Arizona Seeks Supreme Court Review of Domestic Partner Benefits Case

Arizona has petitioned the U.S. Supreme Court to review the 9th Circuit's decision in Diaz v. Brewer, 656 F.3d 1008 (2011), petition for rehearing en banc denied, 676 F.3d 823 (2012), in which the circuit court upheld a preliminary injunction that District Judge John W. Sedwick had issued to prevent same-sex partners of Arizona state employees from losing their domestic partnership health benefits.  Channeling the arguments that 9th Circuit Judge Diarmuid O'Scannlain made in his dissent from the court's decision not to grant rehearing en banc, Arizona argues in its petition in Brewer v. Diaz, No. 12-23 (filed July 2, 2012), that Judge Sedwick misconstrued the Supreme Court's equal protection precedents and has cast doubt on the constitutionality of traditional public sector employee benefit plans that limit participation to the legal spouses and children of employees.

In April 2008, when Janet Napolitano, a Democrat, was governor of Arizona, the state administratively adopted an amendment to its public employee health benefits regulations, expanding eligibility to domestic partners (both same-sex and different-sex) of state employees.  About 800 employees have signed up their partners for health coverage, but the state has not provided data about how many of those are same-sex partners.  In November 2008, Arizona voters approved an anti-gay marriage amendment for their constitution.  In September 2009, in the midst of a budget crisis, the state enacted a budget reconciliation bill that included numerous changes to taxes, fees, and benefits, including overriding the administrative amendment and restricting public employee benefits eligibility to legal spouses of employees.  This change was to go into effect in 2011, and state employees who had enrolled their domestic partners were informed that the coverage would end.

Lambda Legal filed suit on behalf of a group of state employees who had enrolled their partners and had been notified that the coverage would be lost.  Lambda argued that because same-sex couples can't marry in Arizona and their out-of-state same-sex marriages would not be recognized due to the marriage amendment, the change in eligibility rules discriminated based on sexual orientation.  The state moved to dismiss and Lambda moved for a preliminary injunction to prevent the law from going into effect pending an ultimately ruling in the case.  Judge Sedwick denied the motion to dismiss and granted the preliminary injunction.

The judge found that Lambda was likely to prevail on the merits of its equal protection claim (although he dismissed a due process claim), and in light of the factual allegations concerning the same-sex partners of plaintiffs who would lose benefits, plaintiffs would suffer irreparable injury were the coverage terminated.  (Each of the plaintiffs has a same-sex partner whose health status would make it difficult or impossible for them to obtain individual insurance unless it were through a group plan that is not individually underwritten and would, at the time the lawsuit was filed, have faced severe pre-existing condition problems in seeking new insurance coverage.)  At the same time, Judge Sedwick found that there seemed no non-discriminatory rational basis for denying coverage to same-sex partners, having accepted the argument that different-sex partners who might be harmed by the discontinuation of coverage had the option to marry to preserve their eligibility.

The state appealed the preliminary injunction to the 9th Circuit, where a three-judge panel affirmed Judge Sedwick, finding that he had properly applied the tests for preliminary injunctive relief.  The state argued that the law was rationally related to its need to cut expenses in the midst of the budget crisis, and argued, as it had before Judge Sedwick, that the law was neutral on its face, disqualifying all domestic partners, not just same-sex partners.  The 9th Circuit panel found convincing the argument that in light of the state's failure to provide data on how many same-sex partners were receiving benefits and what those benefits cost, and the supposition that most of those affected by the change in policy were different-sex couples who could retain benefits by marrying before the deadline, there was no evidence that disqualifying same-sex partners would save the state any appreciable money, so barring them from covering their partners was not rationally related to the state's fiscal concern.  The plaintiffs had presented expert testimony, not rebutted by the state, that the cost of covering the  domestic partners who had signed up was only a tiny proportion of the state's overall employee benefits cost.  Lacking contrary evidence, Judge Sedwick drew the conclusion that this provision was not really a  cost-saving measure.

Interestingly, the 9th Circuit panel opinion, by Judge Mary M. Schroeder, does not explicitly discuss the main point of Judge O'Scannlain's dissent from the denial of en banc review, presumably because the lawyers for the state of Arizona failed to make the argument that the trial court had misapprehended the scope of the Supreme Court's precedents on equal protection.  If Judge Schroeder's opinion accurately reflects the arguments that the state's lawyers made, they seem to have missed the most obvious argument, at least according to Judge O'Scannlain's dissent. 

O'Scannlain observes that the Supreme Court has construed the Equal Protection Clause to extend only to intentional discrimination.  That is, the "disparate impact" theory, which was judicially developed as an interpretation of Title VII of the Civil Rights Law of 1964, does not generally apply to claims that a state has failed to provide equal protection of the laws. 

Under the Title VII disparate impact theory, a facially-neutral policy that disadvantages employees of a particular race, religion, sex or national origin will be considered unlawful unless the employer can show that it is consistent with business necessity.  In such a case, the plaintiff is not required to show that the employer intended to discriminate when it adopted such a policy that has a significant discriminatory effect.  The Supreme Court accepted this theory based on its finding that Congress intended by enacting Title VII to level the playing field and eliminate barriers to workplace participation.  If a particular policy erected such a barrier, it would have to fall unless there was a non-discriminatory business justification for it.  Congress reaffirmed this policy in 1991, overruling a series of Supreme Court decision that had cut back on the disparate impact theory during the late 1980s, and explicitly incorporating the theory into the Civil Rights Act.

The Supreme Court has in the past rejected attempts to incorporate the disparate impact theory into the 14th Amendment.  It has, however, accepted the proposition that a facially-neutral government policy may violate the Equal Protection Clause if it was intentionally adopted in order to disadvantage a particular group.  Thus, for example, the Supreme Court found an equal protection violation when Congress amended the food stamp law to deny benefits to households with unrelated adults, based on evidence that members of Congress wanted to deny food stamps to "hippies" and "hippie communes" because of moral disapproval of their lifestyle.  The Supreme Court found that this discriminatory effect, which Congress intended, was not rationally justified by the policies underlying the food stamp program, which is intended to increase demand for agricultural products while combating hunger by subsidizing food purchases by poor people. 

Judge O'Scannlain argued that, unlike in the food stamp case, here there was no evidence presented, and no factual finding by Judge Sedwick, that Arizona had amended the qualification requirements specifically to exclude same-sex partners of its gay employees from eligibility.  It had excluded all domestic partners and, he observed, as a result of the likelihood that most participants enrolled different-sex partners, it could not be argued that the legislature changed the rules specifically to disadvantage gay people.  Thus, he contended, Supreme Court precedent did not support the trial court's conclusion that Lambda Legal was likely to prevail on the merits of the equal protection claim, and the preliminary injunction should have been denied.

O'Scannlain also observed that if the panel decision stood as Circuit precedent, it could potentially invalidate any government benefits program that limited eligibility to legal spouses of employees and, in effect, recognize a right of same-sex couples to marry, the ultimate question underlying the Proposition 8 case, which might be before the Supreme Court next term.  (No petition for review has been filed in that case as of this writing.)  He noted that the district judges in two challenges to Section 3 of DOMA, in the Golinski and Dragovich cases, had already cited the panel decision in the Arizona case in support of their conclusions that the federal government violated equal protection by failing to recognize same-sex marriages.

Arizona channels these arguments in the petition it filed with the Supreme Court on July 2.  "Given the court of appeals' conclusion that Section O's adverse impact on same-sex couples violated the Equal Protection Clause without any evidence of discriminatory intent," the state belatedly argues, "the decision also threatens the validity of federal and state statutes that offer benefits only to employees' spouses.  This Court should therefore grant review to clarify that the court of appeals erroneously inferred that the Arizona Legislature was motivated by a discriminatory intent when it limited healthcare benefits to state employees' spouses when there was no evidence to support that inference."


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