Norris v. Arizona Governing Committee

• Decision Date: 12 March 1980
• Docket Number: No. CIV 78-341 PHX VAC.,CIV 78-341 PHX VAC.
• Citation: 486 F. Supp. 645
• Parties: Nathalie NORRIS, on behalf of herself and all others similarly situated, Plaintiffs, v. ARIZONA GOVERNING COMMITTEE For Tax Deferred Annuity and Deferred Compensation Plans, State of Arizona and Richard Rabago, Margaret Griffeth, Ted Williams, Russ Webb, Walter Madsen, Dave Conner and Jack La Sota, in their capacity as members of the Governing Committee For Tax Deferred Annuity and Deferred Compensation Plans, Defendants.
• Court: U.S. District Court — District of Arizona

486 F. Supp. 645

Nathalie NORRIS, on behalf of herself and all others similarly situated, Plaintiffs, v. ARIZONA GOVERNING COMMITTEE For Tax Deferred Annuity and Deferred Compensation Plans, State of Arizona and Richard Rabago, Margaret Griffeth, Ted Williams, Russ Webb, Walter Madsen, Dave Conner and Jack La Sota, in their capacity as members of the Governing Committee For Tax Deferred Annuity and Deferred Compensation Plans, Defendants.

No. CIV 78-341 PHX VAC.

United States District Court, D. Arizona.

March 12, 1980.

COPYRIGHT MATERIAL OMITTED

Bruce Meyerson, Arizona Center for Law in the Public Interest, Phoenix, Ariz., for plaintiffs.

Robert K. Corbin, Atty. Gen., John L. Jones, Asst. Atty. Gen., Division of Transportation, Phoenix, Ariz., for defendants.

OPINION

CORDOVA, District Judge.

The plaintiffs and defendants in this case presented to the Court cross motions for summary judgment upon an agreed statement of facts. The stipulated facts are admitted as true for the purpose of the respective motions for summary judgment.

NATURE OF THE CASE

The plaintiff, Nathalie Norris, requests that this case be certified as a class action and filed the same as a female employee of the State of Arizona challenging certain alleged discriminatory aspects of the Arizona Deferred Compensation Plan ("Plan"). The Plan was adopted by the defendant Arizona Governing Committee For Tax Deferred Annuity And Deferred Compensation Plans ("Governing Committee"). The action is filed under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. Plaintiff contends that because both sexes contribute an equal amount into a retirement account and upon retirement women receive lesser monthly annuity payments than men, that this constitutes discrimination based upon sex and is therefore contrary to the provisions of the Civil Rights Act.

The plaintiff seeks (1) to permanently enjoin the defendants from carrying out their obligations under A.R.S. § 38-871 et seq., through the use of sex segregated actuarial tables, (2) that the Court direct annuity payments to female employees who have retired be made equal to similarly situated male employees, and (3) that this cause be certified as a class action pursuant to Rule 23(b)(2)(3), Federal Rules of Civil Procedure.

FACTS

The stipulated material facts are as follows:

The plaintiff Nathalie Norris is employed by the State of Arizona with the Department of Economic Security. She participates in the State's Deferred Compensation Program adopted by the defendant Governing Committee for tax deferred annuity and deferred compensation plans.

The plaintiff Governing Committee is authorized under A.R.S. § 38-871 to contract for the purposes of establishing tax deferred compensation and annuity programs for employees of the State of Arizona. The defendant State of Arizona is deemed an employer within the meaning of Section 701(b) of Title VII of the Equal Employment Opportunity Act of 1972, 42 U.S.C. § 2000e(b). The individual named defendants are members of the Governing Committee.

The parties agree that the plaintiff has exhausted her administrative remedies and that the Court has jurisdiction pursuant to 42 U.S.C. § 2000e-5(f) and 28 U.S.C. § 1343.

Pursuant to Rule 23(b)(2), F.R.C.P., the plaintiff's class is alleged to be all female employees who have chosen to enroll in or in the future will choose to enroll in the State Deferred Compensation Plan. The parties agree that as of August 18, 1978 there were 681 women employees of a total of 1,675 participating in the plan. Of the 681 women, 572 had elected some form of future annuity option. As of that same date, 10 women had retired and 4 had elected a lifetime annuity payout.

The Plan is described as follows:

In 1972, Arizona enacted the State Deferred Compensation Plan (A.R.S. § 38-871 et seq.). A.R.S. § 38-871 has been amended three times since its original enactment, but none of those amendments have any substantial effect on this litigation. On May 10, 1973, the Governing Committee promulgated rules and regulations which were amended in October of 1974.

The Plan is offered to all state employees on a voluntary basis. There is no employer contribution to the Plan. The benefits to the employee result from immediate tax savings and a promise by the State to ultimately pay the employee a sum of money based upon accumulated values of the employee's account. The Governing Committee made the selection of certain companies as funding media which included life insurance companies with annuity contracts.

One of the options open to the employee is that she may elect to receive a fixed sum for a fixed period of time. The parties agree that all funding media, except the Arizona State Employees Credit Union and the Keystone B4 Mutual Fund, will pay on direction by the Governing Committee a stipulated periodic amount for a specified period of time. The amount or period of time would be determined by the then present worth of the employee's accumulations during the period of time he or she has been a member of the Plan, divided either by the periodic payment amount requested to determine the length of time such an amount would be paid, or the period requested to determine the amount. These payments would be the same for male or female, assuming all other factors are the same.

However, the parties further agree that for those persons who elect annuity options, the payouts are subject to mortality tables which are published in the contract with the particular company. These payments are calculated on the basis of the present worth of the person's account at the time payments are to begin divided by the months a person of that age and sex is expected to live, and factored by any guaranteed payment period. Because according to the annuity tables females as a class live longer than men as a class, the period of time for which payments are to be made to women would be longer than for men and thus, the periodic payment to women is less than for men. The amounts received are determined by the use of actuarial tables published by the particular company.

The plaintiff, on May 3, 1975, made application to the Governing Committee to participate under the Plan and requested that her monies be invested in Lincoln National Life Insurance Company's fixed annuity contract. Her application was approved on May 9, 1975 and she has been a participant in the Plan since that date. At the time she becomes eligible to receive benefits the options available to her would range from a lump sum payment to an annuity payment based upon the rates published by either the Lincoln National Life Insurance Company or any other funding account which would be in existence at that time.

Assuming the plaintiff does not increase or decrease the amount being deferred by her, and all things remaining equal, the total value of her account at age 65 would be $53,890.93, and the annuity payment that she would receive at that time would be $320.11 per month for life, with 10 years certain. However, were the plaintiff a male, and assuming all other factors above remained the same, the payment would be $354.07 per month for life, with 10 years certain.

All of the companies participating in the State Deferred Compensation Plan use sex segregated actuarial tables. Although life expectancy is the rationale for using sex segregated mortality tables, other factors affecting longevity, such as smoking habits, alcohol consumption, weight, prior medical history and family history, are not specifically taken into consideration in determining the amount of monthly annuity to be paid. For example, a male who has smoked for 30 years is paid the same as a male who has never smoked. In compiling the mortality table upon which the annuity is based, males who smoked were included with males who never smoked.

DISCUSSION

The program in question is set forth in Article 5, Chapter 5, Title 38, A.R.S., and is labeled "Tax Deferred Annuity and Deferred Compensation Programs". The program is one which provides for deferred compensation and avoidance of income tax on present income.

The Plan is an employee benefit and the effect of participation is set forth in the statute as follows:

"Any benefits provided pursuant to the provisions of this article shall be in addition to any other benefits provided by law for any employees of this state and shall be supplemental to the provisions of the state retirement system or plan provided pursuant to title 38, chapter 5, articles 2 and 2.1."

(A.R.S. § 38-874 A)

Additionally, A.R.S. § 38-871 C(1), as amended, directs that any program adopted pursuant to the legislation be operated without cost or contribution from the State, and A.R.S. § 38-872 makes participation voluntary.

The plaintiff's contention is that the Plan is violative of Title VII of the Civil Rights Act.¹

The use of sex segregated actuarial tables as applied to retirement plans has been held by the United States Supreme Court as violative of Title VII of the 1964 Civil Rights Act. In Los Angeles Department of Water and Power v. Manhart, 435 U.S. 702, 98 S.Ct. 1370, 55 L.Ed.2d 657 (1978), the employer adopted a retirement plan which provided for equal annuity payments for men and women upon retirement, but required larger contributions from women employees. This practice was held by the Supreme Court to be discriminatory and prohibited by the Civil Rights Act.

However, the question before this Court is distinguishable from Manhart, hence this Court must consider whether that distinction necessarily dictates a different result. In Manhart, it was a retirement plan which was being considered by the Court with mandatory participation by the employee and with females required to pay more into the fund than male employees in order to receive the same monthly payment at retirement. The plan now before this Court is a deferred compensation plan with voluntary participation, with females and...