# KADEL v. FOLWELL

> District Court, M.D. North Carolina · March 5, 2021

URL: https://www.frixlaw.com/law-library/cases/10253709

## Case

- **Court:** District Court, M.D. North Carolina
- **Decided:** March 5, 2021
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10253709

## Opinion text

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,
3
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
4
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),
6
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
7
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.)

9
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
21
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

22

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).
23

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.
25
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

26

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10253709. Public record. Not legal advice.