E.E.O.C. v. Puget Sound Log Scaling and Grading Bureau

• Decision Date: 29 January 1985
• Docket Number: 3807,Nos. 84-3767,s. 84-3767
• Citation: 752 F.2d 1389
• Parties: 36 Fair Empl.Prac.Cas. 1664, 36 Empl. Prac. Dec. P 34,969, 53 USLW 2408, 6 Employee Benefits Ca 1212 EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff-Appellant, v. PUGET SOUND LOG SCALING AND GRADING BUREAU, and Northwest Log Scalers Association, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1389

752 F.2d 1389

36 Fair Empl.Prac.Cas. 1664,

36 Empl. Prac. Dec. P 34,969, 53 USLW 2408,

6 Employee Benefits Ca 1212

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, Plaintiff-Appellant, v. PUGET SOUND LOG SCALING AND GRADING BUREAU, and Northwest

Log Scalers Association, Defendants-Appellees.

Nos. 84-3767, 3807.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Dec. 3, 1984.

Decided Jan. 29, 1985.

Justine Lisser, E.E.O.C., Washington, D.C., for plaintiff-appellant.

Mary E. Drobka, Davis, Wright, Todd, Riese & Jones, Seattle, Wash., for defendants-appellees.

Appeal from the United States District Court for the Western District of Washington.

Before BROWNING, Chief Judge, and GOODWIN and SKOPIL, Circuit Judges.

GOODWIN, Circuit Judge.

In this enforcement action EEOC appeals from an adverse partial summary judgment which disposed of the one claim not covered by stipulation.

Until 1979, the health insurance policy which Puget Sound offered its employees did not provide full coverage for pregnancy-related expenses of female employees or spouses of male employees. Following passage in 1978 of the Pregnancy Discrimination Act (PDA), 42 U.S.C. 2000e(k) (1982) ¹, Puget Sound amended its health policy to cover the pregnancy-related expenses of female employees, but continued to exclude those of spouses of male employees. In January 1982, a male employee and the employees' union filed a discrimination complaint with the EEOC alleging that the policy, as amended, discriminated against male employees by providing them with less comprehensive health insurance benefits than it provided to female employees and their spouses. In September 1983, EEOC brought an action in federal district court on behalf of Puget Sound's male employees whose spouses had incurred noncovered pregnancy-related expenses which would have been covered if incurred by female employees.

The substantive question in that action had been decided several months earlier in Newport News Shipbuilding & Dry Dock Co. v. EEOC, 462 U.S. 669, 103 S.Ct. 2622, 77 L.Ed.2d 89 (1983). In Newport News the Supreme Court held that Congress had clearly intended the PDA to extend to benefit packages, 103 S.Ct. at 2630, and that any insurance policy which limits the coverage available to pregnant spouses of employees but not to pregnant employees discriminates against male employees on the basis of sex. Id. at 2631-32. On the day that Newport News was decided, Puget Sound amended its policies to provide full coverage for pregnant spouses of employees. The only question before us is whether Newport News should be given retroactive effect to 1978 (the date of passage of the Pregnancy Discrimination Act).

Resolution of this question calls for application of the factors set forth in Chevron Oil Co. v. Huson, 404 U.S. 97, 106-07, 92 S.Ct. 349, 355, 30 L.Ed.2d 296 (1971), for gauging the appropriateness of retroactivity.

First, the decision to be applied nonretroactively must establish a new principle of law, either by overruling clear past precedent on which litigants may have relied ... or by deciding an issue of first impression whose resolution was not clearly foreshadowed.... Second, it has been stressed that "[a court] must ... weigh the merits and demerits in each case by looking to the prior history of the rule in question, its purpose and effect, and whether retrospective operation will further or retard its operation." ... Finally ... the inequity imposed by retroactive application [must be weighed]....

Id. (citations omitted).

Retroactivity is not justified under the first Chevron factor if Puget Sound can reasonably claim that it could not predict Newport News. However, a number of signals were available to Puget Sound which render implausible its current claim that it did not expect that the PDA extended coverage to pregnant spouses of employees.

In 1979, the EEOC issued guidelines in question and answer form warning employers that EEOC considered the PDA to require insurance plans to extend coverage to pregnant spouses of employees. 44 Fed.Reg. 23804, 23807-08 (April 20, 1979). Puget Sound could predict that those guidelines of the enforcing agency would be given deference by the courts, Griggs v. Duke Power Co., 401 U.S. 424, 433-34, 91 S.Ct. 849, 854-55, 28 L.Ed.2d 158 (1971), unless they could "be said not to be a reasoned and supportable interpretation of the [applicable statute]." Whirlpool Corp. v. Marshall, 445 U.S. 1, 11, 100 S.Ct. 883, 890, 63 L.Ed.2d 154 (1980).

While the weight of the guidelines could not immediately be assessed according to their own consistency over a period of time, as has been required, see, e.g., Dothard v. Rawlinson, 433 U.S. 321, 334 n. 19, 97 S.Ct. 2720, 2729 n. 19, 53 L.Ed.2d 786 (1977); General Electric Co. v. Gilbert, 429 U.S. 125, 142, 97 S.Ct. 401, 411, 50 L.Ed.2d 343 (1976), they were consistent with prior EEOC guidelines and rulings under Title VII on the unlawfulness of providing different insurance coverage for spouses of male and female employees. See, e.g., 29 C.F.R. Sec. 1604.9(d) (1973); 1970 EEOC Dec. (CCH) p 6114 (unlawful to provide death benefits for wives of male employees but not for husbands of female employees), p 6132 (unlawful to provide insurance coverage for wives of male employees but not for husbands of female employees), p 6133 (same), p 6197 (same). See also Newport News, 103 S.Ct. at 2630, n. 22. These earlier EEOC policies should have served as a warning to Puget Sound and other employers, especially in light of the legislative advice that "[p]regnancy-based distinctions will be subject to the same scrutiny on the same terms as other acts of sex discrimination proscribed in the existing statute." See 1978 U.S.Code Cong. & Ad.News at 4749, 4752.

Moreover, even before passage of the Pregnancy Discrimination Act and the related EEOC guidelines, the Supreme Court had held several times in the equal protection context that less favorable provision of benefits to spouses of female employees constituted sex discrimination not only against the spouses but against the employees. Califano v. Goldfarb, 430 U.S. 199, 208-09, 97 S.Ct. 1021, 1027-28, 51 L.Ed.2d 270 (1977); Weinberger v. Wiesenfeld, 420 U.S. 636, 645, 95 S.Ct. 1225, 1231, 43 L.Ed.2d 514 (1975); Frontiero v. Richardson, 411 U.S. 677, 688, 93 S.Ct. 1764, 1771, 36 L.Ed.2d 583 (1973). The Court reiterated that rule in 1980. Wengler v. Druggists Mutual Ins. Co., 446 U.S. 142, 147-49, 100 S.Ct. 1540, 1543-45, 64 L.Ed.2d 107 (1980). See Newport News, 103 S.Ct. at 2630 n. 22. The analogous holdings in those cases closely presage the Newport News decision.

Between 1979 and 1983, at least two federal courts, including this one, ruled that the PDA did not extend to coverage for nonemployees. EEOC v. Lockheed Missiles & Space Co., 27 FEP Cases 1209, 1210 (N.D.Cal.1981), aff'd, 680 F.2d 1243 (9th Cir.1982), vacated, --- U.S. ----, 103 S.Ct. 3530, 77 L.Ed.2d 1383, remanded for reconsideration in light of Newport News, 710 F.2d 566 (9th Cir.1983); EEOC v. Emerson Electric Co., 539 F.Supp. 153, 158 (E.D.Mo.1982). At least two other federal courts reached the opposite conclusion. United Teachers--Los Angeles v. Board of Education, 31 FEP Cases 943 (C.D.Cal.1982), aff'd in light of Newport News, 712 F.2d 1349 (9th Cir.1983); Newport News Shipbuilding and Dry Dock Co. v. EEOC, 510 F.Supp. 66 (E.D.Va.1981), reversed and remanded, 667 F.2d 448 (4th Cir.1982), aff'd, 462 U.S. 669, 103 S.Ct. 2622, 77 L.Ed.2d 89 (1983).

The holdings which supported the Puget Sound policy limitations lent substance to the possibility that Puget Sound's interpretation of the PDA would prove to be correct. But those were not holdings in a vacuum. The earliest, decided in 1981, followed the EEOC guidelines on the PDA by two years. The 1981 case might therefore have justified Puget Sound in deciding in 1981 that the guidelines were incorrect; it does not vindicate Puget Sound's ignoring the guidelines in the first place.

We do not except from this reasoning our own decision on July 6, 1982, in Lockheed Missiles, 680 F.2d at 1247. Lockheed followed by six months a contrary conclusion by the Fourth Circuit on January 7, 1982, in Newport News, 667 F.2d at 449, and was followed in five months by the Supreme Court grant of certiorari on December 6, 1982, in Newport News, 459 U.S. 1069, 103 S.Ct. 487, 74 L.Ed.2d 630. This chronology provided Puget Sound, some four years after passage of the PDA, with less than half a year in which, at its most optimistic, it could have been confident that the law in this circuit was favorable and would remain that way. In view of the state of the law nationwide during the same period, the short-lived precedential value of Lockheed does not alter our conclusion today that in Newport News the Supreme Court settled a close dispute rather than establishing a new principle of law.

In spite of the EEOC guidelines on the PDA, related EEOC rulings on Title VII questions, analogous equal protection holdings by the Supreme Court and litigation over the application of the PDA to nonemployees, Puget Sound maintains that the first Chevron factor will not allow retroactivity here. We do not agree. We cannot say that the Newport News decision was "clearly foreshadowed." See Chevron, 404 U.S. at 106, 92 S.Ct. at 355. But the 1979 EEOC regulations and subsequent court cases suggest that, as a practical matter, the Newport News result could come as no surprise. And in light of the conflicting factors we have just discussed, it did not overrule any clear "past precedent on which litigants may have relied." Id., (emphasis added). See EEOC v. MTC Gear Corp., 595 F.Supp. 712 (N.D.Ill.1984).

Application of the second Chevron factor requires that we consider the "purpose and effect" of the rule applying the PDA to nonemployees and "whether retrospective operation will further or retard its operation." Chevron, 404 U.S. at 106-07, 92 S.Ct. at...