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UNITED A., A., & A.I.W. OF AMERICA v. STATE FARM M.A.I. CO.

September 20, 1972

UNITED AUTOMOBILE, AEROSPACE, AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA (UAW), BY ROBERT JOHNSTON, REGIONAL DIRECTOR, FOR ITSELF AND ON BEHALF OF CERTAIN MEMBERS AND EMPLOYEES, ET AL., PLAINTIFFS,
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY ET AL., DEFENDANTS.



The opinion of the court was delivered by: Bauer, District Judge.

MEMORANDUM OPINION AND ORDER

This cause comes on certain defendants' motion to dismiss pursuant to Rules 12(b)(1) and (6) of the Federal Rules of Civil Procedure.

Plaintiff United Automobile, Aerospace and Agricultural Implement Workers of America ("UAW") is a labor organization composed of over 1.5 million workers. Plaintiffs Porter, Watkins and Wright are black motorists who reside in the City of Chicago in an area which will hereinafter be referred to as Area 43. Plaintiffs Moscovitch and Carter are white motorists who reside in Area 43. Defendants, except for the Insurance Rating Board ("IRB"), are insurance companies doing business in Illinois. Defendant IRB, now doing business as the Insurance Services Office ("ISO"),*fn1 is an advisory organization which provides insurance carriers with statistical, actuarial, rating, policy form and related services with respect to various lines of insurance, including automobile insurance.

Plaintiffs base federal jurisdiction over the instant case upon various sections of the post-Civil War civil rights legislation — specifically, 42 U.S.C. § 1981-1983. The complaint alleges that in March of 1970, the defendants divided the City of Chicago into four zones for the purpose of setting new automobile insurance premium rates. One of the zones thus created, plaintiffs allege, was that area of Chicago bounded on the north by Chicago Avenue, on the south by 95th Street, on the east by Lake Michigan and on the west by Ashland Avenue and certain other streets west of Ashland Avenue. This is the area which has been referred to as Area 43. The complaint alleges that at the time Area 43 was created, and at all times thereafter, the defendants knew that Area 43 encompassed approximately 85% of the black population in Chicago. The complaint further alleges:

    In so establishing Area 43 the defendants isolated
  or segregated the bulk of the Negro population of
  Chicago and established for those persons
  substantially higher automobile insurance rates,
  thereby discriminating against and depriving these
  persons of equal opportunity to contract for
  automobile insurance.

The primary reason urged by defendants for dismissing the instant suit is the alleged failure of plaintiffs to exhaust their state administrative remedies. Whether this proffered reason is valid depends upon the resolution of two separate issues: (1) Are plaintiffs in a civil rights suit required to exhaust remedies, and (2) if so, are adequate state administrative remedies available to plaintiffs in the instant case? Each of these issues will be discussed separately.

I. ARE PLAINTIFFS IN A CIVIL RIGHTS SUIT REQUIRED TO EXHAUST
    STATE REMEDIES?
  In Monroe v. Pape, 365 U.S. 167, 169, 81 S.Ct. 473, 474, 5
L.Ed.2d 492 (1961), the complaint alleged that:

   . . 13 Chicago police officers broke into
  petitioners' home in the early morning, routed them
  from bed, made them stand naked in the living room,
  and ransacked every room, emptying drawers and
  ripping mattress covers. It further alleg[ed] that
  Mr. Monroe was then taken to the police station and
  detained on `open' charges for 10 hours, while he was
  interrogated about a two-day-old murder, that he was
  not taken before a magistrate, though one was
  accessible, that he was not permitted to call his
  family or attorney, that he was subsequently released
  without criminal charges being preferred against him.

The complaint further alleged that the officers, who did not have a valid search warrant, acted "under color of the statutes, ordinances, regulations, customs and usages" of Illinois. When the defense of plaintiffs' failure to exhaust state remedies was raised, the Court stated:

  It is no answer that the State has a law which if
  enforced would give relief. The federal remedy is
  supplementary to the state remedy, and the latter
  need not be first sought and refused before the
  federal one is invoked. Hence the fact that Illinois
  by its constitution and laws outlaws unreasonable
  searches and seizures is no barrier to the present
  suit in the federal court. Id. at 183, 81 S.Ct. at
  482.

In McNeese v. Board of Education, 373 U.S. 668, 83 S.Ct. 1433, 10 L.Ed.2d 622 (1963), the complaint alleged that the defendant school board required black students to attend classes in a segregated part of the school and use entrances and exits separate from the whites'. The lower court, dismissing the action, held that the administrative remedy provided by the Illinois statute must first be exhausted. The state statute provided that 50 residents of a school district or 10%, whichever is less, could file a complaint with the Superintendent of Public Instruction alleging that a pupil had been discriminated against in a school on account of race. The Superintendent, on notice to the school board, could then put the complaint down for a hearing within a prescribed time. After the hearing, the Superintendent would notify the parties of his decision and, if he decided that the allegations in the complaint were "substantially correct," would request the Illinois Attorney General to bring suit to rectify the practice.

The Court, in reversing an affirmance of the dismissal, stated:

    We have, however, in the present case no underlying
  issue of state law controlling this litigation. The
  right alleged is as plainly federal in origin and
  nature as those vindicated in Brown v. Board of
  Education, 347 U.S. 483, 74 S.Ct. 686, 98 L.Ed. 873.
  It is immaterial whether respondents' conduct is
  legal or illegal as a matter of state law. . . . Such
  claims are entitled to be adjudicated in the federal
  courts. Id. at 674, 83 S.Ct. at 1437 [footnotes
  omitted].

In Damico v. California, 389 U.S. 416, 88 S.Ct. 526, 19 L.Ed.2d 647 (1967), welfare claimants under California's welfare code sought a declaratory judgment of unconstitutionality against certain of the code's sections and regulations. The three-judge District Court dismissed the complaint solely because "it appear[ed] to the Court that all of the plaintiffs [had] failed to exhaust adequate administrative remedies." The Court, in reversing, stated:

  This was error. In McNeese v. Board of Education,
  373 U.S. 668, 83 S.Ct. 1433, 10 L.Ed.2d 622, noting that
  one of the purposes underlying the Civil Rights Act
  was `to provide a remedy in the federal courts
  supplementary to any remedy any State might have,' .
  . . we held that `relief under the Civil Rights Act
  may not be defeated because relief was not first
  sought ...

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