Aarp v. E.E.O.C.

• Decision Date: 30 March 2005
• Docket Number: No. 05-CV-509.,05-CV-509.
• Parties: AARP, et al., Plaintiffs, v. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

Page 705

383 F.Supp.2d 705

AARP, et al., Plaintiffs, v. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Defendant.

No. 05-CV-509.

United States District Court, E.D. Pennsylvania.

March 30, 2005.

Christopher G. Mackaronis, Michael J. Schrier, Bell Boyd & Lloyd PLLC, Laurie A. McCann, AARP Foundation Litigation, Washington, DC, Stephen G. Console, Console Law Offices LLC, Philadelphia, PA, for Plaintiffs.

Gillian Flory, Henry A. Azar, Jr., Jennifer R. Rivera, US Department of Justice, Jacqueline Eloine Coleman, U.S. Dept of Justice Civil Division Federal Programs Branch, Washington, DC, Joan K. Garner, U.S. Attorney's Office, Philadelphia, PA, for Defendant.

Douglas L. Greenfield, Bredhoff & Kaiser PLLC, Ann Elizabeth Reesman, Daniel Yager, McGuiness Norris & Williams, Washington, DC, Daniel P. O'Meara, Montgomery McCracken Walker & Rhoads, LLP, Philadelphia, PA, for Movants.

MEMORANDUM AND ORDER

ANITA B. BRODY, District Judge.

INTRODUCTION

In this case, the AARP seeks to stop the Equal Employment Opportunity Commission (the "EEOC") from putting into effect an exemption.¹ This exemption allows employers to give retirees 65 or older health benefits that are inferior to the health benefits given to retirees who are younger than 65. The AARP argues that this practice is employment discrimination on the basis of age and is illegal under the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq., (the "ADEA").²

The EEOC argues persuasively that without this exemption, employers will reduce or eliminate health benefits for all retirees, no matter what their age. This is because retiree health benefits are becoming so expensive that employers cannot afford to give the same level of health benefits to all of their retirees. With the EEOC's exemption, employers could afford to offer greater health benefits to its retirees under age 65. Retirees over age 65 are eligible for Medicare and, therefore, have less need for employer-provided health benefits. Representatives from labor unions, the health insurance industry, and employer groups have filed amici curiae briefs in support of the EEOC's exemption.

Unfortunately for the EEOC, the Third Circuit Court of Appeals has already ruled that allowing employers to give retirees 65 or older health benefits that are inferior to the health benefits given to retirees who are younger than 65 is illegal under the ADEA. Erie County Retirees Ass'n v. County of Erie, 220 F.3d 193 (3d Cir.2000).

Plaintiffs AARP, Jack W. Macmillan, Frank H. Smith, Jr., Frank A. Wheeler, Fred Dochat, Gerald Fowler, and M. Elaine Clay (collectively referred to as the "AARP") bring this suit for declaratory judgment and permanent injunctive relief against defendant EEOC under the Administrative Procedure Act ("APA"), 5 U.S.C. § 551 et seq., the ADEA, 29 U.S.C. § 621 et seq., Article V of the United States Constitution, and the doctrine of separation of powers. The AARP seeks to enjoin implementation of the EEOC's recently approved regulation³ that would allow employers, without restriction, to reduce or terminate retiree health benefits when the retiree reaches age 65. Jurisdiction is based on the existence of a federal question. I have power to grant the requested relief, declaratory judgment and a permanent injunction, under 5 U.S.C. §§ 702 & 706.

BACKGROUND

Erie County Retirees Association v. County of Erie, 220 F.3d 193 (3rd Cir.2000), involved litigation over the provisions of the health benefits plan offered by the County of Erie, Pennsylvania, to its employees. Under this plan, the health coverage options for retirees were allegedly reduced once these retirees became Medicare-eligible. The Third Circuit reviewed the applicability of the ADEA, as amended by the Older Workers Benefit Protection Act ("OWBPA"), Pub.L. No. 101-433 (1990), to Erie County's plan. 220 F.3d at 196. Based upon a detailed statutory analysis of the Act, the Third Circuit held that it was clear from the face of the Act that Congress intended for the ADEA's prohibitions against age discrimination to apply to the practice of reducing retiree health benefits when retirees become eligible for Medicare. Id. at 208-17; Def.'s Opp. Pls.' Mot. Prelim. Inj. at 6; Mem. Supp. Pls.' Mot. Prelim. Inj. at 11-12. The Third Circuit concluded that Erie County's policy violated the ADEA unless Erie County met the "equal benefit or equal cost" defense set forth in 29 U.S.C. § 623(f)(2)(B)(i). Id.⁴

In October 2000, the EEOC adopted the Erie County ruling as its national enforcement policy. EEOC, Compliance Manual, Section 3: Employee Benefits, at § 3-IV B (2000). Through its enforcement, the EEOC learned that the Erie County rule was having the unintended consequence of discouraging employers from providing any retiree health benefits, which employers are not required by law to provide, so as not to run afoul of the ADEA's non-discrimination provisions. (Def.'s Opp. Pls.' Mot. Prelim. Inj. at 1.) Concerned about the detrimental effect of Erie County enforcement on retiree health plans, the EEOC voted unanimously in August 2001 to rescind the retiree health benefits portion of the Compliance Manual to further study and evaluate the position of the agency towards retiree health benefits. 68 Fed.Reg. 41,545 n. 25 (July 14, 2003). In examining the enforcement of the Erie County rule, the EEOC concluded that the equal benefit or equal cost defense was impracticable when applied to retiree health benefit plans. Id. at 41,546.

On July 14, 2003, the EEOC published for notice and comment a proposed rule that would exempt the coordination of retiree health benefit plans with Medicare-eligibility from the prohibitions of the ADEA even if that coordination did not satisfy the equal benefit or equal cost defense. 68 Fed.Reg. 41542 (July 14, 2003). On April 22, 2004, the EEOC approved the final rule containing the following relevant language:

(b) Exemption. Some employee benefit plans provide health benefits for retired participants that are altered, reduced or eliminated when the participant is eligible for Medicare health benefits or for health benefits under a comparable State health benefit plan, whether or not the participant actually enrolls in the other benefit program. Pursuant to the authority contained in section 9 of the Act [the ADEA], and in accordance with the procedures provided therein and in § 1625.30(b) of this part, it is hereby found necessary and proper in the public interest to exempt from all prohibitions of the Act such coordination of retiree health benefits with Medicare or a comparable State health benefit.

EEOC Final Rule on ADEA Exemption for Retiree Health Benefits, Daily Lab. Rep. (BNA) No. 78, at E-1 (April 23, 2004). The approved exemption will take effect upon publication in the Federal Register.

On February 4, 2005, the AARP filed this suit challenging the exemption. At the same time, the AARP also filed a motion for a temporary restraining order and a preliminary injunction. In a hearing held on February 4, 2005, the EEOC agreed not to publish the challenged exemption before April 5, 2005. (Order of February 7, 2005.) On March 18, 2005, I heard oral arguments on the applicability of Erie County to the challenged exemption. After oral arguments, it was apparent that neither the AARP nor the EEOC dispute the holding of Erie County or the substance of the challenged exemption. (Tr. 3/18/05 at 7, 11; Def.'s Opp. Pls.' Mot. Prelim. Inj. at 6; Mem. Supp. Pls.' Mot. Prelim. Inj. at 11-12.) The EEOC agrees that the challenged exemption addresses the exact same policy that was examined in Erie County. (Tr. 3/18/05 at 7; Def.'s Opp. Pls.' Mot. Prelim. Inj. at 21.) The EEOC also concedes that, absent the challenged exemption, the provisions of the ADEA prohibit the practice of reducing or terminating retiree health benefits in accordance with Medicare eligibility. (Tr. 3/18/05 at 11, 15, 23.) With the agreement of both parties, under Federal Rule of Civil Procedure 65(a)(2), the application for a preliminary injunction is advanced as a trial of the action on the merits. (Pls.' Mot. Consolidate; Def.'s Resp. Pls.' Mot. Consolidate; Order of March 16, 2005.)

Currently before me are both parties' motions for summary judgment. Pursuant to Federal Rule of Civil Procedure 56(c), "[s]ummary judgment should be granted if, after drawing all reasonable inferences from the underlying facts in the light most favorable to the non-moving party, the court concludes that there is no genuine issue of material fact to be resolved at trial and the moving party is entitled to judgment as a matter of law." Kornegay v. Cottingham, 120 F.3d 392, 395 (3d Cir.1997). Both parties are in complete agreement on the facts of this case and the instant motions may be resolved as a matter of law. For the reasons set forth below, the AARP's motion is granted and the EEOC's motion is denied.

DISCUSSION

The AARP argues, inter alia, that the challenged exemption is contrary to the plain language of the ADEA. (Mem. Supp. Pls.' Mot. Prelim. Inj. at 7.) The EEOC argues that, under § 9 of the ADEA, 29 U.S.C. § 628, it has the power to issue the challenged exemption from the provisions of the ADEA because the exemption is "reasonable" and "necessary and proper in the public interest." (Def.'s Opp. Pls.' Mot. Prelim. Inj. at 20.) For the reasons set forth below, the AARP's argument is correct.

There is a two-step approach to judicial review of agency interpretations of acts of Congress. Chevron, U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 843, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). First, the reviewing court must determine whether Congress expressed a clear and unambiguous intent in the statute concerning the precise question at issue. If congressional intent is clear and unambiguous, then that intent is the law and must be given effect. The court proceeds to the second step only "if the statute is silent or ambiguous with respect to...