Norris v. Arizona Governing Committee for Tax Deferred Annuity, 80-5372

• Decision Date: 11 March 1982
• Docket Number: No. 80-5372,80-5372
• Citation: 671 F.2d 330
• Parties: 28 Fair Empl.Prac.Cas. 369, 28 Empl. Prac. Dec. P 32,584, 3 Employee Benefits Ca 1097 Nathalie NORRIS, on behalf of herself and all others similarly situated, Appellee, v. ARIZONA GOVERNING COMMITTEE FOR TAX DEFERRED ANNUITY And Deferred CompensationPlans, State of Arizona, and Richard Rabago; Margaret Griffith; Ted Williams;Russ Webb; Walter Madsen; Dave Conner and Jack La Sota, in their capacity asmembers ofthe Governing Committee for Tax Deferred Annuity and Deferred CompensationPlans, Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 330

671 F.2d 330

28 Fair Empl.Prac.Cas. 369,

28 Empl. Prac. Dec. P 32,584,

3 Employee Benefits Ca 1097

Nathalie NORRIS, on behalf of herself and all others similarly situated, Appellee, v. ARIZONA GOVERNING COMMITTEE FOR TAX DEFERRED ANNUITY And Deferred CompensationPlans, State of Arizona, and Richard Rabago; Margaret Griffith; Ted Williams;Russ Webb; Walter Madsen; Dave Conner and Jack La Sota, in their capacity asmembers ofthe Governing Committee for Tax Deferred Annuity and Deferred CompensationPlans, Appellants.

No. 80-5372.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Aug. 12, 1981.

Decided March 11, 1982.

John L. Endicott, Los Angeles, Cal., argued, for appellants; John L. Jones, Phoenix, Ariz., on brief.

Bruce E. Meyerson, Phoenix, Ariz., Kenneth J. Burchfiel, E.E.O.C., Washington, D. C., argued, for appellee; Larry M. Lavinsky, Proskauer, Rose, Goetz & Mendelsohn, New York City, on brief.

Appeal from the United States District Court for the District of Arizona.

Before GOODWIN and POOLE, Circuit Judges, and NIELSEN, ^* District Judge.

GOODWIN, Circuit Judge.

The Arizona Governing Committee ("Arizona") appeals from a summary judgment in favor of the plaintiff and her class ("Norris"). Relying on Los Angeles Dept. of Water & Power v. Manhart, 435 U.S. 702, 98 S.Ct. 1370, 55 L.Ed.2d 657 (1978), the court enjoined Arizona from using sex-segregated actuarial tables in its Deferred Compensation Plan and ordered that future annuity payments to female retirees equal the payments to similarly situated men.

The summary judgment motions of plaintiff and defendant were argued on stipulated facts. A complete summary of the facts is found in the district court opinion. Norris v. Arizona Governing Committee, 486 F.Supp. 645, 647-48 (D.Ariz.1980). Basically, Arizona is authorized by Ariz.Rev.Stat.Ann. § 38-871 to investigate, approve and contract for tax deferred compensation and annuity programs for its employees. Norris' class, which was certified, consists of all female employees of Arizona who have enrolled in, or will enroll in, the plan.

The plan is offered to all employees on a voluntary basis. It is funded entirely by employee contributions. The employees are offered one of three options. First, an employee may elect the lump sum option. This option allows one to withdraw at once all of the accumulated annuity. Second, the employee may elect to receive a fixed sum for a fixed period of time. The third option-the life annuity contract-is the one in question here. The employee may elect to receive a certain amount of money each month for life. Arizona selects the companies with which the employee must contract. All the companies selected by Arizona use sex-segregated mortality tables in computing the monthly amounts due under the life annuity contract. ¹

Norris challenged the plan as violative of Title VII and the Fourteenth Amendment. The district court agreed that the plan violates Title VII. The court held that the plan does not violate the Fourteenth Amendment because the discrimination was not intentional. The court enjoined Arizona from using sex-segregated actuarial tables and ordered that future annuity payments to women equal the payments to similarly situated men. We affirm.

A. Title VII Applies.

The district court relied extensively on Los Angeles Dept. of Water & Power v. Manhart, supra. The pension plan in Manhart required female employees to make larger contributions to the fund than male employees. This pension plan was based on sex-segregated mortality tables and Los Angeles' experience that women live longer than men. The pension plan was funded by contributions from both the employees and Los Angeles. It was administered entirely by Los Angeles; no private insurance company was involved.

Manhart found this pension plan unlawful because Title VII forbids discrimination against any individual on the basis of sex. Id. at 708, 98 S.Ct. at 1375. The court recognized that the plan treated the class of women equal to the class of men (because the present value of the pensions of similarly situated males and females is the same, due to the greater longevity of women). It held, however, that an individual woman cannot be required to take home less pay than a similarly situated man because of stereotypical characteristics of the class of women, which she as an individual may not share.

Los Angeles argued that without the extra charge women employees, as a class, will be subsidized by male employees. The court rejected this argument because the question of fairness to a class is a question for the legislature. Congress, it said, has decided that classifications based on sex are unlawful. Id. at 709, 98 S.Ct. at 1376.

Los Angeles also argued that the Bennett Amendment authorized the differential. ² The court rejected this argument because the pension did not reflect a differential "based on any other factor other than sex." Id. at 712-713, 98 S.Ct. at 1377-1378. The court rejected the argument that the differential was based on longevity because, although there are numerous factors which influence longevity (e.g., weight, smoking, possibly race), Los Angeles relied only on the factor of sex.

The Manhart Court concluded its discussion of the validity of the plan by noting that Title VII did not intend to revolutionize the insurance and pension industries. It stated that the holding did not imply that an employer could not set aside equal retirement benefits for each employee and let the employee then purchase the best pension available on the open market.

In Manhart, the discriminatory pension plan was compulsory. Here, the plan is voluntary. An employee need not defer compensation. Instead, she may elect to receive her entire compensation each payday.

A voluntary benefit offering tax savings is a "privilege" of employment and a "fringe benefit." Thus, this option of the plan is covered by Title VII even though Arizona does not require that each employee participate. See Peters v. Wayne State University, 476 F.Supp. 1343 (E.D.Mich.1979) (Title VII applies even though employee participation is voluntary). Arizona has cited no law to the contrary.

Arizona and amicus American Council of Life Insurance argue that the McCarran-Ferguson Act (the Act), 15 U.S.C. § 1011, et seq., prohibits the application of Title VII in this situation. The Act states:

"No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, ... unless such Act specifically relates to the business of insurance...." 15 U.S.C. § 1012(b).

Appellants argue (1) that the use of sex-based mortality tables involve the business of insurance; and (2) Arizona regulates the business of insurance (see, e.g., Ariz.Rev.Stat.Ann. § 20-448 prohibiting discrimination in rates). Therefore, Title VII may not be construed to prohibit employers from offering life annuity contracts from private insurers such as those condemned here by the district court.

The fallacy in this argument is that the district court has not interfered with the business of insurance. Title VII has not been construed so as to supersede Arizona's laws. The court has not said that the companies may not use sex-segregated annuity tables. Nor has it joined the companies as defendants or required the companies to pay the adjusted annuities. All the court has done is tell the employer that it may not offer a fringe benefit which treats an individual woman differently than an individual man. As Manhart noted, Title VII says nothing about the situation in which a woman takes her money and chooses to purchase an annuity plan using sex-based tables. Title VII governs the relationship between employees and their employer, not between employees and third parties. Manhart, supra, 435 U.S. at 718, n.33, 98 S.Ct. at 1380, n.33. But compare Women in City Govern. United v. City of New York, 515 F.Supp. 295, 304-06 (S.D.N.Y.1981) (holding that Congress did not intend the McCarran-Ferguson Act to limit Congress' power to enact civil rights legislation that might affect the business of insurance) with Spirt v. Tchrs. Ins. & Annuity Ass'n, 475 F.Supp. 1298, 1304 (S.D.N.Y.1979) (holding application of Title VII to TIAA (a nonprofit legal reserve life insurance company) would supersede New York law, thus it's precluded by the McCarran-Ferguson Act).

B. The Plan Violates Title VII.

Arizona argues that to satisfy Title VII Norris must prove that Arizona intended to discriminate against women. It argues that it did not intend to discriminate because it offered the plan in spite of, not because of, the actuarial difference for women.

The short answer to this argument is provided by Manhart. Manhart required no affirmative showing of intent. Nowhere was the need to prove intent discussed. Instead, the court focused on whether Title VII prohibited the differentials in the pension fund. See e.g., Manhart at 711, 98 S.Ct. at 1377: "(The pension) does not pass the simple test of whether the evidence shows 'treatment of a person in a manner which but for that person's sex would be different.' " Accord Spirt, supra, 475 F.Supp. at 1310 n.18.

Moreover, this circuit has held that facially discriminatory practices are intentional discrimination for the purposes of Title VII regardless of the subjective motivation. See Krause v. Sacramento Inn, 479 F.2d 988 (9th Cir. 1973); Schaeffer v. San Diego Yellow Cabs, Inc., 462 F.2d 1002, 1006 (9th Cir. 1972).

Thus, because on their face the practices in question treat men and women differently, Norris need not prove Arizona's animus in adopting the plan.

In Manhart, the plan required women to pay more than men into the retirement account. Thus, their take-home paycheck was smaller than similarly situated males. In this case, women who pay in equal amounts receive smaller annuity checks than similarly situated men. Every court...