the white
population."

HOME cites evidence from Nationwide’s
"own documents [which] showed that its market penetration in
Richmond’s minority zip codes was less than 50 percent of
its penetration in white zip codes" and that "[t]he
penetration for the Golden Blanket policy was more than 20 times
higher in white neighborhoods than in minority
neighborhoods." HOME says that "Nationwide had so
avoided minority neighborhoods in Richmond that one of the
company’s managers described those areas as the ‘hole
in the donut.’"

Pricing

The evidence showed that the company placed the
City of Richmond in a separate pricing territory and then
established "base rates for the city . . . higher
than the base rates for the surrounding counties." The rates
were "actually somewhat higher than indicated by
Nationwide’s own experience in Richmond," and the
"price would have been less, except [that Nationwide] used
. . . an unsound practice of using competitor
information in Richmond." Nationwide also charged a higher
premium for its "weak- sister" Elite II policy, which
was more adaptable to the older housing found in minority areas,
than it charged for the Golden Blanket policy.

Advertising

Nationwide conducted a minority market study
and produced a report that the specific minority groups studied,
which included African-Americans, "separately and together,
are large enough to be important market segments." The
report also stated that "the African-American market would
be the easiest and most efficient (as a result of
[Nationwide’s] geographic concentration) for which to
formulate new programs." The report cautioned that
African-Americans cannot be reached by advertising in mass-market
publications like Time and Newsweek but that
"to reach specific segments efficiently within the Black
population, advertising must include black-interest publications
(e.g Black Enterprise, Ebony)." The
report’s conclusion was that "a specific marketing
strategy to target these groups individually does not seem
warranted for Nationwide’s property/casualty
operations," and Nationwide continued to advertise in
"primarily the weeklies, Time or Newsweek, Sports
Illustrated, Southern Living, People Magazine."

Testers

HOME employed trained testers to contact
Nationwide agents for "insurance quotes" on test homes
over a period extending from June or July of 1995 to October of
1996. HOME chose three pairs of test homes. Each pair was matched
for similar features and age, but one home of the pair was
located in a minority neighborhood and the other in a white
neighborhood. When completed, the testing showed that quotes had
been denied in nine out of fifteen tests for homes in the
minority neighborhoods and only four out of sixteen tests in the
white neighborhoods.

The agents gave various reasons for their
denial of quotes in the minority neighborhoods, including that
Nationwide did not insure homes more than fifty years old or
valued at less than $60,000 and that the company required
thirty-days notice prior to closing to write insurance. One agent
admitted on the witness stand that an employee of his office had
told an untruth when she informed an African-American tester that
the office did not insure homes more than fifty years old.
Shortly before, the office had given a quote to a white homeowner
on a house of similar age.
[3]

Discussion

Nationwide’s appeal presents a number of
questions, including whether HOME has standing to maintain its
action for damages against Nationwide. "Standing to maintain
an action is a preliminary jurisdictional issue having no
relation to the substantive merits of an action," Andrews
v. American Health & Life Insurance Co.
, 236 Va. 221,
226, 372 S.E.2d 399, 402 (1988), and, accordingly, is a matter
for determination by the court.

Nationwide raised the standing issue in a
motion for summary judgment that was filed, heard, and denied
pretrial. HOME contends, however, that Nationwide later conceded
the standing issue by failing to object to an instruction granted
by the trial court that permitted the jury to consider damage to
HOME’s "mission, purpose, and efforts to promote equal
access to housing." We disagree with HOME.

We recently confronted a similar situation in Wright
v. Norfolk & Western Railway Co.
, 245 Va. 160, 427 S.E.2d
724 (1993). There, the railway company failed to object to an
instruction which permitted the jury to decide whether the
plaintiff was guilty of contributory negligence. During argument
on the railway company’s motion to set aside an adverse
verdict, the plaintiff argued that by failing to object to the
instruction, the railway company had "waived its right to
rely on the proposition that [the plaintiff] was guilty of
contributory negligence as a matter of law." Id. at
166, 427 S.E.2d at 727. The trial court ruled that no waiver had
occurred and that the plaintiff was guilty of contributory
negligence as a matter of law. Id.

We affirmed. We said there was no waiver
because the railway company had consistently maintained the
position throughout the trial that no jury issue was presented on
the question of the plaintiff’s contributory negligence.
This, we stated, gave the trial court the opportunity to rule
intelligently on the issue, which is the main purpose of our
contemporaneous objection rule, Rule 5:25. 245 Va. at 168, 427
S.E.2d at 728. See also Chawla v. BurgerBusters,
Inc.
, 255 Va. 616, 622, 499 S.E.2d 829, 832 (1998).

Here, Nationwide continued throughout the
proceedings to insist that HOME lacked standing to maintain its
action against Nationwide. Nationwide took this position in its
pretrial motion for summary judgment, in its motion to strike at
the close of HOME’s evidence, in its motion to strike at the
conclusion of all the evidence, and in its motion for a new
trial.
[4] This clearly afforded the trial court ample opportunity
to rule on the issue of HOME’s standing. Indeed, at the very
end of the case, after Nationwide’s counsel told the trial
court he was concerned "that all [his] objections are
preserved for the record," the judge remarked: "I say
that you have preserved every argument that you have made from
the time that the case was filed until now." We hold that
Nationwide did not waive or concede the standing issue.

This brings us to the merits of
Nationwide’s contention that HOME lacked standing to
maintain its action for damages because it "failed to
establish below that it was in any way ‘aggrieved
by Nationwide’s alleged discrimination against
‘African-American neighborhoods’ in the City of
Richmond." An "aggrieved person" is defined in the
Virginia Fair Housing Law as one who "claims to have been
injured by a discriminatory housing practice" or
"believes that such person will be injured by a
discriminatory housing practice that is about to occur."
Code ? 36-96.1:1. "Person" is defined to include,
inter alia, "fair housing organizations."
Id.
[5]And "[a]n
aggrieved person may commence a civil action in an appropriate
United States district court or state court . . . to
obtain appropriate relief with respect to such discriminatory
housing practice . . . ." Code
? 36-96.18.

HOME argues that "[t]here can be no
question that [it] is a fair housing organization and that it has
claimed Nationwide’s discriminatory housing practices have
injured it." "Thus," HOME concludes, "under
the plain language of the statute, HOME has standing." In
other words, it is HOME’s position that the statute imposes
a less restrictive standard for standing than might otherwise be
required, with the result that HOME establishes its standing
merely by stating the terms of the statute.

When HOME made this argument in the trial
court, the trial judge remarked, "You can’t just say
it, there really has . . . to be some —," at
which point HOME’s counsel said, "There has to be some
meat to it, yes, Your Honor. And HOME has showed that there is
meat to it in this case. And that’s shown under the common
law of Virginia and we’ve presented to the court [the] common law of Virginia with respect to standing."
HOME’s counsel also said "the federal law, which is
persuasive authority, . . . likewise shows that HOME
has standing in this case," and counsel named Havens
Realty Corp. v. Coleman
, 455 U.S. 363 (1982), as the
persuasive authority.

Thus, in the trial court, HOME asserted three
bases for its claim to standing, i.e., the Supreme
Court’s decision in Havens, the Virginia Fair Housing
Law, and the common law of Virginia. HOME asserts the same three
bases on appeal.

Havens Realty Corp. v.
Coleman

HOME says that Havens "establishes
[its] standing." In Havens, HOME and others brought a
class action under the federal Fair Housing Act against Havens
Realty Corp. for declaratory, injunctive, and monetary relief for
Havens’ alleged "racial steering" in its operation
of two apartment complexes in Henrico County. HOME alleged that
Havens’ discriminatory practices had injured HOME by
frustrating its mission and causing a drain on its resources. On
Havens’ pretrial motion, the district court dismissed the
action, holding that the plaintiffs lacked standing. The United
States Court of Appeals for the Fourth Circuit reversed, and the
Supreme Court granted certiorari. 451 U.S. 905 (1981).

In its opinion, the Supreme Court stated that
"the sole requirement for standing to sue under [the federal
Fair Housing Act] is the [federal Constitution’s] Art. III
minima of injury in fact: that the plaintiff allege that as a
result of the defendant’s actions he has suffered ‘a
distinct and palpable injury.’" 455 U.S. at 372. The
Court held that HOME’s allegations of injury concerning the
frustration of its mission and a drain on its resources were
sufficient to withstand Havens’ motion to dismiss. Id.
at 379. The Court observed in a footnote that "HOME will
have to demonstrate at trial that it has indeed suffered
impairment in its role of facilitating open housing before it
will be entitled to judicial relief." Id. n.21.

Havens involved interpretation of the
federal Fair Housing Act in a context presenting a question of
non-constitutional federal law. Accordingly, the decision is not
binding on this Court in this case involving a state statute and
a pure question of state law.
[6]
While the Virginia statute contains a provision (Code
? 36-96.23) that "[n]othing in [the Virginia Fair
Housing Law] shall abridge the federal Fair Housing Act of 1968
(42 U.S.C. ? 3601 et seq.)," nothing in the Virginia
statute requires that it be interpreted according to federal law.
[7]

The Virginia Fair Housing Law

It is true, of course, as HOME maintains, that
the statute permits an action to be brought by an "aggrieved
person," defined as one who claims to have been or believes
he will be injured. But the statute does not fix a standard for
determining whether standing exists. Undeniably, HOME is a
"person" under the statute, but whether it is an
"aggrieved person" turns on whether it has been or will
be injured. Hence, the key word is "injured"; however,
it is undefined. We resort, therefore, to the common law of
Virginia for the appropriate standard for determining standing, a
standard that was already in place in 1991 when the Virginia Fair
Housing Law was amended to include the definition of an
"aggrieved person" and to add fair housing
organizations to the definition of "person." 1991 Va.
Acts ch. 557. And nothing in the 1991 amendment indicates an
intention on the part of the General Assembly to lower that
standard.

The Virginia Common Law

Admittedly, the Virginia common law standard is
more restrictive than its federal counterpart. In Nicholas v.
Lawrence
, 161 Va. 589, 171 S.E. 673 (1933), we said that for
a person to have standing to invoke the jurisdiction of a court,
"he must show that he has an immediate, pecuniary and
substantial interest
in the litigation, and not a remote or
indirect interest." Id. at 593, 171 S.E. at 674
(emphasis added). In Cupp v. Board of Supervisors, 227 Va.
580, 318 S.E.2d 407 (1984), we said that the "concept of
standing concerns itself with the characteristics of the person
or entity who files suit" and that "[t]he essence of
the standing inquiry is whether [such person or entity has] ‘a personal stake in the outcome of the controversy.’"
Id. at 589, 318 S.E.2d at 411 (quoting Duke Power Co.
v. Carolina Envtl. Study Group
, 438 U.S. 59, 72 (1978)
(emphasis added in Cupp)). And in Virginia Beach
Beautification Commission v. Board of Zoning Appeals
, 231 Va.
415, 344 S.E.2d 899 (1986), we said:

In order for a petitioner to be
"aggrieved," it must affirmatively appear that such
person has some direct interest in the subject matter of
the proceeding that he seeks to attack. . . . [I]t
is not sufficient that the sole interest of the petitioner is to
advance some perceived public right or to redress some
anticipated public injury . . . . The word
"aggrieved" in a statute contemplates a substantial
grievance and means a denial of some personal or property
right . . . or imposition of a burden or obligation
upon the petitioner different from that suffered by the public
generally.

Id. at 419-20, 344 S.E.2d at 902-03
(emphasis added).

HOME says it has standing to maintain its
action against Nationwide because it "can identify economic
and non-economic injuries resulting from Nationwide’s
discriminatory activities." According to HOME, its injuries
consist of the frustration of its mission, the diversion of its
resources, and the discrimination practiced against its
"tester/agents."

Frustration of Mission

HOME’s claim based upon the frustration of
its mission fails the Virginia test for standing. HOME itself has
not suffered any denial of homeowners insurance and cannot claim
injury based upon such a denial. It relies instead upon the
purported injury to others resulting from Nationwide’s
discriminatory practices. And, in the trial court, HOME included
in its claim of purported injury to others resulting from
Nationwide’s practices "the harm caused to the city of
Richmond, individuals, neighborhoods, the tax base."

Hence, HOME’s interest in the litigation
and its purported injury are not "immediate, pecuniary and
substantial" but "remote or indirect." Nicholas,
161 Va. at 593, 171 S.E. at 674. HOME’s purported injury is
not "different from that suffered by the public
generally." Virginia Beach Beautification Commission,
231 Va. at 420, 344 S.E.2d at 903. And HOME’s interest in
this litigation is reduced to an effort "to advance some
perceived public right or to redress some anticipated public
injury." Id. at 419, 344 S.E.2d at 902.

Furthermore, Virginia is not a class-action
state, and "[a]n individual or entity does not acquire
standing to sue in a representative capacity by asserting the
rights of another, unless authorized by statute to do so." W. S.
Carnes, Inc. v. Board of Supervisors
, 252 Va. 377, 383, 478
S.E.2d 295, 300 (1996). The Virginia Fair Housing Law does not
bestow such representative authority. To say, therefore, that
HOME has standing in this case would, in effect, convert the
proceeding into a class action and permit HOME to sue in a
representative capacity for discriminatory housing practices
directed against someone else who may not himself have the
required standing to sue.

Diversion of Resources

HOME’s claim to standing based upon the
diversion of its resources involves some $56,000 that HOME spent
investigating and testing Nationwide for its alleged
discriminatory practices. This sum consists in part of $6,000 to
$7,000 of HOME’s own funds, representing the cost of staff
time spent in preparation for this litigation. The balance, paid
from federal grants totaling approximately $1.2 million,
represents the pro rata share attributable to Nationwide of the
cost of HOME’s investigation of approximately thirty
insurance companies, including Nationwide, writing homeowners
coverage in Richmond. Also involved in HOME’s diversion of
resources claim to standing is the value of a federal grant for
education that HOME lost when it chose instead an enforcement
grant in order to continue with its investigation of the
insurance industry. Finally, HOME says that it had to divert
resources from other testing and education programs to identify
Nationwide’s discriminatory practices.

It is elementary that one who seeks damages as
redress for wrongful action must not only prove the wrongful
action but also a causal connection between the wrongful action
and the injury complained of. Phillips v. Southeast 4-H Educ.
Ctr.
, 257 Va. 209, 215, 510 S.E.2d 458, 461 (1999). Even Havens
requires that an injury be "‘fairly
traceable’" to a discriminatory practice to satisfy the
requirement of injury in fact. 455 U.S. at 376.

There can be no causal connection between
action, even though wrongful, and injury that is self-inflicted.
HOME’s executive director testified below that "[p]rior
to HOME undertaking . . . the systemic industry
homeowners insurance investigation" when HOME’s first
federal grant "came through" on January 1, 1995, HOME
had "received no complaints about Nationwide in the Richmond
area."
[8]HOME’s decisions to undertake the investigation, to
spend part of the grant funds on the investigation, to devote
staff time to preparation for this litigation, to choose an
enforcement grant rather than an educational grant, and to divert
resources from other testing and education programs were all made
voluntarily, independent of anything Nationwide did or failed to
do with respect to minority neighborhoods in the City of
Richmond.

What was said in Fair Employment Council v.
BMC Marketing Corp.
, 28 F.3d 1268 (D.C. Cir. 1994), is
pertinent here:

The diversion of resources to testing might
well harm the Council’s other programs, for money spent on
testing is money that is not spent on other things. But this
particular harm is self-inflicted; it results not from any
actions taken by BMC, but rather from the Council’s own
budgetary choices.

Id. at 1276.

And this from Association for Retarded
Citizens v. Dallas County
, 19 F.3d 241 (5th Cir. 1994), a
fair housing case:

The mere fact that an organization redirects
some of its resources to litigation and legal counseling in
response to actions or inactions of another party is insufficient
to impart standing upon the organization.

Id. at 244.

Also pertinent is this statement from another
fair housing case, Project Sentinel v. Evergreen Ridge
Apartments
, 40 F. Supp.2d 1136 (N.D. Cal. 1999):

Plaintiff cannot manufacture standing by first
claiming a general interest in lawful conduct and then alleging
that the costs incurred in identifying and litigating instances
of unlawful conduct constitute injury in fact.

Id. at 1139.

Discrimination against
"Tester/Agents"

HOME’s claim to standing based upon the
discrimination practiced against its "tester/agents"
rests on even shakier grounds. HOME theorizes that "when the
testers encountered discrimination by Nationwide, that was an
affront to the testers, who were HOME’s agents, and an
insult to HOME’s fair housing work."

But the testers suffered no recognizable
injury. They had no bona fide interest in
purchasing insurance from Nationwide; indeed, HOME stipulated
that "none of the testers were authorized to purchase
insurance." The testers did not even ask for quotes on their
own homes.

Furthermore, a tester did not know who his or
her partner was or what race the partner belonged to, did not
know what home the partner was testing, whether the partner
received quotes from Nationwide, or what the results of the
partner’s tests were. In short, the testers never directly
encountered the effects of Nationwide’s allegedly
discriminatory practices and, hence, had no standing themselves
to maintain an action for those practices. And it follows that
the testers could not derivatively have bestowed standing upon
HOME.

That the testers have suffered no recognizable
injury is exemplified by a holding of the trial court that is not
at issue in this appeal. Originally, in addition to HOME, several
individual owners of test homes in African-American neighborhoods
in the City of Richmond were named as plaintiffs. However, they
were dismissed from the case on Nationwide’s motion because,
as the trial judge explained, they had not "suffered any
damages that the law can recognize." Yet, HOME insisted that
"[t]he individual plaintiffs in this case stand on the same
footing, essentially, as testers." Nationwide says that
"[t]he testers, who were merely pretending to be
homeowners, cannot possibly have greater rights under the
law," and we agree.

As one court put the matter in a fair housing
case:

[Testers] are investigators; they suffer no
harm other than that which they invite in order to make a case
against the persons investigated; there is no suggestion in this
case that they were paid less to be testers than the opportunity
costs of their time. The idea that their legal rights have been
invaded seems an arch-formalism.

Village of Bellwood v. Dwivedi, 895 F.2d
1521, 1526 (7th Cir. 1990).

CONCLUSION

With due respect for HOME’s worthy mission
of providing equal housing opportunities in the metropolitan
Richmond area, we conclude nonetheless that HOME lacks standing
to maintain its action against Nationwide. The trial court erred,
therefore, in denying Nationwide’s motion for summary
judgment. Accordingly, we will reverse the judgment of the trial
court, set aside the jury’s verdict, and enter final
judgment here in favor of Nationwide.

Reversed and final judgment.


JUSTICE HASSELL, with whom JUSTICE LACY and
JUSTICE KEENAN join, dissenting.

I dissent because I disagree with the
majority’s conclusion that Housing Opportunities Made Equal,
Inc., lacked standing to pursue its claims of racial
discrimination against Nationwide. The General Assembly amended
the Virginia Fair Housing Law in 1991 to permit housing
organizations such as HOME to pursue housing discrimination
claims in the courts. HOME proved with overwhelming evidence that
Nationwide engaged in intentional acts of racial discrimination
against black citizens who reside in the City of Richmond. Yet,
the majority concludes that housing organizations, such as HOME,
cannot use the courts to vindicate the rights of citizens who
have been subjected to housing discrimination.

I.

Plaintiffs, Housing Opportunities Made Equal,
Inc., (HOME), Donna Sully, Wanda Canada, and Shelton Jones, filed
their amended motion for judgment against defendants, Nationwide
Mutual Insurance Company, Nationwide Mutual Fire Insurance
Company, Jim Bocrie, Bond-King & Associates, Butler &
Hailey Insurance Agency, Cannon-Fincher Insurance Agency, Daniel
J. Sizemore, John R. Stech, Jr., and Walton Insurance Agency. The
plaintiffs alleged that the defendants committed acts of racial
discrimination in violation of the Virginia Fair Housing Law.

During the course of a two-week trial, the
circuit court granted the defendants’ motion to strike the
individual plaintiffs and also the defendants’ motion to strike
the insurance agents and agencies. At the conclusion of the
trial, the jury returned a verdict of $500,000 in compensatory
damages and $100,000,000 in punitive damages against Nationwide
Mutual Insurance Company and Nationwide Mutual Fire Insurance
Company (hereinafter referred to as Nationwide). The circuit
court entered a judgment confirming the verdict, and Nationwide
appeals.

II.

A.

I will apply well-established principles of
appellate review. A circuit court’s judgment is presumed to be
correct, Wright & Hunt, Inc. v. Wright, 205 Va.
454, 460, 137 S.E.2d 902, 907 (1964), and it will not be set
aside unless it appears from the evidence that the judgment is
plainly wrong or unsupported by the evidence. Code
? 8.01-680; Ravenwood Towers, Inc. v. Woodyard,
244 Va. 51, 57, 419 S.E.2d 627, 630 (1992). A litigant who comes
before this Court armed with a jury verdict approved by the
circuit court "occupies the most favored position known to
the law." Pugsley v. Privette, 220 Va. 892,
901, 263 S.E.2d 69, 76 (1980). On appeal, I will state the
evidence and all reasonable inferences deducible therefrom in the
light most favorable to HOME, the prevailing litigant at trial. Ravenwood
Towers
, 244 Va. at 57, 419 S.E.2d at 630.

B.

HOME is a non-profit corporation organized
under the laws of the Commonwealth of Virginia. It is also a fair
housing organization formed in 1971 to make equal opportunity in
housing a reality in central Virginia, which includes the City of
Richmond. HOME was founded by a group of people, including
members of the real estate industry, who were concerned about
racially-segregated housing patterns and unfair housing
discrimination in Richmond. Constance Chamberlin, HOME’s
executive director, stated that "HOME seeks to ensure equal
access to housing for all persons through counseling, education,
and advocacy." She testified that HOME provides counseling
to individuals and families to assist them with their housing
needs. HOME also provides education and training to members of
the housing industry so that they are aware of the fair housing
laws. HOME has programs to educate housing consumers about
their rights and responsibilities. HOME is also an advocacy
organization, but it considers litigation "[a] last
resort."

In 1994, HOME received a federal grant from the
United States Department of Housing and Urban Development to
examine racial discrimination practices by insurance companies
that issue homeowners’ insurance. HOME’s investigation included
30 insurance companies and insurance agencies. HOME also
conducted a survey and received responses which indicated to HOME
that black homeowners in predominantly black neighborhoods in the
City of Richmond were charged more for homeowners’ insurance than
white homeowners in white neighborhoods in the City.

In the course of its investigation, HOME
decided to conduct tests of insurance companies. HOME conducted
90 "pairs of tests" and 15 of those tests included
Nationwide agents. Chamberlin described the tests as follows:

"Insurance testing is a little bit
different from rental testing, for instance. . . .
In insurance testing, what you’re doing, you’re not matching
people. You’re matching houses. What we did was to try to find
matched pairs of houses, houses that were similar in age and
construction and maintenance. The primary difference between the
houses is that one house would be in [a black] neighborhood and
one house would be in a white neighborhood.

"Testers were assigned to those houses. A
tester who was going to make a call, a white tester would be
assigned to a white house in a white neighborhood to call about,
and a black tester would be assigned to a black house in a black
neighborhood to call about. Each would make calls to the same
agency to see whether they could get homeowners['] insurance."

In response to the question, "Why do you
need to use testing to investigate discrimination?",
Chamberlin replied:

"Well . . . discrimination
doesn’t happen with somebody saying ‘I’m not going to do this
because.’ People are too smart, if they are going to
discriminate, to do it that way.

"Testing is frequently the only way that
you can develop the evidence that will let you know what is
really going on.

"Testing can . . . be a very
clear indication of whether [racial] discrimination is
occurring."

HOME employed a test coordinator to supervise
the testing. All testers were trained "to be objective and
careful observers." Chamberlin described the persons who
conducted the tests as "some of [HOME's] most experienced
testers. They were people who were trained and willing to do
this." The testers were people with various professions and
included "bankers and salespeople and directors of
organizations."

Fifteen tests were conducted on Nationwide.
Matthew Hines, HOME’s test coordinator for the Nationwide tests,
testified that he decided to test houses in Ginter Park,
described as a white neighborhood in Richmond, and Highland Park
and Barton Heights, described as black neighborhoods in Richmond.

Wanda Canada, a tester, testified that she
called Daniel J. Sizemore, a Nationwide agent, on July 5, 1995.
She told him that she desired to purchase a house in the Barton
Heights neighborhood and that the closing date was July 24, 1995.
She informed him that she desired to obtain a quote for
homeowners’ insurance. He refused to provide her with a quote for
the insurance. He stated: "For homes over 50 years, we
require a preinspection by one of our inspectors. We like to have
a 30-day lead time to get an inspector out there, to check the
plumbing, the roof; make sure that everything is okay."
However, the same Nationwide agent, Daniel J. Sizemore, treated a
white tester differently. Elizabeth Poe testified that on May 16,
1996, she contacted Sizemore. She informed him that she desired
homeowners’ insurance for a house located on East Seminary
Avenue, which was described as a white neighborhood. She stated:

"I called him up and we spoke about the
address. I told him the address of the neighborhood, and then he
asked me a number of questions about the house, the age of [the] house, the construction and all of those things. And then at the
. . . end he suggested that we needed to insure it for
more than its value to have guaranteed replacement cost. I said:
Would you insure it for the price, the purchase price? He said at
that point he would need to — I need more information on the
square footage. I agreed to call him back.

"He gave me a verbal quote over the phone.
I called him back the next day with the square footage for the
basement and each floor, and then he gave me a slightly different
quote when he mailed me the written quote, which he mailed very
promptly."

Canada also performed a test with Nationwide’s
agent, Al Taylor. She called Taylor on July 20, 1995, and told
him that she intended to purchase a house in the Barton Heights
neighborhood and that the house was 70 years old. Taylor refused
to provide her with a quote for the requested insurance. Rather,
he responded, "I don’t have a market for it. . . .
[I]t’s 70 years old, and that’s too bad, and the only thing I
could do is call [another insurance company]." Sandra K.
Green, a white tester, conducted a test with Al Taylor on July
10, 1995. She called him and told him that she was "buying a
house and . . . needed quotes for homeowners['] insurance." In response to questions that he asked, she told
him that the house she desired to insure was in Ginter Park and
that the house was over 70 years old. He told her that he could
provide her with homeowners’ insurance and quoted her a premium
of $344. Subsequently, he forwarded a written quote to her in the
mail.

Regina Leftwich, a black tester, performed a
test on Nationwide agent, John R. Stech, Jr. She placed a
telephone call to Stech’s office and Linda Estes answered the
telephone. Leftwich told Estes that she desired to obtain
homeowners’ insurance for a house on Edgewood Avenue, which is
located in the Barton Heights neighborhood. Estes asked her for
the zip code of the property, and Leftwich gave it to her.
Leftwich also informed Estes that the house was over 70 years
old. She told Estes that the closing date was October 31. Estes
initially told Leftwich that Leftwich could obtain insurance at a
rate of $306 per year. Leftwich asked Estes to mail a written
quote to her, and Estes promised to do so.

Later, Estes called Leftwich over the telephone
and stated, "I saw the house, I can’t insure it,
sorry," and hung up the phone. Subsequently, Leftwich placed
a telephone call to Estes and asked why "Nationwide was
unable to write homeowners['] insurance . . . and was
there an issue of which [she] should be aware. [Estes] said this
particular Nationwide office did not write homeowners['] [insurance] for houses greater than 50 years of age."

At trial, Stech testified that he was aware
that Linda Estes had spoken to Leftwich and that his office had
sent a written quote for insurance to her. He also confirmed that
he called Ms. Estes and told her that "[w]e cannot now give
you a quote on this property" and that no reason was given
for the failure to provide a quote. Stech gave the following
testimony:

"Q: Ms. Estes told [Leftwich] that your
office did not insure homes over 50 years old; is that correct?

"A: That’s was Ms. Estes said, yes.

. . . .

"Q: When Ms. Estes told Ms. Leftwich that
your office does not insure homes over 50 years old, that was
untrue, wasn’t it?

"A: Yes, it was.

"Q: Because you understood that Nationwide
did insure homes over 50 years, didn’t you?

"A: That’s correct.

"Q: In fact, you, just within the few days
prior or around the situation with Ms. Leftwich, you had issued
quotes or processed insurance applications for homes that were
over 50 years of age; correct?

"A: That’s correct."

Stech also testified that he had mailed a
written quote for homeowners’ insurance to a white female for a
home over 50 years old.

HOME’s testing of Nationwide revealed that
Nationwide refused to issue homeowners’ insurance quotes for nine
of the 15 tests for houses in black neighborhoods, which totaled
a 60% rejection rate. However, Nationwide only refused to provide
quotes for four of the 16 homes in white neighborhoods, a 25%
rejection rate. Each pair of homes was matched, however, for
similar features and age.

Nationwide agents gave the following reasons
for their decisions to refuse to offer homeowners’ insurance to
homeowners in predominantly black neighborhoods: Nationwide did
not insure homes over 50 years old; Nationwide needed 30 days
notice before closing in order to write insurance; or Nationwide
did not insure homes with market values less than $60,000.
However, in each corresponding test, the white tester who
received a quote had represented to the Nationwide insurance
agent that the "quoted" house had a similar age,
closing date, and market value as a house in a black neighborhood
for which Nationwide refused to provide an insurance quote. In
every test in which both homes received quotes, the quotes for
insurance premiums given to the black testers were higher than
the quotes given to the white testers.

Patrick Irvine, a Nationwide employee, had been
the agency manager in central Virginia for over 28 years. He
testified that a Nationwide agent can provide a homeowner with a
quote even if a house is over 50 years old and an inspection has
not been performed. The quote would simply be subject to a
favorable inspection.

Joseph Lowe, III, a former Nationwide insurance
agent, testified that Nationwide used race as a factor to
distinguish between the issuance of homeowners’ insurance
policies to homeowners in black neighborhoods and homeowners in
white neighborhoods. He gave the following testimony:

"Q: Let me ask you: Do you remember, even
generally, specific homes that you tried to insure in [black] neighborhoods that may have been comparable to homes in other
neighborhoods?

"A: I can’t remember specific homes, but I
can remember neighborhoods. In other words, some neighborhoods,
primarily over in the Church Hill section [of Richmond], over in
the east end, I would write a particular house, and Nationwide
would not accept that house. And I, for certain reasons, I’ve
seen houses of the same caliber written in white neighbor[hoods] that Nationwide did accept. And I even had cases where I’d go
into a house in a neighborhood, wrote that house, wrote that
particular house  . . .

"I’ve gone into certain neighborhoods and
written houses that Nationwide rejected that particular house
because of the house next door to it; in other words, saying that
the house next door to it is too — it’s too close, or too
old, or something of that nature. When that same house that
Nationwide rejected was written in a . . . white
neighborhood, I have gotten that same similar house through. Put
it that way."

William H. Lee, Sr., another former Nationwide
insurance agent, testified that Nationwide treated homeowners in
black neighborhoods differently than it treated homeowners in
white neighborhoods. He said that Nationwide implicitly directed
its insurance agents that Nationwide did not wish to insure
properties in certain black neighborhoods in Richmond. He also
testified that Nationwide applied its insurance underwriting
standards more stringently to houses in black neighborhoods:

"Q: And how did Nationwide’s treatment,
based on your observation and your experience, how did
Nationwide’s treatment of homes in [black] areas compare with
Nationwide’s treatment of homes in [white] areas?

"A. Much stricter.

"Q: Much more strict?

"A: That’s right."

Nationwide used the racial composition of
neighborhoods as a factor in its marketing strategies. After a
1990 market study, Nationwide used a racial profile report known
as MicroVision. The developers of MicroVision identified every
zip code in the United States and placed each zip code into one
of 50 categories, evaluated primarily by racial identity.
Nationwide used these designations that contained
racially-offensive stereotypical names. For example, black
communities with certain zip codes in Richmond were referred to
as "difficult times." Members of this community were
described as "working hard to survive, they have little time
for recreation, but they do watch situation comedies and read TV
Guide."

Nationwide divided Richmond zip codes into
market groups and applied racial profiles to each zip code area.
Four of the market groups were designated "affluent,"
"mainstream," "mature," and "country
living," and were considered by Nationwide as favorable
marketing groups. Neighborhoods comprised of white homeowners
were placed in these favorable marketing classifications.
Nationwide classified every black neighborhood in Richmond as
unfavorable and placed the neighborhoods in an undesirable
marketing category labeled "remaining diverse."

Nationwide also used a marketing tool referred
to as its Local Area Marketing Plan to help define Nationwide’s
insurance market. This marketing plan also placed every zip code
into one of four categories: best in state, best in market, next
best in market, and remaining. Every zip code area that had a
predominantly black population in Richmond was placed in the
"remaining" category.

John Robert Hunter, Jr., who served as the
chief actuary of the Federal Insurance Administration Agency, and
who was subsequently the administrator of the Federal Insurance
Agency in the United States Department of Housing and Urban
Development under two United States presidents, qualified as an
expert witness on the subjects of regulation of insurance
companies, issuance of homeowners’ insurance policies,
"redlining," insurance actuaries, and insurance surplus
requirements. He testified that from an actuarial vantage, the
racial composition of a neighborhood has no correlation to
insurance risks. He testified that Nationwide’s marketing data is
not related to actuarial data or experience in the community, but
that Nationwide’s marketing plan and its MicroVision material
contain racial identifiers. Hunter opined, without objection,
that Nationwide’s marketing policies and strategies indicate that
Nationwide tried to avoid issuing insurance policies to black
homeowners in black neighborhoods in Richmond.

Rick Becker, Nationwide’s market manager for
the Commonwealth of Virginia, testified that Nationwide’s
homeowners’ insurance products that are sold in black
neighborhoods are more expensive and less comprehensive than
other Nationwide products which afford more protection to
non-black homeowners. Dr. Scott Harrington, Nationwide’s own
expert witness, gave the following testimony:

"Q: A company’s target market, in which
you discuss target marketing, should not focus on racial
characteristics of neighborhoods, should it?

"A: That would be illegal and unfair, in
my opinion. It’s illegal and, according to my opinion, it would
be very unfair.

"Q: Just because a neighborhood is a
minority neighborhood does not mean, for example, it’s a bad risk
or likely to have losses, for example, or excess losses, would
it?

"A: You’re correct."

Chamberlin, HOME’s executive director,
testified that HOME was forced to divert resources from other
agency programs in order to conduct its investigation of
Nationwide’s racially-discriminatory practices. Additionally,
HOME expended $6,000 to $7,000 worth of staff time to conduct the
investigation. HOME also was required to provide approximately
$150,000 of its resources to implement a HUD-sponsored grant
which it had obtained to investigate race or discriminatory
practices in the provision of homeowners’ insurance. HOME also
had to divert resources from other programs to conduct its
investigation.

III.

A.

Code ? 36.96.1(B), which is part of the
Virginia Fair Housing Law, states:

"It is the policy of the Commonwealth of
Virginia to provide for fair housing throughout the Commonwealth,
to all its citizens, regardless of race, color, religion,
national origin, sex, elderliness, familial status, or handicap,
and to that end to prohibit discriminatory practices with respect
to residential housing by any person or group of persons, in
order that the peace, health, safety, prosperity, and general
welfare of all the inhabitants of the Commonwealth may be
protected and insured. This law shall be deemed an exercise of
the police power of the Commonwealth of Virginia for the
protection of the people of the Commonwealth."

Code ? 36-96.4 states in part:

"A. It shall be unlawful for any person or
other entity, including any lending institution, whose business
includes engaging in residential real estate-related
transactions, to discriminate against any person in making
available such a transaction, or in the terms or conditions of
such a transaction, or in the manner of providing such a
transaction, because of race, color, religion, national origin,
sex, elderliness, familial status, or
handicap. . . .

"B. As used in this section, the term
"residential real estate-related transaction"
means any of the following:

. . . .

"2. The selling, brokering, insuring or
appraising of residential real property."

Code ? 36-96.18(A) states in relevant
part:

"An aggrieved person may commence a civil
action in an appropriate United States district court or state
court not later than two years after the occurrence or the
termination of an alleged discriminatory housing practice
. . . ."

Code ? 36-96.1:1 states in part:

"For the purposes of this chapter, unless
the context clearly indicates otherwise:

"’Aggrieved person‘ means any
person who (i) claims to have been injured by a discriminatory
housing practice or (ii) believes that such person will be
injured by a discriminatory housing practice that is about to
occur.

. . . .

"’Discriminatory housing practices
means an act that is unlawful under ?? 36-96.3, 36-96.4,
36-96.5, or ? 36-96.6.

. . . .

"’Person‘ means one or more
individuals, whether male or female, corporations, partnerships,
associations, labor organizations, fair housing organizations,
civil rights organizations, organizations, governmental entities,
legal representatives, mutual companies, joint stock companies,
trusts, unincorporated organizations, trustees, trustees in
bankruptcy, receivers and fiduciaries."

B.

Nationwide argues that HOME lacks standing
under the Virginia Fair Housing Law to pursue a cause of action
under the aforementioned statutes because HOME is not an
"aggrieved person." Relying upon our decision in Virginia
Beach Beautification Commission
v. Board of Zoning Appeals,
231 Va. 415, 419, 344 S.E.2d 899, 902 (1986), Nationwide asserts
that HOME must show that it has an immediate, pecuniary, and
substantial interest in the litigation in order to have standing.
Responding, HOME contends that it is an aggrieved

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