9th Circuit Says Arizona Partner Benefits Should Continue While Lawsuit Proceeds

In a decision that strongly signals the likelihood that Arizona's statute repealing health benefits eligibility for domestic partners of state employees will ultimately be held unconstitutional, a three-judge panel of the 9th Circuit Court of Appeals ruled on September 6 against the state's challenge to a preliminary injunction that had been issued by District Judge John W. Sedwick requiring that the benefits continue while the litigation proceeds.  Diaz v. Brewer, 2011 Westlaw 3890755.

Tara L. Borelli, a staff attorney in the Western Regional Office of Lambda Legal, represents a group of Arizona state employees and their same-sex partners in arguing that the statute, which rescinds benefits that had been administratively extended to domestic partners in 2008, violates the Equal Protection Clause of the 14th Amendment by legislating against the interest of a particular group of citizens without any legitimate justification.

In April 2008, the state's executive branch, then led by Democratic governor Janet Napolitano, amended its Administrative Code to expand eligibility for public employee benefits to include domestic partners of employees within the definition of "dependents," under a benefits plan that authorized coverage for spouses and dependents of employees.  Later that year, however, Arizona voters approved Proposition 102, the so-called "Marriage Protection Amendment," which added to the Arizona constitution a provision virtually identical to California's Proposition 8: "Only a union of one man and one woman shall be valid or recognized as a marriage in this state." 

After Napolitano went to Washington to become Secretary of Homeland Security, the Arizona government passed over to Republican hands, and in September 2009, Governor Janice Brewer signed into law a new statutory definition of "dependent" that would go into effect on January 1, 2011, limiting that term to legal spouses and dependent children of an employee.  Thus, several hundred state employees who had signed up their partners and their partners' children for health coverage stood to lose their coverage.

The original administrative amendment had not distinguished between same-sex and different-sex partners, and the state did not maintain records showing the proportion of each that signed up for the benefits.  After the statute limiting dependent coverage was signed into law, Lambda Legal filed suit on behalf of a group of state employees and their same-sex partners who stood to lose the benefits.  Lambda argued that because different-sex partners could obtain the benefits by marrying, the new definition of dependent was targeted at same-sex partners, and that there was no rational justification for singling them out in this way.

Lambda sought a preliminary injunction to require the state to maintain benefits for those who had signed up at least until the federal district court decides the case.  In order to get such a preliminary injunction, the plaintiffs had to show both that denial of preliminary relief would subject them to irreparable injury and that there was a strong likelihood that they would win the constitutional argument.  After a hotly-contested argument in which the state contended that the case should be dismissed for failure to assert a valid constitutional claim and the plaintiffs contended that the case should be allowed to continue and that they should get to keep their benefits pending the outcome, District Judge Sedwick ruled that the case would continue and the plaintiffs could keep their benefits for now.

Although the plaintiffs, making an argument that has recently been accepted by both the federal Justice Department and several federal trial judges, asserted that the statute should be subjected to "heightened scrutiny," placing the burden on the state to prove that the new law was justified based on important state policy interests, Judge Sedwick decided to evaluate it using the more deferential rational basis test.  Nonetheless, he found that the law failed that test.  The district judge accepted the plaintiffs' argument that the cost of providing the benefits was minimal compared to the state's overall cost of providing health benefits to its employees, and found that neither the other arguments made by the state to support the law nor any others that the court could imagine would provide any rational support for the law.

The court of appeals panel agreed, in an opinion by Circuit Judge Mary M. Schroeder.  First, wrote Judge Schroeder, the district court applied the proper standard for determining whether the plaintiffs were entitled to this preliminary (pre-trial) injunctive relief, requiring them to show both a likelihood of eventual success on their constitutional claim and that they were likely to suffer irreparable harm. 

On the later point, plaintiffs provided evidence that the same-sex partners either would not be able to get insurance on an individual basis, or would only be able to obtain inferior coverage at much greater expense.  Since some of them had medical issues that made continued coverage crucial for their health, they easily met the test of showing irreparable injury were their benefits to be rescinded.

On the issue of likelihood of success on the merits, it was clear that the state had fallen down by not providing evidence that excluding same-sex couples from coverage would make a significant difference in terms of cost.  Indeed, wrote Judge Schroeder, "the court was not provided any evidence of the actual amount of benefits the state paid for same-sex partners," which adversely affected the credibility of its argument that the statute was justified as a cost-saving measure. 

The court rejected the state's argument on appeal that the district court had improperly recognized a "constitutional right to healthcare."  The state is not required by the Constitution to provide health care insurance for its employees.  But having decided to do so, "it may not do so in an arbitrary or discriminatory manner that aversely affects particular groups that may be unpopular," wrote Judge Schroeder. 

She pointed to a much-cited U.S. Supreme Court equal protection case, U.S. Department of Agriculture v. Moreno, 413 U.S. 528 (1973), in which the Supreme Court invalidated on equal protection grounds a federal statutory provision that adopted a definition of "household" for the food stamp program that would have denied food stamps to households where unrelated adults lived together.  The legislative history showed that this stemmed from Congressional moral disapproval of unmarried cohabitation, and particularly – in the argot of that time – hippie communes.  The Supreme Court rejected the idea that Congress could establish a program intended to benefit American agriculture while feeding the hungry but exclude certain kinds of people based on their unpopularity with the electorate. 

"Those excluded were like the same-sex partners in this case who, because they cannot marry, are unable to alter their living arrangements to retain eligibility," wrote Judge Schroeder.  "The Court concluded that the 'hippie' amendment's classification was 'wholly without any rational basis.'  We must reach the same conclusion."  Indeed, she pointed out, because the Arizona Constitution prohibits same-sex marriage, the exclusion is harsher in this case than it was in Moreno.  "This case may present a more compelling scenario," she wrote, "since the plaintiffs in Moreno were prevented by financial circumstances from adjusting their status to gain eligibility, while same-sex couples in Arizona are prevented by operation of law."  What Schroeder overlooked, or perhaps just decided not to mention, was that the food stamp provision invalidated in Moreno would also of course have excluded households with same-sex partners from food stamp eligibility.  But back in 1973 when that case was decided, it is unlikely that anybody would have raised that particular argument.

The state's argument to the district court that the Arizona statute was intended to promote marriage by eliminating benefits for domestic partners also backfired, in the court's view.  "The district court properly concluded that the denial of benefits to same-sex domestic partners cannot promote marriage, since such partners are ineligible to marry," she wrote, noting that the state "has not seriously advanced this justification" on appeal.

To add a final twist to its decision, the court of appeals panel also ruled that there was no problem with Judge Sedwick's ruling that the plaintiffs would not have to post a bond to cover potential liability to the state if their lawsuit was defeated on the merits.  The Federal Rules of Civil Procedure authorize the district court to require plaintiffs to post a bond when a preliminary injunction is issued to ensure that if the court ultimately rules against them, the defendant can be reimbursed for its expenses in complying with the preliminary injunction.  In this case, Judge Sedwick invoked his discretion not to require a bond, based on his conclusion that it was very likely that the plaintiffs would ultimately win on the merits of their claim, so no reimbursement was likely to be required.

By upholding the preliminary injunction and denial of the bond, the 9th Circuit sends a strong signal to the state of Arizona that it has a losing case.  But will the state respond by offering to rescind the statute and restore the benefits permanently?  Only time will tell.  Meanwhile, so long as the case continues, the same-sex partners who were enrolled for benefits under the more expansive definition of dependent adopted in 2008 will continue to enjoy coverage.  Different-sex partners of state employees, who are not covered by this lawsuit, lost their insurance coverage back on New Years' Day unless they took advantage of their privileged right to marry.

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