Kadel v. Folwell, 1:19CV272

• Court: United States District Courts. 4th Circuit. Middle District of North Carolina
• Writing for the Court: LORETTA C. BIGGS, District Judge.
• Citation: 446 F.Supp.3d 1
• Parties: Maxwell KADEL; Jason Fleck; Connor Thonen-Fleck, by his next friends and parents, Jason Fleck and Alexis Thonen; Julia McKeown; Michael D. Bunting, Jr.; C.B., by his next friends and parents, Michael D. Bunting, Jr. and Shelley K. Bunting; and Sam Silvaine, Plaintiffs, v. Dale FOLWELL, in his official capacity as State Treasurer of North Carolina; Dee Jones, in her official capacity as Executive Administrator of the North Carolina State Health Plan for Teachers and State Employees; University of North Carolina at Chapel Hill; North Carolina State University; University of North Carolina at Greensboro; and North Carolina State Health Plan for Teachers and State Employees, Defendants.
• Docket Number: 1:19CV272
• Decision Date: 10 March 2020

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Maxwell KADEL; Jason Fleck; Connor Thonen-Fleck, by his next friends and parents, Jason Fleck and Alexis Thonen; Julia McKeown; Michael D. Bunting, Jr.; C.B., by his next friends and parents, Michael D. Bunting, Jr. and Shelley K. Bunting; and Sam Silvaine, Plaintiffs,
v.
Dale FOLWELL, in his official capacity as State Treasurer of North Carolina; Dee Jones, in her official capacity as Executive Administrator of the North Carolina State Health Plan for Teachers and State Employees; University of North Carolina at Chapel Hill; North Carolina State University; University of North Carolina at Greensboro; and North Carolina State Health Plan for Teachers and State Employees, Defendants.

1:19CV272

United States District Court, M.D. North Carolina.

Signed March 10, 2020
Filed March 11, 2020

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Deepika H. Ravi, Harris, Wiltshire & Grannis LLP, Washington, DC, Meredith T. Brown, Tara L. Borelli, Lambda Legal Defense and Education Fund, Inc., Atlanta, GA, Omar F. Gonzalez-Pagan, Lambda Legal Defense and Education Fund, Inc., Noah E. Lewis, Alejandra L. Caraballo, David Brown, Transgender Legal Defense and Education Fund, New York, NY, Amy E. Richardson, Wiltshire & Grannis LLP, Raleigh, NC, for Plaintiffs.

John G. Knepper, Law Office of John G. Knepper, LLC, Cheyenne, WY, Sam M. Hayes, North Carolina Department of State Treasurer, Olga E. Vysotskaya De Brito, Catherine F. Jordan, Nora F. Sullivan, Kimberly D. Potter, North Carolina Department of Justice Education Section, Raleigh, NC, Kevin Guy Williams, Mark A. Jones, Bell Davis & Pitt, P.A, Winston-Salem, NC, for Defendants.

MEMORANDUM OPINION AND ORDER

LORETTA C. BIGGS, District Judge.

North Carolina offers healthcare coverage to its employees through a State Health Plan (the "State Health Plan" or the "Plan"). N.C. Gen. Stat. § 135-48.2.

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While enrollees can access a wide array of medical benefits, the Plan categorically excludes coverage for treatment sought "in conjunction with proposed gender transformation" or "in connection with sex changes or modifications" (the "Exclusion"). (ECF No. 1 ¶ 155.) Plaintiffs allege that the Exclusion violates the Equal Protection Clause of the Fourteenth Amendment of the United States Constitution;¹ Title IX of the Education Amendments of 1972 ("Title IX"), 20 U.S.C. § 1681 et seq. ; and Section 1557 of the Affordable Care Act ("ACA"), 42 U.S.C. § 18116. (Id. ¶¶ 124–157.)

Before the Court are two motions to dismiss: Defendants University of North Carolina at Chapel Hill, North Carolina State University, and University of North Carolina at Greensboro (together, the "University Defendants") move to dismiss Plaintiffs' Title IX claim (ECF No. 30), whereas Defendants Dale Folwell, Dee Jones, and the North Carolina State Health Plan for Teachers and State Employees ("NCSHP") (together, the "State Defendants") seek dismissal of Plaintiffs' Equal Protection and ACA claims, (ECF No. 32). For the reasons that follow, both motions will be denied.

I. BACKGROUND

Plaintiffs are all current or former employees of University Defendants, or the dependents of said employees. (ECF No. 1 ¶¶ 7–11.) All are enrolled, or were enrolled, in the State Health Plan. (Id. ¶ 1.) Further, all are, or are the parents of, transgender individuals with a condition called gender dysphoria. (See id. ¶¶ 3, 61, 69, 82, 98, 115.)

According to Plaintiffs' complaint, each of us has an internal sense of being a particular gender; a gender identity. (Id. ¶ 24.) For most people, gender identity is consistent with the sex we are assigned at birth. However, transgender men and women have gender identities which differ from their assigned sexes. This incongruence can result in gender dysphoria —"a feeling of clinically significant stress and discomfort born out of experiencing that something is fundamentally wrong." (Id. ¶ 27.) Gender dysphoria is a recognized medical condition which, if left untreated, may result in severe anxiety, depression, or suicidal ideation. (See id. ¶¶ 27–29.)

Further, the complaint alleges that treatment for gender dysphoria includes gender transition, which is the process of "com[ing] to live in a manner consistent with ... gender identity." (Id. ¶ 31.) For some people, medical intervention is "a critical part" of gender transition. (Id. ¶ 35.) Obtaining a psychological diagnosis of gender dysphoria is a first step. (Id. ) Later, certain secondary sex characteristics (for example, hair-growth patterns and body fat distribution) can be masculinized or feminized through hormone replacement therapy. (Id. ¶ 36.) In some cases, gender-confirming surgery is ultimately needed to "better align ... primary or secondary sex characteristics with ... gender identity." (Id. ¶¶ 37–38.) These treatments are not "cosmetic, elective, or experimental"; rather, they are "safe, effective, and medically necessary treatments for a serious health condition." (Id. ¶ 39 (quotations omitted).)

With the exception of the 2017 plan year, the State Health Plan has categorically excluded coverage for transition-related healthcare since the 1990s. (Id. ¶ 45; ECF No. 33 at 8.) The Plan's third-party administrators—Blue Cross Blue Shield of North Carolina ("BCBSNC"), which administers

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claims, and CVS Caremark ("CVS"), which administers pharmaceuticals—maintain coverage policies for the treatment of gender dysphoria outside of the Plan. (ECF No. 1 ¶¶ 43, 48.) This means that, absent the Exclusion, "claims for gender-confirming care would be evaluated under the BCBSNC and CVS criteria for individual medical necessity" and covered in the same manner as other claims. (Id. ¶ 49.) However, as it now stands, the Plan denies coverage for medically necessary treatment if the need stems from gender dysphoria, as opposed to some other condition. (See id. ¶ 46.) For example, a cisgender² woman's medically necessary mastectomy would be covered; a transgender man's would, too, so long as the reason for surgery was not related to gender transition ; however, the same procedure would not be covered if needed to treat gender dysphoria.

In this way, Plaintiffs allege, the Plan "single[s] out employees who are transgender, or who have transgender dependents, for unequal treatment." (Id. ¶ 56.) On March 11, 2019, they initiated this action against their employers and the Plan's administrators for declaratory and injunctive relief, as well as damages. (Id. at 38.) Their three-count complaint asserts the following claims: (1) that by maintaining the Exclusion, Defendants Folwell and Jones discriminate on the bases of both sex and transgender status in violation of the Fourteenth Amendment's Equal Protection Clause; (2) that by offering the Plan to their employees, the University Defendants discriminate on the basis of sex in violation of Title IX; and (3) that by administering the Plan, Defendant NCSHP discriminates on the basis of sex in violation of Section 1557 of the ACA. (Id. ¶¶ 124–57.) Defendants now move to dismiss all three claims pursuant to Federal Rules of Civil Procedure 12(b)(1), (6), and (7).³ (ECF Nos. 30; 32.)

II. LEGAL STANDARDS

Under Rule 12(b)(1), a party may seek dismissal based on the court's "lack of subject-matter jurisdiction." Fed. R. Civ. P. 12(b)(1). Subject matter jurisdiction is a threshold issue that relates to the court's power to hear a case and must be decided before a determination on the merits of the case. Constantine v. Rectors & Visitors of George Mason Univ. , 411 F.3d 474, 479–80 (4th Cir. 2005). A motion under Rule 12(b)(1) raises the question of "whether [the plaintiff] has a right to be in the district court at all and whether the court has the power to hear and dispose of [the] claim." Holloway v. Pagan River Dockside Seafood, Inc. , 669 F.3d 448, 452 (4th Cir. 2012). The burden of proving subject matter jurisdiction rests with the plaintiff, and the trial court may "consider evidence by affidavit, depositions or live testimony without converting the proceeding to one for summary judgment." Adams v. Bain , 697 F.2d 1213, 1219 (4th Cir. 1982). Furthermore, when evaluating a Rule 12(b)(1) motion to dismiss, the court should grant the motion "only if the material jurisdictional facts are not in dispute and the

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moving party is entitled to prevail as a matter of law." Richmond, Fredericksburg & Potomac R.R. Co. v. United States , 945 F.2d 765, 768 (4th Cir. 1991).

A motion to dismiss filed pursuant to Rule 12(b)(6) "challenges the legal sufficiency of a complaint." Francis v. Giacomelli , 588 F.3d 186, 192 (4th Cir. 2009). To survive, a complaint "must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). In assessing a claim's plausibility, a court must draw all reasonable inferences in the plaintiff's favor. Vitol, S.A. v. Primerose Shipping Co. , 708 F.3d 527, 539 (4th Cir. 2013). However, "mere conclusory and speculative allegations" are...