KADEL v. FOLWELL

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

MAXWELL KADEL, et al., )

)

Plaintiffs, )

)

v. ) 1:19cv272

)

DALE FOLWELL, et al., )

)

Defendants. )

MEMORANDUM OPINION AND ORDER

This case comes before the Court on “Plaintiff’s Motion for

Leave to File First Amended Complaint” (Docket Entry 62) (the

“Motion to Amend”). For the reasons that follow, the Court will

grant the Motion to Amend.1

BACKGROUND

Asserting several violations of their federal constitutional

and statutory rights, Maxwell Kadel, Jason Fleck, Connor Thonen-

1 For reasons stated in Deberry v. Davis, No. 1:08cv582, 2010

WL 1610430, at *7 n.8 (M.D.N.C. Apr. 19, 2010), the undersigned

Magistrate Judge will enter an order, rather than a recommendation,

as to the Motion to Amend. See also Everett v. Prison Health

Servs., 412 F. App’x 604, 605 & n.2 (4th Cir. 2011) (explaining

that, where the plaintiff “moved for leave to amend her complaint[]

. . . to add a state-law claim of medical malpractice,” “the

magistrate judge denied [that] motion,” and the plaintiff “timely

objected, thereby preserving the issue for review by the district

court,” the district court “could not modify or set aside any

portion of the magistrate judge’s order unless the magistrate

judge’s decision was ‘clearly erroneous or contrary to law’”

(citing 28 U.S.C. § 636(b)(1)(A); Fed. R. Civ. P. 72(a))).

Fleck,2 Julia McKeown, Michael D. Bunting, Jr., C.B.,3 and Sam

Silvaine (collectively, “Plaintiffs”) initiated this action against

Dale Folwell, in his official capacity as State Treasurer of North

Carolina; Dee Jones, in her official capacity as Executive

Administrator of the North Carolina State Health Plan for Teachers

and State Employees; University of North Carolina at Chapel Hill

(“Defendant UNC”); North Carolina State University (“Defendant

NCSU”); University of North Carolina at Greensboro (“Defendant

UNCG”); and North Carolina State Health Plan for Teachers and State

Employees (“Defendant NCSHP”) (collectively, “Defendants”).

(Docket Entry 1 (the “Original Complaint”), ¶¶ 1–18.) In

particular, the Original Complaint alleges:

Plaintiffs are all transgender individuals, or the parent(s)

of a transgender child. (Id., ¶¶ 7-11.) Plaintiffs (to exclude

Plaintiff Fleck and Plaintiff Bunting)4 have experienced gender

dysphoria, “the clinically significant distress that can result

2 By virtue of his minority, Plaintiff Thonen-Fleck “sues

pursuant to Federal Rule of Civil Procedure 17(c) by and through

his next friends and parents[.]” (Docket Entry 1, ¶ 8.) The Court

discloses his full name because he “waive[d] the privacy

protections afforded by Fed. R. Civ. P. 5.2(a).” (Id., ¶ 8 n.1.)

3 Like Plaintiff Thonen-Fleck, Plaintiff C.B. brings suit “by

and through his next friends and parents[.]” (Docket Entry 1,

¶ 10.)

4 As explained more fully below, Plaintiff Fleck and

Plaintiff Bunting brought suit on behalf of their minor children

and on their own behalf, as subscribers to employer-sponsored

health insurance that denied treatment for their dependent

children’s gender dysphoria. (See Docket Entry 1, ¶¶ 1, 8, 10.)

2

from the dissonance between an individual’s gender identity and sex

assigned at birth” (id., ¶ 1). (Id., ¶¶ 61, 69, 82, 98, 115.)

“Gender identity refers to an individual’s fundamental, internal

sense of being a particular gender.” (Id., ¶ 24.) Both “the

American Psychiatric Association’s Diagnostic and Statistical

Manual of Mental Disorders, Fifth Edition” and “the World Health

Organization’s International Classification of Diseases” recognize

gender dysphoria as a medical condition. (Id., ¶ 27.) Without

adequate treatment, gender dysphoria may “result in severe anxiety,

depression, and suicidal ideation or suicide.” (Id., ¶ 28.)

As current or former employees of Defendant UNC, Defendant

NCSU, or Defendant UNCG (or dependents of such employees),

Plaintiffs have received health care coverage through plans (the

“Health Plans”) offered by Defendant NCSHP. (Id., ¶¶ 59, 74, 85,

101, 114.) “Defendant NCSHP, a corporation, administers

comprehensive group health insurance to eligible teachers and other

North Carolina state employees, pursuant to N.C. Gen. Stat.

§ 135-48.2. [Defendant] NCSHP is self-funded and empowered to

determine, define, adopt, and remove health care benefits and

exclusions . . . .” (Docket Entry 1, ¶ 17.) Defendant Folwell, as

North Carolina State Treasurer and “Chair of the Board of Trustees

of [Defendant NCSHP],” bears responsibility “for designing,

operating, and/or administering [the Health Plans].” (Id., ¶ 12.)

Defendant Jones, the Executive Administrator of Defendant NCSHP,

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possesses “authori[ty] to negotiate, renegotiate, and execute

contracts with third parties in the performance of her duties and

responsibilities.” (Id., ¶ 13.)

“[W]ith the exception of the 2017 plan year . . . the Health

Plans have contained a categorical exclusion” such that transgender

enrollees (or the transgender dependent of an enrollee) may not

receive “coverage for transition-related health care.” (Id.,

¶ 45.) Such exclusion “denies coverage for . . . counseling,

hormone therapy, surgical care, and any other health care provided

in relation to a person’s transgender status and/or gender

transition.” (Id., ¶ 2.) However, other “enrollees [in the Health

Plans] who are not transgender do not face a categorical exclusion

barring coverage for health care that is medically necessary for

them based on their sex and receive coverage for the same care that

is denied to transgender enrollees.” (Id.) “Plaintiffs have all

been denied coverage for medically necessary gender-confirming

health care because they or their dependents are transgender, based

on the categorical exclusion of [such care] in the [Health Plans].”

(Id., ¶ 3; see also id., ¶¶ 57–122 (describing denial of coverage

as to each Plaintiff, as well as foregone medical treatment and/or

payments out-of-pocket for hormone therapy or surgical care for

their (or their dependent’s) gender dysphoria).) As a result, “all

Plaintiffs have suffered emotional distress, humiliation,

degradation, embarrassment, emotional pain and anguish, violation

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of their dignity, loss of enjoyment of life, and other compensatory

damages, in an amount to be established at trial.” (Id., ¶ 123.)

In connection with the foregoing allegations, the Original

Complaint asserts the following claims:

(1) that Defendant Folwell and Defendant Jones, by “adopti[ng

and enforc[ing ]the discriminatory sex-based classifications in the

[] Health Plans” (id., ¶ 126), discriminated against all Plaintiffs

on the basis of sex and transgender status, in violation of the

Equal Protection Clause of the Fourteenth Amendment and 42 U.S.C.

§ 1983 (Docket Entry 1, ¶¶ 124–38 (“Equal-Protection Claims”));

(2) that Defendant UNC, Defendant NCSU, and Defendant UNCG

(collectively, “University Defendants”), by offering the Health

Plans to their employees, intentionally discriminated against

Plaintiffs5 on the basis of sex, in violation of Title IX of the

Education Amendments of 1972 (“Title IX”), 20 U.S.C. §§ 1681–1688

(Docket Entry 1, ¶¶ 139–47 (“Title IX Claims”)); and

(3) that Defendant NCSHP “provid[ed] or administer[ed] health

care insurance coverage” that discriminates against all Plaintiffs

on the basis of sex in violation of Title IX, all in violation of

5 Each Plaintiff asserted a Title IX Claim against their

current or former employer (or, in the case of Plaintiff Thonen-

Fleck and Plaintiff C.B., the employer of one or both of their

parents), as follows: Plaintiff Kadel, Plaintiff Bunting, and

Plaintiff C.B. against Defendant UNC; Plaintiff McKeown and

Plaintiff Silvaine against Defendant NCSU; and Plaintiff Fleck and

Plaintiff Thonen-Fleck against UNCG. (See Docket Entry 1,

¶¶ 139–47.)

5

Section 1557 of the Patient Protection and Affordable Care Act

(“ACA”), 42 U.S.C. § 18116 (Docket Entry 1, ¶¶ 148–57 (“ACA

Claims”)).

Instead of answering the Original Complaint, University

Defendants filed a motion to dismiss pursuant to Federal Rule of

Civil Procedure 12(b)(6) (“Rule 12(b)(6)”). (See Docket Entry 30

(the “University Defendants’ Motion”); see also Docket Entry 31

(supporting memorandum).) According to University Defendants, as

concerns the Title IX Claims, Plaintiffs (i) lack standing, and

(ii) failed to state a viable claim. (See Docket Entry 31 at

6–18.) Defendant Folwell, Defendant Jones, and Defendant NCSHP

(collectively, “State Defendants”) likewise moved to dismiss the

Equal-Protection Claims and the ACA Claims. (See Docket Entry 32

(the “State Defendants’ Motion”); see also Docket Entry 33

(supporting memorandum).) State Defendants challenged the Equal-

Protection Claims as alleging disparate impact (rather than

intentional discrimination) and asserted that the exclusion of

gender-confirming health care satisfied the applicable rational-

basis standard of review. (See Docket Entry 33 at 15–22.) With

respect to the ACA Claims, State Defendants invoked sovereign

immunity and contended that, in any event, Plaintiffs have failed

to state a claim under Title IX or the ACA. (See id. at 22–31.)

Plaintiffs responded in opposition to the University Defendants’

Motion and the State Defendants’ Motion (Docket Entries 34, 35),

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and University Defendants and State Defendants replied (Docket

Entries 37, 39).

Plaintiffs then moved for the entry of a tolling stipulation

as to their claims under Title VII of the Civil Rights Act of 1964

(“Title VII”), 42 U.S.C. §§ 2000e–2000e-17. (Docket Entry 41 (the

“Stipulation Motion”) at 1.) In that regard, the memorandum

supporting the Stipulation Motion explains that, when Plaintiffs

filed the Original Complaint, Plaintiff Kadel, Plaintiff McKeown,

and Plaintiff Silvaine had “timely filed charges alleging

violations of [] Title VII” but had not yet exhausted their

administrative remedies with the United States Equal Employment

Opportunity Commission (“EEOC”). (Docket Entry 42 at 2.) At the

same time, R.G. & G.R. Harris Funeral Homes, Inc. v. EEOC, No.

18-107 (U.S. argued Oct. 8, 2019), remained pending. (See Docket

Entry 42 at 1–3.) Plaintiff Kadel, Plaintiff McKeown, and

Plaintiff Silvaine entered into a tolling agreement with University

Defendants “to preserve Plaintiffs’ prospective Title VII claims

against University Defendants — and to allow Plaintiffs to plead

those claims, and University Defendants to formulate a responsive

pleading — with the benefit of the Supreme Court’s ruling in Harris

Funeral Homes.” (Id. at 3.) State Defendants took no position on

the Stipulation Motion and declined to join the tolling agreement.

(See id. at 1–2.) The Court (per United States District Judge

Loretta C. Biggs) granted the Stipulation Motion, thereby

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permitting Plaintiff Kadel, Plaintiff McKeown, and Plaintiff

Silvaine to assert Title VII claims against University Defendants

within 50 days of the Supreme Court’s ruling in Harris Funeral

Homes. (See Docket Entry 42-1 at 3-5; Docket Entry 43 at 1.)

Thereafter, the Court (per Judge Biggs) denied the University

Defendants’ Motion and the State Defendants’ Motion. (See Docket

Entry 45 at 2.) More specifically, Judge Biggs concluded that the

Original Complaint “stated cognizable claims under [Title] IX, the

ACA, and the Equal Protection Clause” (id. at 25), rejected

University Defendants’ standing-based argument for dismissal of the

Title IX Claims (see id. at 7-12), and found that Defendant NCSHP

had waived its sovereign immunity for purposes of the ACA Claims

(see id. at 16-20). In response to that ruling, Defendant NCSHP

gave notice of its interlocutory appeal to the United States Court

of Appeals for the Fourth Circuit. (See Docket Entry 50 at 1.)

That appeal remains pending. (See Docket Entries dated Apr. 9,

2020, to present (lacking Fourth Circuit decision on appeal)

Plaintiffs, pursuant to Federal Rule of Civil Procedure 15

(“Rule 15”), subsequently filed the Motion to Amend (Docket Entry

62), attaching a proposed amended complaint (Docket Entry 62-1)

(the “Amended Complaint”). (Docket Entry 62 at 1.) The Amended

Complaint proposes to add Dana Caraway (“Plaintiff Caraway”), an

employee of the State of North Carolina, Department of Public

Safety (“DPS”) (see Docket Entry 62-1, 4 12; see also id.,

¶¶ 130–38), who would join the existing Plaintiffs in asserting

(i) an Equal-Protection Claim against Defendant Folwell and

Defendant Jones (see id., ¶¶ 139–53 (describing such claim brought

by “[a]ll Plaintiffs”)), and (ii) an ACA Claim against Defendant

NCSHP (see id., ¶¶ 165–74 (same, as to ACA Claim)). The Amended

Complaint further lodges new Title VII claims: on behalf of

Plaintiff Kadel against Defendant UNC; on behalf of Plaintiff

McKeown and Plaintiff Silvaine against Defendant NCSU; and on

behalf of Plaintiff Caraway against Defendant DPS and Defendant

NCSHP. (See id., ¶¶ 175–88.)

University Defendants “[took] no position on [the Motion to

Amend]” (Docket Entry 62, ¶ 8) and declined to file a response (see

Docket Entries dated Aug. 3, 2020, to present). State Defendants,

however, responded in opposition, asserting that (i) the Court

lacks jurisdiction to grant the Motion to Amend in light of the

pending interlocutory appeal, and (ii) the Amended Complaint fails

for futility and prejudices Defendants. (See Docket Entry 64 (the

“Response”) at 6–10.) Plaintiffs replied, characterizing the

Response as inaccurate as to the applicable standard for complaint

amendment, incorrect as to the effect of the interlocutory appeal,

and premature as to the viability of Plaintiff Caraway’s Title VII

claim against Defendant NCSHP. (See Docket Entry 65 (the “Reply”)

at 2–8.)

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DISCUSSION

I. Preliminary Matters

The Court begins by addressing State Defendants’ contention,

in its Response, that the Court lacks jurisdiction to rule on the

Motion to Amend. In particular, the Response states that, because

the pending interlocutory appeal concerns Defendant NCSHP’s

invocation of sovereign immunity and because sovereign immunity

constitutes “an immunity from suit rather than a mere defense to

liability” (Docket Entry 64 at 8 (quoting Puerto Rico Aqueduct &

Sewer Auth. v. Metcalf & Eddy, Inc., 506 U.S. 139, 144 (1993))),

the Court must wait “until the Fourth Circuit has reached its

decision or given permission to proceed” (id. at 6). Consistent

with that reasoning, the Response concludes that “[t]he [Original]

Complaint must remain intact for purposes of the appeal, and new

legal theories of recovery against [Defendant NCSHP] must wait.”

(Id. at 8.)

“Federal law . . . limits [appellate] jurisdiction to appeals

from ‘final decisions of the district courts.’” Davis v. City of

Greensboro, 770 F.3d 278, 281 (4th Cir. 2014) (citing 28 U.S.C.

§ 1291). “A ‘final decision’ generally is one which ends the

litigation on the merits and leaves nothing for the court to do but

execute the judgment.” Catlin v. United States, 324 U.S. 229, 233

(1945), superseded on other grounds by statute, Judicial

Improvements and Access to Justice Act, Pub. L. No. 100-702, 102

10

Stat. 4642 (1988) (codified at 9 U.S.C. § 16). However, appellate

jurisdiction under Section 1291 “encompasses not only judgments

that ‘terminate an action,’ but also a ‘small class’ of collateral

rulings that, although they do not end the litigation, are

appropriately deemed ‘final.’” Mohawk Indus. v. Carpenter, 558

U.S. 100, 106 (2009) (quoting Cohen v. Beneficial Indus. Loan

Corp., 337 U.S. 541, 545–46 (1949)). “That small category includes

only decisions that are conclusive, that resolve important

questions separate from the merits, and that are effectively

unreviewable on appeal from the final judgment in the underlying

action.” Swint v. Chambers Cnty. Comm’n, 514 U.S. 35, 42 (1995)

(discussing Cohen’s “collateral order doctrine”).

“Generally, the denial of a motion to dismiss does not

constitute a ‘final decision,’ and thus does not provide the proper

basis for an appeal.” Davis, 770 F.3d at 281. Notwithstanding

that general rule, “orders denying certain kinds of immunity fall

within the collateral order doctrine.” Id. Consistent with the

foregoing principles, “[s]tates and state entities that claim to be

‘arms of the State’ may take advantage of the collateral order

doctrine to appeal a district court order denying a claim of

Eleventh Amendment immunity.” Puerto Rico Aqueduct & Sewer Auth.,

506 U.S. at 147.

“[A] timely filed notice of appeal transfers jurisdiction of

a case to the court of appeals and strips a district court of

11

jurisdiction to rule on any matters involved in the appeal.”

Company Doe v. Public Citizen, 749 F.3d 246, 258 (4th Cir. 2014);

see also Griggs v. Provident Consumer Disc. Co., 459 U.S. 56, 58

(1982) (“The filing of a notice of appeal is an event of

jurisdictional significance [that] confers jurisdiction on the

court of appeals and divests the district court of its control over

those aspects of the case involved in the appeal.”), superseded on

other grounds by statute, Fed. R. App. P. 4(a)(4) (as amended Dec.

1, 1993). Adherence to that “rule fosters judicial economy and

guards against the confusion and inefficiency that would result if

two courts simultaneously were considering the same issues.”

Company Doe, 749 F.3d at 258. As concerns interlocutory appeals,

“[t]he divestiture of jurisdiction occasioned by the filing of a

notice of appeal is especially significant . . . . Unlike an

appeal from a final judgment, an interlocutory appeal disrupts

ongoing proceedings in the district court.” Stewart v. Donges, 915

F.2d 572, 575 (10th Cir. 1990).

When a litigant properly seeks an interlocutory appeal, “[a]

district court does not have the power to ‘alter the status of the

case as it rests before the [appellate court.]’” Dayton Indep.

Sch. Dist. v. United States Mineral Prods. Co., 906 F.2d 1059, 1063

(5th Cir. 1990) (quoting Coastal Corp. v. Texas E. Corp., 869 F.2d

817, 820-21 (5th Cir. 1989)). For example, when “an interlocutory

appeal from an order refusing to dismiss on . . . qualified

12

immunity grounds relates to the entire action[,] . . . it divests

the district court of jurisdiction to proceed with any part of the

action against an appealing defendant.” Stewart, 915 F.2d at 576

(emphasis added). However, “interlocutory review of a denial of

qualified immunity does not automatically confer [appellate]

jurisdiction over other issues □□□ case.” Livingston v. Kehagias,

803 F. App’x 673, 686 n.5 (4th Cir. 2020) (emphasis added); see

also Alice L. v. Dusek, 492 F.3d 563, 564 (5th Cir. 2007) (“A

notice of appeal from an interlocutory order .. . only divests the

district court of jurisdiction over those aspects of the case on

appeal.”).

Here, although State Defendants properly have invoked the

collateral order doctrine with respect to the Court’s denial of

sovereign immunity, see Puerto Rico Aqueduct & Sewer Auth., 506

U.S. at 147, the resulting interlocutory appeal poses no absolute

jurisdictional bar in light of the scope of the appeal and the

substance of the Amended Complaint. The Court possesses

jurisdiction to resolve the Motion to Amend because the changes

Plaintiffs have proposed in the Amended Complaint bear no

meaningful relation to “any matters involved in the appeal,”

Company Doe, 749 F.3d at 258.

As far as the nature of the appeal, State Defendants’ Motion

previously suggested that sovereign immunity defeats Plaintiffs’

ACA Claims. (See Docket Entry 32 at 2 (asserting lack of subject

13

matter jurisdiction as defense); Docket Entry 33 at 22–27

(developing argument that “[t]he Eleventh Amendment bars federal

jurisdiction over [Defendant NCSHP]”).) The Court (per Judge

Biggs) rejected that contention, concluding that Defendant NCSHP

had waived its sovereign immunity. (See Docket Entry 45 at 16–20

(holding “that Section 1557 [of the ACA], when read in conjunction

with [the Civil Rights Remedies Equalization Act of 1986, 42 U.S.C.

§ 2000d-7(a)(1)], effectuates a valid waiver of sovereign

immunity”).) Defendant NCSHP appealed that ruling. (See Docket

Entry 50 at 1.) Consequently, the appeal concerns whether

sovereign immunity bars Plaintiffs’ ACA Claims against Defendant

NCSHP.

Turning to the substance of the Amended Complaint, Plaintiff

Caraway has sought to add a Title VII claim against Defendant DPS

and Defendant NCSHP. (See Docket Entry 62-1, ¶¶ 175–88; see also

Docket Entry 64 at 5 (“Plaintiffs also allege that [Defendant

NCSHP] has violated Title VII.”).) As Plaintiffs correctly have

observed, “states do not have sovereign immunity [against suit for

claims] under Title VII” (Docket Entry 65 at 4 (citing Fitzpatrick

v. Bitzer, 427 U.S. 445, 456 (1976))). See Savage v. Maryland, 896

F.3d 260, 275 (4th Cir. 2018) (“Title VII . . . abrogates

[eleventh-amendment sovereign] immunity for suits against a state

in its capacity ‘as employer.’”). As a result, even if the Fourth

Circuit decides the sovereign immunity issue in Defendant NCSHP’s

14

favor, that ruling cannot foreclose Plaintiff Caraway’s Title VII

claim. Stated differently, the issue on appeal does not bear on

the viability of Plaintiff Caraway’s Title VII theory.

Furthermore, no other aspect of the Amended Complaint

“alter[s] the status of the case as it rests before the [Fourth

Circuit],” Dayton Indep. Sch. Dist., 906 F.2d at 1063 (internal

quotation marks omitted). The ACA Claims in the Amended Complaint

effectively mirror such claims in the Original Complaint, except

for the Amended Complaint’s addition of Plaintiff Caraway.

(Compare Docket Entry 1, ¶¶ 148–57, with Docket Entry 62-1,

¶¶ 165–74.) That change in no way impacts the question on appeal.

To the extent Plaintiff Caraway seeks to join existing Plaintiffs

in asserting an ACA Claim against Defendant NCSHP, that claim will

not proceed until the Fourth Circuit resolves the sovereign

immunity question. Moreover, the Amended Complaint’s inclusion of

factual matter pertaining to Plaintiff Caraway does not affect the

issue before the Fourth Circuit. Consequently, the Response’s

jurisdictional argument lacks merit; the Court retains jurisdiction

to rule on the Motion to Amend despite the interlocutory appeal.

II. Motion to Amend

A. Relevant Standards

1. Complaint Amendment

“Under [Rule 15], leave to amend a pleading ‘shall be freely

given when justice so requires.’” Edwards v. City of Goldsboro,

15

178 F.3d 231, 242 (4th Cir. 1999) (quoting Fed. R. Civ. P. 15(a)).

“[L]eave to amend a pleading should be denied only when the

amendment would be prejudicial to the opposing party, there has

been bad faith on the part of the moving party, or the amendment

would be futile.” Johnson v. Oroweat Foods Co., 785 F.2d 503, 509

(4th Cir. 1986). “An amendment is futile if the amended claim

would fail to survive a motion to dismiss pursuant to [Rule]

12(b) (6).” Hall v. Greystar Mgmt. Servs., L.P., 637 F. App’x 93,

97 (Ath Cir. 2016).

A Rule 12 (b) (6) motion “tests the sufficiency of a complaint,”

but “does not resolve contests surrounding the facts, the merits of

a claim, or the applicability of defenses.” Republican Party of

N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992). Accordingly, in

reviewing a motion to dismiss, the Court must “accept the facts

alleged in the complaint as true and construe them in the light

most favorable to the plaintiff.” Coleman v. Maryland Ct. of App.,

626 F.3d 187, 189 (4th Cir. 2010), aff’d sub nom. Coleman v. Court

of App. of Md., 566 U.S. 30 (2012). The Court must also “draw all

reasonable inferences in favor of the plaintiff.” E.I. du Pont de

Nemours & Co. v. Kolon Indus., Inc., 637 F.3d 435, 440 (Ath Cir.

2011) (internal quotation marks omitted).

To avoid Rule 12(b) (6) dismissal, a complaint must contain

sufficient factual allegations “to ‘state a claim to relief that is

plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678

16

(2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570

(2007)). To qualify as plausible, a claim needs sufficient factual

content to support a reasonable inference of the defendant’s

liability for the alleged misconduct. See id. (citing Twombly, 550

U.S. at 556). “Where a complaint pleads facts that are ‘merely

consistent with’ a defendant’s liability, it ‘stops short of the

line between possibility and plausibility of “entitlement to

relief.”’” Id. (quoting Twombly, 550 U.S. at 557). “At bottom,

determining whether a complaint states . . . a plausible claim for

relief . . . will ‘be a context-specific task that requires the

reviewing court to draw on its judicial experience and common

sense.’” Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir. 2009)

(quoting Iqbal, 556 U.S. at 679).

2. Title VII

Title VII provides that “[i]t shall be an unlawful employment

practice for an employer . . . to discriminate against any

individual with respect to . . . compensation, terms, conditions,

or privileges of employment, because of such individual’s race,

color, religion, sex, or national origin.” 42 U.S.C. § 2000e-

2(a)(1). The Supreme Court recently held that, within the meaning

of Title VII, the terms “because of ‘sex’” prohibit employment

discrimination on the basis of an individual’s transgender status.

Bostock v. Clayton Cnty., ___ U.S. ___, ___, 140 S. Ct. 1731, 1754

(2020).

17

Title VII defines an “employer” as “a person engaged in an

industry affecting commerce who has fifteen or more employees for

each working day in each of twenty or more calendar weeks in the

current or preceding calendar year, and any agent of such a

person... .” 42 U.S.C. § 2000e(b). As concerns Title VII, the

Fourth Circuit has recognized that “Title VII should be liberally

construed in light of its remedial purpose,” Butler v. Drive Auto.

Indus. of Am., 793 F.3d 404, 409 (4th Cir. 2015), and “such liberal

construction is also to be given to the definition of ‘employer,’”

id. (brackets and some internal quotation marks omitted). In that

regard, the Fourth Circuit has adopted the “joint employment

doctrine [a]s the law of this Circuit,” id., such that “multiple

entities may simultaneously be considered employers for the

purposes of Title VII,” id. at 410 (noting that doctrine “prevents

those who effectively employ a worker from evading liability by

hiding behind another entity”). Additionally, Title VII’s

inclusion of “agent” within its definition of “employer” reinforces

the principle that “an employer can[not] avoid his responsibilities

by delegating discriminatory programs to corporate shells.” City

of Los Angeles Dep’t of Water & Power v. Manhart, 435 U.S. 702, 718

n.33 (1978).

However, Title VII generally does not impose individual

liability on employees as agents of their employer. See Lissau v.

Southern Food Serv., 159 F.3d 177, 180-81 (4th Cir. 1998)

18

(collecting cases); see also, e.g., Wathen v. General Elec. Co.,

115 F.3d 400, 405 (6th Cir. 1997) (“Congress did not intend to

provide for individual employee/supervisor liability under Title

VII.”). Courts have limited agent liability under Title VII to

“ensur[e] that individuals who were employees could not be held

individually liable for violations of Title VII simply because

their employment status also qualified them as agents of their

employer.” Nealey v. University Health Servs., 114 F. Supp. 2d

1358, 1369 (S.D. Ga. 2000) (discussing Equal Emp. Opportunity

Comm’n _v. AIC Sec. Investigations, Ltd., 55 F.3d 1276 (7th Cir.

1995), and Mason v. Stallings, 82 F.3d 1007 (llth Cir. 1996)).

Consistent with the foregoing principles, some courts have allowed

Title VII claims to proceed on an agency theory when such claims

target entities beyond the scope of the traditional employment

relationship that nonetheless control an aspect of the plaintiff’s

employment. See Jimenez v. Laborer’s Welfare Fund of Health &

Welfare Dep’t of Constr. & Gen. Laborers’ Dist. Council of Chi. &

Vicinity, _-F. Supp. 3d, ss, :- 2020 WL 5979653, at *4-5 (N.D.

Ill. Oct. 8, 2020); Boyden v. Conlin, No. 1l17-cv-264, 2018 WL

2191733, at *8 (W.D. Wis. May 11, 2018) (unpublished); see also

Pappas v. Bethesda Hosp. Ass’n, 861 F. Supp. 616, 617-19 (S.D. Ohio

1994) (rejecting American with Disabilities Act claim against

administrator of health insurance plan after noting lack of

allegation that employer “delegated any of its duties regarding

19

employee benefits” to administrator); Crowder v. Fieldcrest Mills,

Inc., 569 F. Supp. 825, 827–29 (M.D.N.C. 1983) (dismissing Title

VII claim against administrator of group insurance programs because

administrator lacked “any significant control over the insurance

program, a fringe benefit which [the employer] extend[ed] to its

employees”).

Finally, as a matter of procedure, Title VII imposes various

requirements before a plaintiff may file a civil suit alleging such

claim. For example, a complainant must file a charge with the EEOC

in order to secure the ability to sue. See 42 U.S.C. § 2000e-5(f).

A complainant may initiate a civil suit within 90 days of receiving

a right-to-sue notice from the EEOC. Id. § 2000e-5(f)(1).

B. Analysis

State Defendants have urged the Court to deny the Motion to

Amend, arguing that the Amended Complaint fails for futility and

prejudices Defendants. (See Docket Entry 64 at 8.) The Response

observes that Defendant NCSHP declined to join the tolling

agreement, suggests that Plaintiff Caraway has not yet exhausted

administrative remedies (for purposes of Title VII), and maintains

that her Title VII theory against Defendant NCSHP fails to satisfy

Rule 12(b)(6) standards. (See id. at 8–9.) In particular, the

Response contends that Defendant NCSHP qualifies as neither an

“agent” of Defendant DPS nor a “joint employer” and thus can bear

no Title VII liability. (Id. at 9–10.)

20

Turning first to the Rule 12(b)(6) issue, the Amended

Complaint alleges that Defendant NCSHP acted as the “agent” of

Defendant DPS within the meaning of Title VII. In relevant part,

the Amended Complaint states:

In establishing the scope of health insurance coverage

for state employees, [Defendant] NCSHP acts as an agent

for North Carolina government employers who participate

in [the Health Plans], including but not limited to

[Defendant DPS], for purposes of determining components

of state employees’ “compensation, terms, conditions, or

privileges of employment” under Title VII. [Defendant]

NCSHP exists solely so that participating employers can

delegate responsibility for the benefits provided to

their employees, as its enacting statute makes clear.

N.C. Gen. Stat. Ann. § 135-48.2(a) provides for creation

of [Defendant] NCSHP “exclusively for the benefit of”

state employees, retirees, and eligible dependents, to

“administer one or more group health plans that are

comprehensive in coverage.” Government employers that

participate in [the Health Plans], including [Defendant

DPS], delegate significant control over employee health

benefits to [Defendant] NCSHP.

(Docket Entry 62-1, ¶ 20 (emphasis added); see also id., ¶ 180 (“In

establishing the scope of insurance coverage and administering that

coverage, [Defendant] NCSHP is an agent of all employers under

Title VII who participate in [the Health Plans], including but not

limited to [Defendant DPS].”).) As Plaintiffs have pointed out,

another district court (albeit outside the Fourth Circuit) deemed

an employer’s “agent” liable under Title VII under similar

circumstances. (See Docket Entry 65 at 7–8 (discussing Boyden v.

Conlin, 341 F. Supp. 3d 979, 998 (W.D. Wis. 2018)).) Additionally,

when other courts have assessed such claims against multiple

putative employers, they generally have considered the extent of

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control to determine whether an entity (other than the traditional

“employer”) may bear Title VII liability. See, e.g., Crowder, 569

F. Supp. at 828 (“[D]elegation of [an employer’s] authority [can]

result[] in [a third party] having control of an aspect of the

terms and conditions of employment.” (distinguishing Spirt v.

Teachers Ins. & Annuity Ass’n, 475 F. Supp. 1298 (S.D.N.Y. 1979),

aff’d in part and _ rev’d in part, 691 F.2d 1054 (2d Cir. 1982),

judg’ □ vacated and remanded, 463 U.S. 1223 (1983))).

The Response seemingly acknowledges such delegation but

nonetheless insists that the “employer” (here, Defendant DPS)

remains solely liable under Title VII. (See Docket Entry 64 at 9

(“Liability for delegated decisions remains with the employer.”).)

In support of that proposition, the Response invokes Birkbeck v.

Marvel Lighting Corp., 30 F.3d 507 (4th Cir. 1994), which held that

“the [Age Discrimination in Employment Act (‘ADEA’)] limits civil

liability to the employer,” id. at 510-11. (See Docket Entry 64 at

9.) However, in context, Birkbeck merely concluded that no

liability could attach to an individual employee for his allegedly

discriminatory action, see Birkbeck, 30 F.3d at 509-11, a ruling

consistent with the many courts that have rejected employment

discrimination claims against individuals, see Lissau, 159 F.3d at

181 (“[A] large number of circuit courts have held that individual

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supervisors are not liable under Title VII.”).° Birkbeck neither

foreclosed nor endorsed an agency theory under which more than one

entity may bear Title VII liability. See Birkbeck, 30 F.3d at

509-11 (deeming company vice president not subject to suit, on

agency theory, for allegedly discriminatory layoff decisions).

Here, the issue of individual Title VII liability (and

Birkbeck’s holding to that effect) remains irrelevant because the

Amended Complaint does not lodge a Title VII claim against anyone

in an individual capacity. (See Docket Entry 62-1, WII 175-88.)

Instead, Plaintiff Caraway’s Title VII claim targets two entities,

one (Defendant DPS) which controlled most aspects of her employment

(see id. 7 178 (identifying Defendant DPS as Title VII

“employer”)), and another (Defendant NCSHP) which allegedly

“exercise[d] significant control over [her] by determining

components of [her] ‘compensation, terms, conditions, or privileges

of employment’” (id., {@ 181). State Defendants have identified no

authority demonstrating that such theory necessarily fails. (See

Docket Entry 64 at 9.) To the contrary, some case law (including

from this Court) supports the notion that an entity like Defendant

NCSHP may bear Title VII liability under certain circumstances.

6 Although Lissau involved a Title VII claim rather than an

ADEA claim as in Birkbeck, Lissau explained that, in light of the

similarity between the two statutes, “[t]he Title VII definition of

employer must be read in the same fashion as the ADEA definition of

employer.” Lissau, 159 F.3d at 180 (viewing Birkbeck as

analogous).

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See, e.g., Manhart, 435 U.S. 702, 718 n.33; Crowder, 569 F. Supp.

at 828. As a result, the Amended Complaint does not suffer from

futility in that regard.’

7 State Defendants separately have argued that Defendant

NCSHP fails to qualify as a “joint employer” such that Title VII

liability cannot attach. (See Docket Entry 64 at 9-10 (citing

Butler, 793 F.3d at 408, 415).) In Butler, the Fourth Circuit

adopted a hybrid test (combining the “control test” and the

“economic realities test”) to determine whether multiple entities

qualify as “joint employers” under Title VII. Butler, 793 F.3d at

412-14. The hybrid test involves the consideration of, among other

factors,

(1) authority to hire and fire the individual;

(2) day-to-day supervision of the individual, including

employee discipline;

(3) whether the putative employer furnishes the equipment

used and the place of work;

(4) possession of and responsibility over the

individual’s employment records, including payroll,

insurance, and taxes;

(5) the length of time during which the individual has

worked for the putative employer;

(6) whether the putative employer provides the individual

with formal or informal training;

(7) whether the individual’s duties are akin to a regular

employee’s duties;

(8) whether the individual is assigned solely to the

putative employer; and

(9) whether the individual and putative employer intended

to enter into an employment relationship.

Id. at 414. The Response neither identifies nor analyzes those

factors but nonetheless concludes that Defendant NCSHP (which the

Response characterizes as a “health insurance provider” (Docket

Entry 64 at 10)) can bear no Title VII liability. (See id. at

9-10.) Because the Response declines to afford full treatment to

the “joint employer” issue and because the Amended Complaint

elsewhere plausibly alleges that Defendant NCSHP acted as Defendant

DPS’s agent with respect to an aspect of the employment

relationship between Plaintiff Caraway and Defendant DPS, the Court

declines to deny the Motion to Amend on the Response’s undeveloped

“joint employer” argument.

24

The Response’s remaining arguments do not justify denial of

the Motion to Amend. First, to the extent the Response suggests

that amendment would prejudice Defendants (see Docket Entry 64 at

8), it offers no support for that conclusion (see id. at 5–10).

Second, although the Response correctly observes that State

Defendants formed no part of the tolling agreement between some

existing Plaintiffs and University Defendants (id. at 8), no “delay

in bringing suit” (id.) bars Plaintiff Caraway’s Title VII claim

against Defendant DPS and Defendant NCSHP. As Plaintiffs have

explained in their Reply, Plaintiff Caraway sought relief under

Title VII (via the Amended Complaint) four days after receiving a

right-to-sue notice from the EEOC. (See Docket Entry 65 at 6–7;

see also Docket Entry 62-1 (Amended Complaint filed Aug. 3, 2020);

Docket Entry 65-1 at 2–5 (Notices of Right to Sue Within 90 Days,

each dated July 30, 2020).) Her Title VII claims therefore fall

within the 90-day statute of limitations, 42 U.S.C.

§ 2000e-5(f)(1), without regard for the tolling agreement that

Plaintiff Caraway, Defendant DPS, and Defendant NCSHP never signed.

Lastly, the Reply refutes the Response’s supposition that Plaintiff

Caraway has not exhausted administrative remedies. (Compare Docket

Entry 64 at 8–9, with Docket Entry 65 at 6–7.)

CONCLUSION

IT IS THEREFORE ORDERED that the Motion to Amend (Docket Entry

62) is GRANTED.

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IT IS FURTHER ORDERED that Plaintiffs shall file their amended

complaint in the form of Exhibit A (Docket Entry 62-1) by March 12,

2021.

/s/ L. Patrick Auld

L. Patrick Auld

United States Magistrate Judge

March 5, 2021

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