Leonard F. v. Israel Discount Bank of NY, Docket No. 98-7320

• Decision Date: 01 August 1998
• Docket Number: Docket No. 98-7320
• Citation: 199 F.3d 99
• Parties: (2nd Cir. 1999) LEONARD F., Plaintiff-Appellant, v. ISRAEL DISCOUNT BANK OF NEW YORK, Defendant, and THE METROPOLITAN LIFE INSURANCE COMPANY, Defendant-Appellee
• Court: U.S. Court of Appeals — Second Circuit

Page 99

199 F.3d 99 (2nd Cir. 1999)

LEONARD F., Plaintiff-Appellant, v. ISRAEL DISCOUNT BANK OF NEW YORK, Defendant, and THE METROPOLITAN LIFE INSURANCE COMPANY, Defendant-Appellee.

Docket No. 98-7320

August Term, 1998

UNITED STATES COURT OF APPEALS

SECOND CIRCUIT

Argued: Jan. 19, 1999

Decided: Dec. 8, 1999.

Plaintiff Leonard F. appeals from the judgment of the United States District Court for the Southern District of New York (Charles L. Brieant, Jr., Judge) dismissing his complaint against Defendant The Metropolitan Life Insurance Company under Fed. R. Civ. P. 12(b)(6) for failure to state a claim on which relief may be granted. The complaint alleged that MetLife discriminated against Leonard F. on the basis of his mental disability in violation of Title III of the Americans with Disabilities Act, 42 U.S.C. 12181-12189, by furnishing him a disability policy as a benefit of his employment (at a bank) that limited coverage for mental disabilities to two years without similarly limiting coverage for physical disabilities. The district court held that, because MetLife's policy is consistent with state law and does not constitute a subterfuge to evade the purposes of the Act, MetLife is exempt from Plaintiff's Title III claim under the "safe harbor" provision of Section 501(c) of the ADA, 42 U.S.C. 12201(c). The Court of Appeals, Leval, J., holds the district court correctly interpreted the term "subterfuge," in accordance with the Supreme Court's decision in Public Employees Retirement Sys. v. Betts, 492 U.S. 158, 171 (1989), as inapplicable to insurance policies adopted prior to the enactment of the ADA; however, the court erred in dismissing Plaintiff's claim under Fed. R. Civ. P. (12)(b)(6) based on its finding that MetLife adopted its policy prior to the ADA's enactment, because the court relied on matter outside the pleadings to make this finding and failed to afford Plaintiff an opportunity to take discovery and contest the issue.

Vacated and remanded for determination whether MetLife adopted the policy in question prior to enactment of the ADA.

EDWARD COPELAND, New York, NY (Pauline H. Yoo, New York Lawyers for the Public Interest, New York, NY, Robert L. Schonfeld, Stein & Schonfeld, Garden City, on the brief), for Plaintiff-Appellant.

ALLEN I. FAGIN, New York, NY (Aaron J. Schindel, Proskauer Rose LLP, Alvin Pasternak, Allan M. Marcus, Lawrence K., Wolff, Metropolitan Life Insurance Co., New York, NY, on the brief), for Defendant-Appellee.

Before: LEVAL and POOLER, Circuit Judges, and NEVAS, District Judge.^*.

LEVAL, Circuit Judge:

Plaintiff Leonard F. appeals from the judgment of the United States District Court for the Southern District of New York (Charles L. Brieant, Jr., J.) dismissing his complaint against Defendant The Metropolitan Life Insurance Company ("MetLife") for failure to state a claim under Fed. R. Civ. P. 12(b)(6). The complaint alleged (inter alia) that MetLife discriminated against Plaintiff on the basis of his mental disability in violation of Title III of the Americans with Disabilities Act (the "ADA" or "Act"), 42 U.S.C. 12181-12189, by contracting with his employer, Defendant Israel Discount Bank of New York (the "Bank"), to provide him with a health insurance policy that limited coverage for mental disabilities to two years while providing coverage for physical disabilities that was not so limited. The district court dismissed the complaint, finding that because MetLife's policy is consistent with state law and does not constitute a subterfuge to evade the purposes of the Act, MetLife is exempt from Plaintiff's Title III claim under the "safe harbor" provision of Section 501(c) of the ADA, 42 U.S.C. 12201(c). We agree with the district court's reasoning. However, we believe it erred in dismissing the complaint under Fed. R. Civ. P. 12(b)(6) based on a finding that relied on matter outside the pleadings without converting the motion to one for summary judgment and affording Plaintiff an opportunity to take discovery and contest the finding. We accordingly vacate and remand so that Plaintiff may have such an opportunity.

Background

A. Relevant statutory provisions.

Title I of the ADA, which generally prohibits discrimination on the basis of disability in the context of employment, see 42 U.S.C. 12112-12117, provides in Section 102(a):

No covered entity shall discriminate against a qualified individual with a disability because of the disability of such individual in regard to . . . [the] terms, conditions, and privileges of employment.

Id. 12112(a). A "covered entity" is defined in Title I to include "an employer." Id. 12111(2).

Title III of the ADA, which generally prohibits discrimination on the basis of disability by so-called "public accommodations," see id. 12181-12189, provides in Section 302(a):

No individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases (or leases to), or operates a place of public accommodation.

Id. 12182(a). Title III includes a long list of private entities that qualify as a "public accommodations" so long as their operations "affect commerce," including an "insurance office, professional office of a health care provider, hospital, or other service establishment." Id. 12181(7)(F).

Section 501(c) of Title V of the ADA, known as the "safe harbor" provision, exempts insurers from the regulatory scope of Titles I through III of the Act if they meet certain conditions. It includes the following relevant language:

INSURANCE

Subchapters I through III of this chapter [i.e., Titles I through III of the ADA] and title IV of this Act shall not be construed to prohibit or restrict--

(1) an insurer, hospital or medical service company, health maintenance organization, or any agent, or entity that administers benefit plans, or similar organizations from underwriting risks, classifying risks, or administering such risks that are based on or not inconsistent with State law . . . .

Id. 12201(c). The safe harbor provision also states, in its so-called "subterfuge clause":

Paragraph[] (1) . . . shall not be used as a subterfuge to evade the purposes of [Titles] I and III of [the Act].

Id.

B. Events giving rise to this lawsuit.

In 1987, the Bank hired Plaintiff as an Assistant Vice President. As a fringe benefit of employment, it furnished him short-term and long-term disability insurance coverage issued by MetLife. For persons with "mental" disabilities, the long-term disability ("LTD") plan limits benefits to two years. For persons with "physical" disabilities, the plan provides benefits up to age 65.

In April 1994, Plaintiff became disabled as a result of depression. After receiving benefits under the Bank's short-term disability plan, he applied for LTD benefits. MetLife approved his claim retroactive to October 1994.

In August 1995, Plaintiff filed this lawsuit in the United States District Court for the Southern District of New York. His original complaint named only his employer, the Bank, as a defendant. The complaint alleged that the Bank discriminated against him on the basis of his mental disability in violation of Title I of the ADA by imposing a two-year limit on benefits for mental disabilities, while imposing no such limit for physical disabilities.

In October 1996, MetLife terminated Plaintiff's benefits pursuant to the two-year cap on coverage for mental disabilities. Plaintiff was at that time, and continues to be, unable to work.

In November 1996, Plaintiff amended his complaint to add MetLife as a defendant, and to assert that both MetLife and the Bank violated Title III of the ADA by virtue of the shorter duration of coverage provided for mental, than for physical, disabilities. The complaint also alleged that the shorter benefits limitation for mental disabilities constituted a "subterfuge to evade the purposes of the ADA" under Section 501(c) of Title V. Plaintiff sought a declaration that the Bank and MetLife were in violation of the ADA, and an injunction prohibiting MetLife "from continuing to provide long-term disability insurance in a manner that limits benefits for mental disorders to Leonard F."

In March 1997, the EEOC moved to intervene in Plaintiff's suit. In April 1997, the district court granted the motion, and in May, the EEOC filed its complaint-in-intervention, alleging principally that the LTD policy furnished by the Bank and issued by MetLife violated Title I of the ADA.

C. The district court's ruling.

In January 1997, both Defendants moved to dismiss the Title III claims under Fed. R. Civ. P. 12(b)(6). In June 1997, Judge Brieant issued a Memorandum & Order granting the motions. Leonard F. v. Israel Discount Bank, 967 F. Supp. 802 (S.D.N.Y. 1997). The court first held that Plaintiff cannot maintain an action against the Bank under Title III because his grievance does not relate to the "goods, services and facilities" that the Bank provides as a "public accommodation." Id. at 804. Instead, the court reasoned, Plaintiff's grievance pertains to "the terms and conditions of a benefit" the Bank furnished him in its capacity as his employer. Id. Accordingly, the court concluded, Plaintiff's claim against the Bank--if actionable under the ADA at all--lies under Title I of the Act, not Title III. Id. at 804, 806.

The district court dismissed the claim against MetLife as well, holding that MetLife is protected by the safe harbor provision of Section 501(c). Id. at 805-06. The court reasoned that the safe harbor exempts insurance underwriters from the ADA's regulatory scope so long as their conduct complies with state law, id. at 805, and does not constitute a "subterfuge to evade the purposes of the [Act]." See id. at 806. Applying this standard to MetLife's LTD policy in the instant dispute, the court first found...