American Ass'n of Retired Persons v. E.E.O.C.

• Decision Date: 04 June 2007
• Docket Number: No. 05-4594.,05-4594.
• Parties: AMERICAN ASSOCIATION OF RETIRED PERSONS; Jack W. MacMillan; Frank H. Smith, Jr.; Frank A. Wheeler; Fred Dochat; Gerald Fowler; M. Elaine Clay, Appellants v. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION.
• Court: U.S. Court of Appeals — Third Circuit

489 F.3d 558

AMERICAN ASSOCIATION OF RETIRED PERSONS; Jack W. MacMillan; Frank H. Smith, Jr.; Frank A. Wheeler; Fred Dochat; Gerald Fowler; M. Elaine Clay, Appellants v. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION.

No. 05-4594.

United States Court of Appeals, Third Circuit.

Argued: February 27, 2007.

Filed: June 4, 2007.

Christopher G. Mackaronis (Argued), Brickfield, Burchette, Ritts and Stone, Laurie A. McCann, American Association of Retired Persons, Washington, DC, Stephen G. Console, Philadelphia, PA, Counsel for Appellants.

Anthony A. Yang (Argued), United States Department of Justice, Appellate Section, Marleigh D. Dover, United States Department of Justice, Washington, DC, Counsel for Appellees.

Barbara B. Brown, Neal D. Mollen, Paul, Hastings, Janofsky & Walker, Washington, DC, for Counsel for Amicus-Appellee Chamber of Commerce of the United States.

Douglas L. Greenfield, Bredhoff & Kaiser, Washington, DC, Counsel for Amicus-Appellees National Education Association; American Federation of Teachers; International Union, United Automobile, Aerospace and Agricultural Implement Workers of America; American Federation of State, County and Municipal Employees; United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union; and International Association of Fire Fighters.

Ann E. Reesman, McGuiness, Norris & Williams, Washington, DC, Counsel for Amicus-Appellees Equal Employment Advisory Council; HR Policy Association; America's Health Insurance Plans; American Benefits Council; ERISA Industry Committee; National Rural Electric Cooperative Association; Society for Human Resource Management; American Council on Education; College and University Professional Association for Human Resources; and WorldatWork.

Before: MCKEE and ALDISERT, Circuit Judges, and RESTANI^*, Judge.

OPINION OF THE COURT

RESTANI, Judge.

Appellants American Association of Retired Persons, et al. ("AARP"), appeal a judgment of the United States District Court for the Eastern District of Pennsylvania. The District Court vacated, on the basis of a significant change in law, a previous grant of summary judgment in favor of AARP, and instead granted summary judgment in favor of the Equal Employment Opportunity Commission ("EEOC"). At issue is a regulation that would exempt from the Age Discrimination in Employment Act ("ADEA")¹ employer coordination of retirement benefits with, inter alia, Medicare benefits. AARP challenges the regulation as contrary to the terms of the ADEA, and seeks to reinstate the District Court's permanent injunction against implementation of the regulation. We will affirm the District Court's order granting summary judgment in favor of the EEOC on grounds other than those relied on by the District Court.

BACKGROUND

On July 14, 2003, the EEOC published a notice of proposed rulemaking to exempt from the prohibitions of the ADEA "the practice of altering, reducing or eliminating employer-sponsored retiree health benefits when retirees become eligible for Medicare or a State-sponsored retiree health benefits program." Age Discrimination in Employment Act; Retiree Health Benefits, 68 Fed.Reg. 41,542, 41,542 (EEOC July 14, 2003) (notice of proposed rulemaking).² AARP brought suit in the Eastern District of Pennsylvania on February 4, 2005, challenging the proposed regulation under the Administrative Procedure Act, 5 U.S.C. §§ 551, et seq. ("APA"), and the ADEA. AARP v. Equal Employment Opportunity Comm'n, 383 F.Supp.2d 705, 708 (E.D.Pa.2005) ("AARP I").

Initially, the District Court granted summary judgment in favor of AARP, holding that the challenged regulation was contrary to law under this court's decision in Erie County Retirees Ass'n v. County of Erie, 220 F.3d 193 (3d Cir.2000). In Erie County, consistent with the position of the EEOC in that action, we held that, as Medicare eligibility is age dependent, the ADEA did not permit reduction or termination of retiree health benefits upon Medicare eligibility unless the employer met the "equal benefit or equal cost" defense set forth in section 4 of the ADEA.³ Id. at 217. Accordingly, here the District Court stated that "[b]ecause the Third Circuit held in Erie County that Congress intended the ADEA to apply to the exact same behavior that the EEOC would exempt, the EEOC's challenged exemption is contrary to Congressional intent and the plain language of the ADEA." AARP I, 383 F.Supp.2d at 710. The District Court permanently enjoined the EEOC from "publishing or otherwise implementing the regulation at issue." Id. at 712. The EEOC appealed that judgment.

On June 27, 2005, while the first appeal was pending, the Supreme Court decided National Cable and Telecommunications Ass'n v. Brand X Internet Services, 545 U.S. 967, 125 S.Ct. 2688, 162 L.Ed.2d 820 (2005). Brand X held that prior judicial interpretation of a statute bars subsequent agency interpretations only where the precedent "unambiguously forecloses the agency's interpretation, and therefore contains no gap for the agency to fill." Brand X, 545 U.S. at 983, 125 S.Ct. 2688. The EEOC moved for relief from judgment in the District Court, citing Brand X as an intervening change of law with respect to the court's application of Erie County and arguing that its proposed regulation was consistent with the statute. AARP v. Equal Employment Opportunity Comm'n, 390 F.Supp.2d 437, 441-42 (E.D.Pa.2005) ("AARP II"). The District Court granted the motion, vacating its decision in AARP I and granting summary judgment in favor of the EEOC. Id. at 462. The District Court stayed its order lifting the permanent injunction pending any appeal. Id. at 463. AARP appeals.

JURISDICTION AND STANDARD OF REVIEW

The District Court had jurisdiction under 28 U.S.C. § 1331. We have jurisdiction under 28 U.S.C. § 1291. We review the District Court's grant of summary judgment de novo. Concerned Citizens Alliance, Inc., v. Slater, 176 F.3d 686, 693 (3d Cir.1999).

DISCUSSION

At issue is whether the proposed regulation is within the EEOC's authority under the ADEA, and whether the regulation is valid under the APA.

I. The Proposed Regulation is Within the EEOC's Exemption Authority Under Section 9 of the ADEA

There is a well-trodden two-step approach to judicial review of an agency regulation. Chevron, U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837, 842-43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). Step one asks "whether Congress has directly spoken to the precise question at issue." Id. at 842, 104 S.Ct. 2778. If the intent of Congress is clearly expressed in the statute, "that is the end of the matter; for the court, as well as the agency," and such intent must be given effect. Id. at 842-43, 104 S.Ct. 2778. "[I]f the statute is silent or ambiguous with respect to the specific issue," then the court proceeds to a step-two determination of whether the agency interpretation is based on a "permissible construction" of the statute. Id. at 843, 104 S.Ct. 2778.

The precise question in this case is whether the EEOC has the power to issue a regulation exempting from the prohibitions of the ADEA employer-sponsored benefits plans that coordinate retiree health benefits with eligibility for Medicare or state-sponsored health benefits programs. Section 9 of the ADEA authorizes the EEOC to "establish such reasonable exemptions to and from any or all provisions of [the Act] as it may find necessary and proper in the public interest." 29 U.S.C. § 628. The EEOC acknowledges this source of authority in its notice of the proposed rulemaking, stating that "[a]fter an in-depth study, the Commission believes that the practice of [coordinating retiree health benefits with Medicare eligibility] presents a circumstance that warrants Commission exercise of its ADEA exemption authority.... [P]ursuant to its authority under Section 9 of the Act, the EEOC proposes ... this notice of proposed rulemaking." 68 Fed.Reg. at 41,542.

Section 9 clearly and unambiguously grants to the EEOC the authority to provide, at least, narrow exemptions from the prohibitions of the ADEA. By definition, the power to grant "exemptions" provides an agency with authority to permit certain actions at variance with the express provisions of the statute in question. By stating that "any or all provisions" may be subject to exemptions,⁴ Congress made plain its intent to allow limited practices not otherwise permitted under the statute, so long as they are "reasonable" and "necessary and proper in the public interest." 29 U.S.C. § 628 (emphasis added).⁵ Because the language of section 9 expressly grants to the EEOC the power to implement such exceptions, there is no question that a limited exemption shown by the agency to be reasonable, necessary, and proper falls within the agency's authority under the statute.

AARP argues that the proposed exemption exceeds the EEOC's authority under section 9 because it would allow certain employer practices otherwise prohibited by the ADEA. (See Appellants' Br. 35-36.) AARP points to section 4 of the ADEA, which states that "[i]t shall be unlawful for an employer ... [to] discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's age." 29 U.S.C. § 623(a)(1). As discussed previously, however, it is clear that Congress intended to permit limited exemptions from the ADEA, including the anti-discrimination provision of section 4. Section 9 unambiguously grants reasonable exemption authority to the EEOC, and plainly states that such authority applies to any and all parts of the statute. Because section 9 clearly grants such authority to the EEOC, the fact that the proposed regulation would allow certain practices not otherwise permitted under section 4 does not render the regulation invalid.

This is not to say that the EEOC's exemption authority is unlimited. As indicated, section 9 limits permissible...