Ford v. Schering Plough Corp

Opinions of the United

1998 Decisions States Court of Appeals

for the Third Circuit

5-22-1998

Ford v. Schering Plough Corp

Precedential or Non-Precedential:

Docket 96-5674

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Filed May 22, 1998

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 96-5674

COLLEEN V. FORD,

Appellant

v.

SCHERING-PLOUGH CORPORATION;

SCHERING CORPORATION;

METROPOLITAN LIFE INSURANCE COMPANY

On Appeal from the United States District Court

for the District of New Jersey

(D.C. No. 96-cv-01991)

Argued January 28, 1998

BEFORE: MANSMANN, COWEN and ALITO, Circuit Judges

(Filed May 22, 1998)

Maureen S. Binetti, Esq. (Argued)

Wilentz, Goldman & Spitzer

90 Woodbridge Center Drive

P.O. Box 10

Woodbridge, NJ 07095

Counsel for Appellant

Colleen V. Ford

Robert J. Gregory, Esq.

(Argued)

Room 7032

Equal Employment Opportunity

Commission

1801 L Street, N.W.

Washington, DC 20507

Counsel for Amicus-Appellant

Equal Employment Opportunity

Commission

Corrie L. Fischel, Esq.

McGuiness & Williams

1015 15th Street, N.W.

Suite 1200

Washington, DC 20005

Counsel for Amicus-Appellee

Equal Employment Advisory

Council

Patricia A. Dunn, Esq.

Jones, Day, Reavis & Pogue

1450 G Street, N.W.

Suite 700

Washington, DC 20005-2088

Counsel for Amicus-Appellee

American Council Life Insurance

Ronald S. Cooper, Esq.

Steptoe & Johnson

1330 Connecticut Avenue, N.W.

Washington, DC 20036

Counsel for Amicus-Appellee

Association of Private Pension

And Welfare Plans

Blue Cross and Blue Shield

Association

Thomas F. Campion, Esq. (Argued)

Lee E. Miller

2

Shanley & Fisher

131 Madison Avenue

Morristown, NJ 07962-1979

Counsel for Appellee

Schering Plough Corporation

Allen I. Fagin

Aaron J. Schindel

Ronald S. Rauchberg

Proskauer, Rose, Goetz &

Mendelsohn

1585 Broadway

New York, NY 10036

Allan M. Marcus, Esq. (Argued)

Metropolitan Life Insurance

Company

Law Department

One Madison Avenue

New York, NY 10010-3690

Sondra M. Hirsch, Esq.

Metropolitan Life Insurance

Company

One Meadowlands Plaza

1st Floor

East Rutherford, NJ 07073

Counsel for Appellee

Metropolitan Life Insurance

Company

OPINION OF THE COURT

COWEN, Circuit Judge.

This appeal presents the purely legal question of whether

a disparity between disability benefits for mental and

physical disabilities violates the Americans with Disabilities

Act of 1990 (ADA), 42 U.S.C. S 12101 et seq. (1994). The

plaintiff-appellant, Colleen Ford, sued her employer,

Schering-Plough Corporation (Schering), and the carrier of

3

Schering's group insurance policy, Metropolitan Life

Insurance Company (MetLife), alleging that the two-year

cap applicable to benefits for mental disabilities, but not for

physical disabilities, violates the ADA. On September 12,

1996, the District Court for the District of New Jersey

granted the defendants' motion to dismiss Ford's complaint

under Federal Rule of Civil Procedure 12(b)(6). Ford

appealed. We will affirm the order of the district court

dismissing Ford's complaint even though we differ with the

district court by finding Ford eligible to file suit under Title

I of the ADA.

I.

The facts concerning the plaintiff's employment and her

disability are not in dispute. Ford was an employee of

Schering from 1975 until May of 1992, when she became

disabled by virtue of a mental disorder and was unable to

continue her employment. While she served as an

employee, Ford enrolled in the employee welfare benefits

plan offered by Schering through MetLife. The plan

provided that benefits for physical disabilities would

continue until the disabled employee reached age sixty-five

so long as the physical disability persisted. Regarding

mental disabilities, however, the plan mandated that

benefits cease after two years if the disabled employee was

not hospitalized. Ford found herself in this latter category,

suffering from a mental disorder yet not hospitalized and

thus ineligible for a continuation of her benefits past the

two-year limit. Her benefits expired on Nov. 23, 1994.

Ford filed a charge of discrimination with the Equal

Employment Opportunity Commission (EEOC). The EEOC

issued her a "right-to-sue" letter on January 31, 1996.

Subsequently, Ford filed a three-count complaint against

Schering and MetLife alleging discrimination in violation of

the ADA. The defendants filed motions to dismiss the

complaint pursuant to Rule 12(b)(6) and, in the alternative,

for summary judgment. The district court granted the

defendants' Rule 12(b)(6) motion, dismissing the complaint

for failure to state a claim. This appeal followed.

4

II.

We have jurisdiction under 28 U.S.C. S 1291 (1994), and

our review over the district court's order is plenary. When

considering a Rule 12(b)(6) motion, we accept as true all the

allegations set forth in the complaint, and we must draw all

reasonable inferences in the plaintiff's favor. See Schrob v.

Catterson, 948 F.2d 1402, 1405 (3d Cir. 1991). Dismissal of

a plaintiff's claim under Rule 12(b)(6) occurs only if the

plaintiff "can prove no set of facts in support of his claim

which would entitle him to relief." Conley v. Gibson, 355

U.S. 41, 45-46, 78 S. Ct. 99, 102 (1957).

III.

Because the facts of this case are not in dispute, our

analysis focuses on the legal question of whether the

disparity between mental and physical disability benefits

violates the ADA and, as a preliminary issue, whether Ford

is even eligible to sue under the ADA. We will address

Ford's claims under Titles I and III seriatim.

A.

Ford's first claim alleges that the defendants' group

insurance plan violates Title I of the ADA because of the

disparity in benefits between mental and physical

disabilities. Title I of the ADA proscribes discrimination in

the terms and conditions of employment and mandates in

relevant part:

(a) General rule

No covered entity shall discriminate against a

qualified individual with a disability because of the

disability of such individual in regard to job application

procedures, the hiring, advancement, or discharge of

employees, employee compensation, job training, and

other terms, conditions, and privileges of employment.

(b) Construction

As used in subsection (a) of this section, the term

"discriminate" includes--

5

. . . .

(2) participating in a contractual or other

arrangement or relationship that has the effect of

subjecting a covered entity's qualified applicant or

employee with a disability to the discrimination

prohibited by this subchapter (such relationship

includes a relationship with . . . an organization

providing fringe benefits to an employee of the covered

entity[)] . . . .

42 U.S.C. S 12112(a)-(b) (emphasis added). As the plaintiff

correctly observes, the defendants' group insurance plan is

a fringe benefit of employment at Schering. Ford claims

that the defendants violated Title I of the ADA because the

mental-physical disparity constitutes discrimination against

her on the basis of her disability.

i.

Before addressing the merits of Ford's Title I claim, we

must first ascertain whether Ford is eligible tofile suit

under Title I. While the district court held that Ford lacked

"standing[,]" Dist. Ct. Op. at 7, the question of standing is

not at issue in this case. Indeed, Ford has been"injured in

fact" by the denial of her benefits, which is"an injury to

[herself] that is likely to be redressed by a favorable

decision." Simon v. Eastern Ky. Welfare Rights Org., 426

U.S. 26, 38, 96 S. Ct. 1917, 1924 (1976). Furthermore,

Ford's interest is arguably within the zone of interests

regulated by the ADA. See id. at 39 n.19, 96 S. Ct. at 1925

n.19. Instead of ascertaining Ford's standing, we must

assess Ford's eligibility under the ADA's requirements to file

suit.

Title I of the ADA restricts the ability to sue under its

provisions to a "qualified individual with a disability[,]"

whose characteristics are defined as follows:

The term "qualified individual with a disability"

means an individual with a disability who, with or

without reasonable accommodation, can perform the

essential functions of the employment position that

such individual holds or desires. For the purposes of

6

this subchapter, consideration shall be given to the

employer's judgment as to what functions of a job are

essential, and if an employer has prepared a written

description before advertising or interviewing applicants

for the job, this description shall be considered

evidence of the essential functions of the job.

42 U.S.C. S 12111(8). Thus, an individual eligible to sue

under Title I of the ADA must be disabled but still able to

perform his or her job duties with or without a reasonable

accommodation by the employer. Ford, however, admits

that she is currently unable to work even with a reasonable

accommodation. Indeed, her disabled status is the reason

for her desire to receive the disability benefits at issue here.

The defendants-appellees argue that Ford is clearly

ineligible to sue under Title I of the ADA because she is

currently disabled, and they point to our recent statement

that "a person unable to work is not intended to be, and is

not, covered by the ADA." McNemar v. Disney Store, Inc., 91

F.3d 610, 618 (3d Cir. 1996), cert. denied, ___ U.S. ___, 117

S. Ct. 958 (1997). McNemar focused on whether an

individual is judicially estopped from claiming to be a

"qualified individual with a disability" when he represented

to governmental agencies that he was completely disabled.

In McNemar, an HIV-positive man represented to

government agencies that he was completely disabled for

the purpose of receiving disability benefits. At the same

time, he asserted that he was a "qualified individual with a

disability[,]" meaning that he could work with or without a

reasonable accommodation, in his suit against his former

employer under the ADA for wrongful discharge. As a

result, we concluded that the district court was within its

discretion in finding that McNemar's representations to

government agencies estopped him from claiming that he

was a "qualified individual with a disability" under Title I.

See id. at 617-18.

At first glance, McNemar seems to cover the instant case

since Ford has asserted she is completely disabled for

purposes of disability benefits yet is now asserting she is a

"qualified individual with a disability" for purposes of her

ADA suit. However, despite its apparent relevance,

McNemar is distinguishable. In McNemar, the plaintiff's

7

situation vis-a-vis the ADA did not give rise to the

possibility that, for reasons intrinsic to the ADA, there was

an ambiguity in the definition of "qualified individual with

a disability[.]" The essence of McNemar's suit was that he

could still work despite his disability (meaning that he was

wrongfully discharged), yet he simultaneously received

benefits for being unable to work due to his disability.

McNemar's situation did not unearth an internal

contradiction in the ADA; instead, the contradiction in

McNemar's position arose between McNemar's various

representations, namely his claim of wrongful discharge

and his assertion to government agencies that he was

completely disabled.

In the instant case, Ford is also attempting to qualify

under Title I's eligibility requirement, but the factual

predicate of her claim (that she is disabled and deserving of

disability benefits) matches the representation she made to

qualify for the benefits she already received. Unlike the

McNemar plaintiff, Ford illuminates an internal

contradiction in the ADA itself, namely the disjunction

between the ADA's definition of "qualified individual with a

disability" and the rights that the ADA confers. Title I of the

ADA prohibits discrimination by employers regarding the

"terms, conditions, and privileges" of employment, 42

U.S.C. S 12112(a), including "fringe benefits" such as

disability benefits. Id. S 12112(b)(2). Yet, as Ford and the

EEOC as amicus argue, restricting eligibility to sue under

Title I to individuals who can currently work with or without

a reasonable accommodation prevents disabled former

employees from suing regarding discrimination in disability

benefits. Once an individual becomes disabled and thus

eligible for disability benefits, that individual loses the

ability to sue under a strict reading of Title I's definition of

"qualified individual with a disability" because that

individual can no longer work with or without a reasonable

accommodation. In order for the rights guaranteed by Title

I to be fully effectuated, the definition of "qualified

individual with a disability" would have to permit suits

under Title I by more than just individuals who are

currently able to work with or without reasonable

accommodations.

8

This disjunction between the explicit rights created by

Title I of the ADA and the ostensible eligibility standards for

filing suit under Title I causes us to view the contents of

those requirements as ambiguous rather than as having an

unassailable plain meaning. "The plainness or ambiguity of

statutory language is determined by reference to the

language itself, the specific context in which that language

is used, and the broader context of the statute as a whole."

Robinson v. Shell Oil Co., ___ U.S. ___, ___, 117 S. Ct. 843,

846 (1997) (citing Estate of Cowart v. Nicklos Drilling Co.,

505 U.S. 469, 477, 112 S. Ct. 2589, 2594-95 (1992), and

McCarthy v. Bronson, 500 U.S. 136, 139, 111 S. Ct. 1737,

1740 (1991)). The locus of the ambiguity is whether the

ADA contains a temporal qualifier of the term "qualified

individual with a disability[.]" If the putative plaintiff must,

at the time of the suit, be employable with or without a

reasonable accommodation, then a disabled former

employee loses his ability to sue to challenge discriminatory

disability benefits. Alternatively, the term "qualified

individual with a disability" may include former employees

who were once employed with or without reasonable

accommodations yet who, at the time of suit, are completely

disabled.

The Supreme Court's recent decision in Robinson, which

concerned the scope of Title VII of the Civil Rights Act of

1964, 42 U.S.C. S 2000e et seq. (1994), contributes to this

ambiguity by lending support for interpreting Title I of the

ADA to permit suits by disabled individuals against their

former employers concerning their disability benefits. Cases

interpreting Title VII are relevant to our analysis of the ADA

because the ADA is essentially a sibling statute of Title VII.

Indeed, the ADA's accompanying House report states that

the purpose of the ADA is "to provide civil rights protections

for persons with disabilities that are parallel to those

available to minorities and women." H.R. Rep. No. 101-485,

pt. 3, at 48 (1990), reprinted in 1990 U.S.C.C.A.N. 267, 471.

Furthermore, the ADA incorporates by reference several

terms defined in Title VII. See 42 U.S.C. S 12111(7)

(incorporating Title VII's definitions of "person", "labor

organization", etc.).

In Robinson, the Supreme Court analyzed whether former

employees are allowed to bring suits against their previous

9

employers under Title VII for post-termination retaliation

such as negative job references. The Court found that the

term "employees" as used in S 704(a) of Title VII was

ambiguous regarding its temporal reach, i.e., whether it

covered only current employees or encompassed former

employees as well. See ___ U.S. at ___, 117 S. Ct. at 846-

48. Resolving this ambiguity, the Court held that the term

encompassed former employees in order to provide former

employees with a legal recourse against post-termination

retaliation. See id. at ___, 117 S. Ct. at 848-49; see

also Charlton v. Paramus Bd. of Educ., 25 F.3d 194, 200 (3d

Cir. 1994) (former employee may file a retaliation claim

against a former employer under Title VII).

As with the term "employees" in Title VII, the ADA

contains an ambiguity concerning the definition of

"qualified individual with a disability" because there is no

temporal qualifier for that definition. Congress could have

restricted the eligibility for plaintiffs under the ADA to

current employees or could have explicitly broadened the

eligibility to include former employees. Since Congress did

neither but still created rights regarding disability benefits,

we are left with an ambiguity in the text of the statute

regarding eligibility to sue under Title I.

We resolve this ambiguity by interpreting Title I of the

ADA to allow disabled former employees to sue their former

employers regarding their disability benefits so as to

effectuate the full panoply of rights guaranteed by the ADA.

This is in keeping with the ADA's rationale, namely "to

provide a clear and comprehensive national mandate for

the elimination of discrimination against individuals with

disabilities . . . [and] to provide clear, strong, consistent,

enforceable standards addressing [such] discrimination

. . . ." 42 U.S.C. S 12101(b)(1)-(2) (emphasis added). Our

decision is also in keeping with the Supreme Court's

Robinson decision, which found that the temporal reach of

Title VII encompasses former employees, and our pre-

Robinson decision to that effect in Charlton, 25 F.3d at 200.

By adopting this interpretation, we part ways with the

Seventh and Eleventh Circuits, both of which tendered

decisions prior to Robinson.1 In EEOC v. CNA Ins.

_________________________________________________________________

1. The Sixth Circuit in Parker v. Metropolitan Life Ins. Co., 99 F.3d 181

(6th Cir. 1996), analyzed whether a plaintiff was eligible to sue under

10

Companies, 96 F.3d 1039 (7th Cir. 1996), the Seventh

Circuit rejected the suit of an individual in a position

similar to Ford's. Litigating on behalf of the former

employee, the EEOC argued that the individual was eligible

to sue under Title I by arguing that an analogy may be

drawn to decisions allowing former employees to sue

employers for retaliation under Title VII. The Seventh

Circuit rejected this argument by noting that no

discrimination against the plaintiff occurred during her

employment, while, in the Title VII retaliation situation,

actual harm occurred by virtue of the retaliation. As the

Seventh Circuit wrote, "[N]othing happened that

discriminated against her during the time she was working

at CNA. The only thing that occurred was CNA's 1985

decision to reduce the long-term benefits available to all of

its employees for mental health problems." Id. at 1045.

However, the Seventh Circuit's brief analysis conflates two

issues, the first being whether the individual could sue

regarding fringe benefits while completely disabled, and the

second being whether the individual's suit had merit and

was based upon actual discrimination. The Seventh Circuit

essentially declined to find the individual eligible to sue

because her suit lacked merit. Therefore, we do notfind the

Seventh Circuit's reasoning persuasive regarding whether

Ford is eligible to sue in the instant case as opposed to

whether her suit has merit.2

_________________________________________________________________

Title I. However, that decision was vacated by the granting of the

plaintiff's petition for rehearing en banc. See 6th Cir. R. 14(a). The en

banc decision did not address the Title I issue because it was not raised

by the plaintiff's petition for rehearing en banc. See Parker v.

Metropolitan Life Ins. Co., 121 F.3d 1006, 1009 n.2 (6th Cir. 1997) (en

banc), cert. denied, ___ U.S. ___, 118 S. Ct. 871 (1998).

2. The EEOC also argued in CNA that the disabled person was in the

"employment position" of "disability benefit recipient." Id. at 1043

(internal quotation marks omitted). According to the Seventh Circuit, the

EEOC claimed that, "[b]ecause CNA imposes no job-related duties on any

of the beneficiaries of its long-term disability plan, [the plaintiff] by

definition can perform the essential functions of her position: there are

none . . . ." Id. at 1043-44. The Seventh Circuit rejected that argument

because, in its words, "[a]n `employment position' is a job[,]" id. at

1044,

meaning that receiving disability benefits did not qualify as an

employment position. However, Ford does not offer this argument in the

instant litigation.

11

We also disagree with the Eleventh Circuit's ruling in

Gonzales v. Garner Food Services, Inc., 89 F.3d 1523 (11th

Cir. 1996). In Gonzales, as in the instant case, a disabled

former employee sued his former employer under the ADA

regarding alleged discrimination in disability benefits. The

Eleventh Circuit recognized the possible analogy between

the Title VII retaliation context and the ADA situation, but

it refused to adopt this analogy and to grant the plaintiff

permission to sue. Instead, the Eleventh Circuit argued

that, "[a]bsent clearly expressed legislative intent to the

contrary, the plain language of the statute should be

conclusive." Id. at 1528. The Eleventh Circuit concentrated

on what it believed to be the plain meaning of the ADA, that

only currently employable individuals could sue. However,

it failed to address the possibility that the disparity between

the rights created by the ADA and the apparent legal

remedy fashioned by the ADA creates an ambiguity in the

eligibility requirements for obtaining a remedy.

In sum, we respectfully disagree with the district court

and sister courts of appeals. We find that Title I of the ADA

does permit disabled individuals to sue their former

employers regarding their disability benefits. We reach this

conclusion because the ADA's proscription of

discrimination in fringe benefits generates the need for

disabled individuals to have legal recourse against such

discrimination and exposes the temporal ambiguity in the

ADA's definition of "qualified individual with a disability[.]"

We resolve this ambiguity in favor of a broad temporal

interpretation of "qualified individual with a disability[,]"

that disabled former employees, no longer able to work with

or without reasonable accommodations, can sue their

former employers concerning alleged discrimination in their

package of disability benefits. Our impetus for this

conclusion also comes from the Supreme Court's Robinson

decision allowing former employees to sue under Title VII of

the Civil Rights Act of 1964.

ii.

Having established Ford's eligibility to sue under Title I,

we must now ascertain whether she states a claim that

survives the defendants' Rule 12(b)(6) motion. Ford

12

essentially claims that the disparity between benefits for

mental and physical disabilities violates Title I of the ADA.

However, Ford's argument does not support a finding of

discrimination under Title I.

While the defendants' insurance plan differentiated

between types of disabilities, this is a far cry from a specific

disabled employee facing differential treatment due to her

disability. Every Schering employee had the opportunity to

join the same plan with the same schedule of coverage,

meaning that every Schering employee received equal

treatment. So long as every employee is offered the same

plan regardless of that employee's contemporary or future

disability status, then no discrimination has occurred even

if the plan offers different coverage for various disabilities.

The ADA does not require equal coverage for every type of

disability; such a requirement, if it existed, would

destabilize the insurance industry in a manner definitely

not intended by Congress when passing the ADA.

This analysis is supported by Supreme Court and Third

Circuit precedent concerning the Rehabilitation Act of

1973, 29 U.S.C. S 794 (1994), to which we may look for

guidance in interpreting the ADA. See Gaul v. Lucent

Technologies, Inc., 134 F.3d 576, 580 (3d Cir. 1998). In

Alexander v. Choate, 469 U.S. 287, 105 S. Ct. 712 (1985),

plaintiffs sued in response to the Tennessee Medicaid

program's reduction in the number of inpatient hospital

days for which it would pay. The plaintiffs claimed that the

reduction would have a disproportionate effect on

handicapped individuals since they would require longer

inpatient care than non-handicapped individuals. However,

the Supreme Court held that the limit on inpatient hospital

care was "neutral on its face[ ]" and did not "distinguish

between those whose coverage will be reduced and those

whose coverage will not on the basis of any test, judgment,

or trait that the handicapped as a class are less capable of

meeting or less likely of having." Id. at 302, 105 S. Ct. at

720-21. According to the Supreme Court, handicapped

citizens did not suffer from discrimination because both

handicapped and non-handicapped individuals were

"subject to the same durational limitation." Id. at 302, 105

S. Ct. at 721.

13

Building on Alexander, the Supreme Court in Traynor v.

Turnage, 485 U.S. 535, 108 S. Ct. 1372 (1988), dismissed

a challenge to a federal statute precluding the Veterans

Administration from granting extensions to a ten-year

delimiting period for veterans to claim their benefits if the

veterans' disabilities arose from their own willful

misconduct, defined by regulations as including alcoholism.

The Supreme Court rejected the argument that the statute

discriminated against one type of disability, namely

alcoholism. "There is nothing in the Rehabilitation Act that

requires that any benefit extended to one category of

handicapped persons also be extended to all other

categories of handicapped persons." Id. at 549, 108 S. Ct.

at 1382.

We have likewise held, in the context of the

Rehabilitation Act, that a state's medical assistance statute

need not treat every disability equally. In Doe v. Colautti,

592 F.2d 704 (3d Cir. 1979), we dismissed a challenge to a

Pennsylvania statute that provided unlimited

hospitalization for physical illness in a private hospital but

restricted hospitalization for mental illness in private

mental hospitals. We rejected the argument that the

differential level of benefits violated the Rehabilitation Act

by noting that, "[i]n the treatment of their physical

illnesses, the mentally ill receive the same benefits as

everyone else. A mental patient with heart disease, for

instance, is as entitled to benefits for treatment of the heart

disease as would be a person not mentally ill." Id. at 708.

Our holding in Doe is supported by the D.C. Circuit's

decision in Modderno v. King, 82 F.3d 1059 (D.C. Cir.

1996), cert. denied, ___ U.S. ___, 117 S. Ct. 772 (1997), in

which the D.C. Circuit rejected a challenge brought by a

former spouse of a foreign service officer against the

Foreign Service Benefit Plan under the Rehabilitation Act

based upon the plan's lower level of benefits for mental

illness as compared to physical illness.

Aside from Supreme Court and Third Circuit precedent in

the Rehabilitation Act context, claims under the ADA

similar to Ford's have been rejected by three courts of

appeals in published opinions. While we disagree with the

Seventh Circuit's reasoning in CNA regarding the plaintiff's

14

eligibility to sue, we agree with its discussion regarding the

merits of the plaintiff's claim. In rejecting the plaintiff's

challenge to the disparity between benefits for mental and

physical illnesses, the Seventh Circuit stated:

One of those terms, conditions, or privileges of

employment may be a pension plan, but there is no

claim here that CNA discriminated on the basis of

disability in offering its pension plan to anyone. It did

not charge higher prices to disabled people, on the

theory that they might require more in benefits. Nor

did it vary the terms of its plan depending on whether

or not the employee was disabled. All employees--the

perfectly healthy, the physically disabled, and the

mentally disabled--had a plan that promised them

long-term benefits from the onset of disability until age

65 if their problem was physical, and long-term

benefits for two years if the problem was mental or

nervous. . . .

[The plaintiff] raises a different kind of discrimination

claim, more grist for the ERISA mill or the national

health care debate than for the ADA. She claims that

the plan discriminates against employees who in the

future will become disabled due to mental conditions

rather than physical conditions; their present dollars

(unbeknownst to them) are buying only 24 months of

benefits, instead of benefits lasting much longer.

However this is dressed up, it is really a claim that

benefit plans themselves may not treat mental health

conditions less favorably than they treat physical

health conditions. Without far stronger language in the

ADA supporting this result, we are loath to read into it

a rule that has been the subject of vigorous, sometimes

contentious, national debate for the last several years.

Few, if any, mental health advocates have thought that

the result they would like to see has been there all

along in the ADA.

CNA, 96 F.3d at 1044 (citations omitted). Likewise, in

Krauel v. Iowa Methodist Med. Ctr., 95 F.3d 674 (8th Cir.

1996), the Eighth Circuit rejected a challenge under the

ADA to an insurance plan that denied coverage for

infertility. Analogizing the infertility exclusion to differential

15

benefits for mental and physical illnesses, the Eighth

Circuit stated, "Insurance distinctions that apply equally to

all insured employees, that is, to individuals with

disabilities and to those who are not disabled, do not

discriminate on the basis of disability." Id. at 678. Finally,

the Sixth Circuit in Parker rejected a claim similar to Ford's

made against the same defendants as in the instant case.

As the Sixth Circuit held, "Because all the employees at

Schering-Plough, whether disabled or not, received the

same access to the long-term disability plan, neither the

defendants nor the plan discriminated between the disabled

and the able bodied." 121 F.3d at 1015-16; cf . Brennen v.

Comptroller of the State of N.Y., 100 F.3d 942, 1996 WL

19057 (2d Cir. 1996) (unpublished table decision) (benefits

extended to one category of disabled persons need not be

extended to all other categories).

The cases finding no violation of the ADA by a disparity

in benefits between mental and physical disabilities are

supported by the ADA's legislative history. As the Senate

Labor and Human Resources Committee report states:

In addition, employers may not deny health

insurance coverage completely to an individual based

on the person's diagnosis or disability. For example,

while it is permissible for an employer to offer

insurance policies that limit coverage for certain

procedures or treatments, e.g., only a specified amount

per year for mental health coverage, a person who has

a mental health condition may not be denied coverage

for other conditions such as for a broken leg or for

heart surgery because of the existence of the mental

health condition. A limitation may be placed on

reimbursements for a procedure or the types of drugs

or procedures covered[,] e.g., a limit on the number of

x-rays or non-coverage of experimental drugs or

procedures; but, that limitation must apply to persons

with or without disabilities. All people with disabilities

must have equal access to the health insurance

coverage that is provided by the employer to all

employees.

S. Rep. No. 101-116, at 29 (1989).

16

In addition, legislative history subsequent to the ADA's

passage evinces that Congress did not believe that the ADA

mandated parity between mental and physical disability

benefits. In 1996, the Senate defeated an amendment to the

Health Insurance Portability and Accountability Act of

1996, Pub. L. No. 104-191, 110 Stat. 1936 (1996) (codified

primarily in Titles 18, 26 and 42 of the U.S. Code), which

would have mandated parity in insurance coverage for

mental and physical illnesses. Such an amendment would

have been unnecessary altogether if the ADA already

required such parity. See 142 Cong. Rec. S9477-02 (daily

ed. Aug. 2, 1996) (statement of Sen. Heflin); see also CNA,

96 F.3d at 1044. Furthermore, Congress then passed the

Mental Health Parity Act of 1996, Pub. L. No. 104-204, Title

VII, 110 Stat. 2944 (1996) (codified at 29 U.S.C.S 1185a

and 42 U.S.C. S 300gg-5), which mandates, inter alia, that

a health insurance plan containing no annual or lifetime

limit for medical benefits cannot have such limits on

mental health. Such congressional action reveals both that

the ADA does not contain parity requirements and that no

parity requirements for mental and physical disability

benefits have been enacted subsequent to the ADA.

iii.

Ford attempts to buttress her challenge to the disparity

between benefits for mental and physical disabilities by

pointing to section 501(c) of the ADA, which contains the

"safe harbor" provision covering the insurance industry.

This section, codified at 42 U.S.C. S 12201(c), reads as

follows:

(c) Insurance

Subchapters I through III of this chapter and title IV

of this Act shall not be construed to prohibit or restrict

--

(1) an insurer, hospital or medical service

company, health maintenance organization, or any

agent, or entity that administers benefit plans, or

similar organizations from underwriting risks,

classifying risks, or administering such risks that

are based on or not inconsistent with State law; or

17

(2) a person or organization covered by this

chapter from establishing, sponsoring, observing or

administering the terms of a bona fide benefit plan

that are based on underwriting risks, classifying

risks, or administering such risks that are based

on or not inconsistent with State law; or

(3) a person or organization covered by this

chapter from establishing, sponsoring, observing or

administering the terms of a bona fide benefit plan

that is not subject to State laws that regulate

insurance.

Paragraphs (1), (2), and (3) shall not be used as a

subterfuge to evade the purposes of subchapter [sic] I

and III of this chapter.

42 U.S.C. S 12201(c). Ford essentially claims that, once she

presents a prima facie case alleging discrimination in

disability benefits, Schering and MetLife must present

actuarial data demonstrating that their plan is not a

"subterfuge[.]" Hence, according to Ford, the district court

erred in granting the defendants' Rule 12(b)(6) motion since

the defendants had not offered data justifying the actuarial

basis for the disparity in benefits.

Ford's argument must fail, however, since it runs

contrary to Supreme Court precedent, ignores our statutory

duty regarding insurance regulation and distorts the role of

this court. First, Ford's argument that Schering and MetLife

must justify their insurance plan contradicts the Supreme

Court's interpretation of a provision similar to section

501(c) in the context of the Age Discrimination in

Employment Act (ADEA), Pub. L. No. 90-202, 81 Stat. 602

(1967) (codified at 29 U.S.C. S 621 et seq. (1994)). Prior to

Congress's elimination of the term "subterfuge" from the

ADEA in 1990, see Older Workers Benefit Protection Act of

1990, Pub. L. No. 101-433, 104 Stat. 978, the ADEA

granted an exemption from the ADEA's prohibition of age

discrimination to an employee benefit plan that was not "a

subterfuge[.]" 29 U.S.C. S 623(f) (1988). In Public Employees

Retirement Sys. of Ohio v. Betts, 492 U.S. 158, 109 S. Ct.

2854 (1989), the Supreme Court rejected a challenge to an

insurance plan that rendered covered employees ineligible

18

for disability retirement once they reached age sixty.

Relying on its decision in United Air Lines, Inc. v. McMann,

434 U.S. 192, 98 S. Ct. 444 (1977), the Supreme Court

concluded that the term "subterfuge" must be given its

ordinary meaning of " `a scheme, plan, stratagem, or artifice

of evasion.' " Betts, 492 U.S. at 167, 109 S. Ct. at 2861

(quoting McMann, 434 U.S. at 203, 98 S. Ct. at 450). In

addition, the Supreme Court found that requiring an

insurance company to justify its coverage scheme had no

basis in the statutory language. See id. at 170-71, 109 S.

Ct. at 2863; see also McMann, 434 U.S. at 203, 98 S. Ct.

at 450.

The Supreme Court's definition and analysis of the

ADEA's use of the term "subterfuge" are applicable to the

ADA's use of the term "subterfuge[.]" Congress enacted

section 501(c) of the ADA in 1990, see Pub. L. No. 101-336,

104 Stat. 369 (1990), while the Supreme Court decided

Betts in 1989. Congress therefore is presumed to have

adopted the Supreme Court's interpretation of "subterfuge"

in the ADEA context when Congress enacted the ADA.

"[W]here, as here, Congress adopts a new law incorporating

sections of a prior law, Congress normally can be presumed

to have had knowledge of the interpretation given to the

incorporated law, at least insofar as it affects the new

statute." Lorillard v. Pons, 434 U.S. 575, 581, 98 S. Ct. 866,

870 (1978); see Standard Oil Co. of N.J. v. United States,

221 U.S. 1, 59, 31 S. Ct. 502, 515 (1911) ("[W]here words

are employed in a statute which had at the time a well-

known meaning at common law or in the law of this

country, they are presumed to have been used in that

sense unless the context compels to the contrary."). "Had

Congress intended to reject the Betts interpretation of

subterfuge when it enacted the ADA, it could have done so

expressly by incorporating language for that purpose into

the bill that Congress voted on and the President signed."

Krauel, 95 F.3d at 679; accord Modderno, 82 F.3d at 1064.

Accordingly, as the Supreme Court held in the ADEA

context, the term "subterfuge" does not require an

insurance company to justify its policy coverage after a

plaintiff's mere prima facie allegation.

The second reason that Ford's argument must fail is that

it ignores our statutory duty under the McCarran-Ferguson

19

Act regarding insurance cases. Pursuant to that Act, "No

Act of Congress shall be construed to invalidate, impair, or

supersede any law enacted by any State for the purpose of

regulating the business of insurance . . . unless such Act

specifically relates to the business of insurance . . . ." 15

U.S.C. S 1012(b) (1994). The ADA does not "specifically

relate[ ] to the business of insurance[,]" id., and does not

mention the term "insurance" in its introductory section

entitled "Findings and purpose[.]" See 42 U.S.C. S 12101.

Accordingly, we will not construe section 501(c) to require

a seismic shift in the insurance business, namely requiring

insurers to justify their coverage plans in court after a mere

allegation by a plaintiff. This second reason is integrally

related to the third reason Ford's argument regarding

section 501(c) fails, namely that requiring insurers to justify

their coverage plans elevates this court to the position of

super-actuary. This court is clearly not equipped to become

the watchdog of the insurance business, and it is unclear

exactly what actuarial analysis the defendants would have

to produce to disprove the charge of "subterfuge[.]" See

Modderno, 82 F.3d at 1062-63 (noting confusion as to

exactly what actuarial data would be sufficient).

B.

Ford's second claim against Schering and MetLife is that

the disparity in benefits for mental and physical disabilities

violates Title III of the ADA. Title III reads in relevant part

as follows: "No individual shall be discriminated against on

the basis of disability in the full and equal enjoyment of the

goods, services, facilities, privileges, advantages, or

accommodations of any place of public accommodation by

any person who owns, leases (or leases to), or operates a

place of public accommodation." 42 U.S.C. S 12182(a).

Relying on the principle that courts should avoid

interpreting statutes in a manner rendering some words

redundant, see United States v. Alaska, ___ U.S. ___, ___,

117 S. Ct. 1888, 1918 (1997), Ford and the U.S. Dept. of

Justice as amicus essentially argue that the phrase

"services, . . . privileges, [and] advantages" covers

discrimination in realms different than physical access to

facilities or else these words would be superfluous. Ford

20

can also cite to the ADA itself for the proposition that an

"insurance office[ ]" is a public accommodation under Title

III. 42 U.S.C. S 12181(7)(F) (listing examples of public

accommodations including "insurance office[]").

The fact that an insurance office is a public

accommodation, however, does not mean that the

insurance policies offered at that location are covered by

Title III. In the instant case, Schering and MetLife offered

disability benefits to Ford in the context of her employment

at Schering, meaning that the disability benefits constituted

part of the terms and conditions of Ford's employment.

Terms and conditions of employment are covered under

Title I, not Title III. "Title III is not intended to govern any

terms or conditions of employment by providers of public

accommodations or potential places of employment;

employment practices are governed by title I of this

legislation." S. Rep. No. 101-116, at 58 (1989); see H.R.

Rep. No. 101-485, pt. 2, at 99 (1990), reprinted in 1990

U.S.C.C.A.N. 303, 382. Therefore, Ford cannot state a claim

against her employer, Schering, pursuant to Title III.

See Parker, 121 F.3d at 1015.

Regarding MetLife, the disability benefits that Ford

challenges do not qualify as a public accommodation and

thus do not fall within the rubric of Title III. The plain

meaning of Title III is that a public accommodation is a

place, leading to the conclusion that " `[i]t is all of the

services which the public accommodation offers, not all

services which the lessor of the public accommodation

offers[,] which fall within the scope of Title III.' " Id. at 1011

(quoting Stoutenborough v. National Football League, Inc.,

59 F.3d 580, 583 (6th Cir. 1995) (a television broadcast is

not covered by Title III)). This is in keeping with the host of

examples of public accommodations provided by the ADA,

all of which refer to places. See 42 U.S.C. S 12181(7).3 Since

_________________________________________________________________

3. Section 12181(7) reads as follows:

The following private entities are considered public accommodations

for purposes of this subchapter, if the operations of such entities affect

commerce--

(A) an inn, hotel, motel, or other place of lodging, except for an

establishment located within a building that contains not more than five

21

Ford received her disability benefits via her employment at

Schering, she had no nexus to MetLife's "insurance office"

and thus was not discriminated against in connection with

a public accommodation. Furthermore, the "goods, services,

facilities, privileges, advantages, or accommodations"

concerning which a disabled person cannot suffer

discrimination are not free-standing concepts but rather all

refer to the statutory term "public accommodation" and

thus to what these places of public accommodation provide.

Ford cannot point to these terms as providing protection

from discrimination unrelated to places.

_________________________________________________________________

rooms for rent or hire and that is actually occupied by the proprietor of

such establishment as the residence of such proprietor;

(B) a restaurant, bar, or other establishment serving food or drink;

(C) a motion picture house, theater, concert hall, stadium, or other

place of exhibition or entertainment;

(D) an auditorium, convention center, lecture hall, or other place of

public gathering;

(E) a bakery, grocery store, clothing store, hardware store, shopping

center, or other sales or rental establishment;

(F) a laundromat, dry-cleaner, bank, barber shop, beauty shop, travel

service, shoe repair service, funeral parlor, gas station, office of an

accountant or lawyer, pharmacy, insurance office, professional office of

a health care provider, hospital, or other service establishment;

(G) a terminal, depot, or other station used for specified public

transportation;

(H) a museum, library, gallery, or other place of public display or

collection;

(I) a park, zoo, amusement park, or other place of recreation;

(J) a nursery, elementary, secondary, undergraduate, or postgraduate

private school, or other place of education;

(K) a day care center, senior citizen center, homeless shelter, food

bank, adoption agency, or other social service center establishment; and

(L) a gymnasium, health spa, bowling alley, golf course, or other place

of exercise or recreation.

42 U.S.C. S 12181(7).

22

Restricting "public accommodation" to places is in

keeping with jurisprudence concerning Title II of the Civil

Rights Act of 1964, 42 U.S.C. S 2000a (1994). Title II

proscribes racial and religious discrimination in"the goods,

services, facilities, privileges, advantages, and

accommodations of any place of public accommodation

. . . ." 42 U.S.C. S 2000a(a). This proscription has been

limited to places rather than including membership in an

organization, see Welsh v. Boy Scouts of Am., 993 F.2d

1267, 1269-75 (7th Cir. 1993), and rather than

encompassing an organization's operations unconnected to

any physical facility. See Clegg v. Cult Awareness Network,

18 F.3d 752, 755-56 (9th Cir. 1994).

Confining "public accommodation" to places is also in

keeping with the Dept. of Justice's regulations to this effect:

The purpose of the ADA's public accommodations

requirements is to ensure accessibility to the goods

offered by a public accommodation, not to alter the

nature or mix of goods that the public accommodation

has typically provided. In other words, a bookstore, for

example, must make its facilities and sales operations

accessible to individuals with disabilities, but is not

required to stock Brailled or large print books.

Similarly, a video store must make its facilities and

rental operations accessible, but is not required to

stock closed-captioned video tapes.

28 C.F.R. pt. 36, app. B, at 640 (1997). Just as a bookstore

must be accessible to the disabled but need not treat the

disabled equally in terms of books the store stocks, likewise

an insurance office must be physically accessible to the

disabled but need not provide insurance that treats the

disabled equally with the non-disabled. While the Dept. of

Justice has issued other documents stating that Title III

does cover the substance of insurance contracts, see Dept.

of Justice, Title III Technical Assistance Manual: Covering

Public Accommodations and Commercial Facilities S III-

3.11000, at 19 (Nov. 1993) ("Insurance offices are places of

public accommodation and, as such, may not discriminate

on the basis of disability in the sale of insurance contracts

or in the terms or conditions of the insurance contracts

they offer."), such an interpretation is "manifestly contrary"

23

to the plain meaning of Title III and, accordingly, is not

binding on this court. Chevron U.S.A., Inc. v. Natural

Resources Defense Council, 467 U.S. 837, 844, 104 S. Ct.

2778, 2782 (1984); see Parker, 121 F.3d at 1012 n.5.

Furthermore, since we find the plain meaning of "public

accommodation" and 42 U.S.C. S 12182(a) to be clear, we

have no need to analyze the ADA's legislative history.

We also note that, by aligning ourselves with the Sixth

Circuit's Parker decision regarding the definition of "public

accommodation[,]" we part company with the First Circuit

in this regard. In Carparts Distribution Ctr., Inc. v.

Automotive Wholesaler's Ass'n of New England, Inc., 37

F.3d 12 (1st Cir. 1994), the First Circuit held that Title III

is not limited to physical structures. The First Circuit

pointed to the inclusion of "travel service" in the list of

public accommodations and noted:

Many travel services conduct business by telephone or

correspondence without requiring their customers to

enter an office in order to obtain their services.

Likewise, one can easily imagine the existence of other

service establishments conducting business by mail

and phone without providing facilities for their

customers to enter in order to utilize their services. It

would be irrational to conclude that persons who enter

an office to purchase services are protected by the

ADA, but persons who purchase the same services over

the telephone or by mail are not. Congress could not

have intended such an absurd result.

Id. at 19 (citing 42 U.S.C. S 12181(7)(F)). However, as the

Sixth Circuit pointed out in Parker, 121 F.3d at 1014, the

First Circuit failed to read the examples of public

accommodations that piqued the First Circuit's interest in

the context of the other examples of public

accommodations. The litany of terms, including

"auditorium," "bakery," "laundromat," "museum," "park,"

"nursery," "food bank," and "gymnasium[ ]" refer to places

with resources utilized by physical access. 42 U.S.C.

S 12181(7)(D)-(F), (H)-(L). Pursuant to the doctrine of

noscitur a sociis, the terms that the First Circuit finds

ambiguous should be interpreted by reference to the

accompanying words of the statute "to avoid the giving of

24

unintended breadth to the Acts of Congress." Jarecki v.

G.D. Searle & Co., 367 U.S. 303, 307, 81 S. Ct. 1579, 1582

(1961). Accordingly, we do not find the term "public

accommodation" or the terms in 42 U.S.C. S 12181(7) to

refer to non-physical access or even to be ambiguous as to

their meaning.

In sum, Ford fails to state a claim under Title III of the

ADA since the provision of disability benefits by MetLife to

Schering's employees does not qualify as a public

accommodation.

IV.

For the above reasons, we will affirm the September 12,

1996, order of the district court dismissing Ford's

complaint for failure to state a claim. Unlike the district

court, we find that Ford is eligible to sue under Title I.

However, Ford fails to state a claim under Titles I or III and

errs in asserting that the "safe harbor" provision of Title V

requires insurance companies to justify their coverage

plans after a plaintiff's prima facie allegation.

25

ALITO, Circuit Judge, concurring in the judgment:

I agree with the majority that Ford fails to state a claim

under the Americans with Disabilities Act (ADA). However,

I reach this conclusion based solely on the insurance "safe

harbor" provision located in section 501(c) of the ADA. See

42 U.S.C. S 12201(c).

Section 501(c) provides that Titles I and III of the ADA

"shall not be construed to prohibit or restrict" the terms of

a bona fide insurance plan. 42 U.S.C. S 12201(c). This

exemption applies so long as it is not "used as a subterfuge

to evade the purposes of" the ADA. Id. As the majority

recognizes, the term "subterfuge" must be construed in

accordance with the Supreme Court's decision in Public

Employees Retirement Sys. of Ohio v. Betts, 492 U.S. 158

(1989). See Maj. Op. at 18-19. Betts concerned a "safe

harbor" provision that exempted fringe benefit plans from

coverage by the Age Discrimination in Employment Act

(ADEA). See 29 U.S.C. S 623(f)(2) (1988).1 Like section

501(c), the ADEA exemption provided that it would not

protect a plan that was "a subterfuge to evade the purposes

of" the Act. Id. In interpreting this language, the Court

concluded that an employee benefit plan adopted prior to

the enactment of the ADEA could not be considered a

subterfuge to evade the purposes of the ADEA. Betts, 492

U.S. at 166-69 (reaffirming the holding of United Air Lines,

Inc. v. McMann, 434 U.S. 192, 203 (1977)). Under the same

reasoning, the insurance plan challenged by Ford cannot be

considered a subterfuge to evade the purposes of the ADA

since the plan was adopted prior to the enactment of the

ADA.2 See Modderno v. King, 82 F.3d 1059, 1063-1065

_________________________________________________________________

1. Following Betts, section 623(f)(2) was amended by the Older Workers

Benefit Protection Act of 1990, Pub. L. No. 101-433, S 103(1), 104 Stat.

978.

2. The disputed portions of the plan have been in effect since at least

1985. App. at 69, 87. The ADA was enacted in 1990. See 42 U.S.C.

S 12101.

Three justices in McMann rejected the majority's conclusion that a

plan adopted prior to the enactment of the ADEA could not be a

subterfuge to avoid the purposes of that Act. See 434 U.S. at 204-05

(White, J., concurring); id. at 219 n.13 (Marshall, J., joined by Brennan,

26

(D.C. Cir. 1996) (holding that an insurance plan enacted

prior to the importation of ADA standards into the

Rehabilitation Act could not be considered a subterfuge to

evade those standards). Accordingly, the defendants' plan is

insulated from attack by section 501(c).

I further note that Ford's complaint as currently framed

fails to allege that the defendants ever developed a"specific

intent" to evade the purposes of the ADA. See Betts, 492

U.S. at 171. In Betts, the Court wrote:

[W]hen an employee seeks to challenge a benefit plan

provision as a subterfuge to evade the purposes of the

Act, the employee bears the burden of proving that the

discriminatory plan provision actually was intended to

serve the purpose of discriminating in some non-fringe-

benefit aspect of the employment relation.

Betts, 492 U.S. at 181. Under this reading of "subterfuge,"

Ford could not successfully challenge the defendants'

insurance plan unless she could show that it was intended

to serve the purpose of discriminating in some non-

insurance-benefit aspect of her relationship with the

defendants. Ford's complaint contains no such allegation of

intent.

Given the effect of section 501(c) on Ford's claims, I do

not think that it is necessary for the court to conclude that

distinguishing between people with different disabilities for

insurance purposes is not discrimination based on

disability. See Maj. Op. at 12-13. In fact, it would seem that

making such distinctions does constitute discrimination in

the most basic sense of the word. See Webster's Third New

International Dictionary at 648 (defining discrimination as

_________________________________________________________________

J., dissenting). According to these justices, a pre-Act plan could become

a subterfuge if it was maintained after the passage of the ADEA in order

to evade the purposes of that Act. One could argue that this position is

stronger under the ADA's "safe harbor" provision due to difference in the

statutory language. Compare 29 U.S.C. S 623(f) ("is not a subterfuge to

evade the purposes of" the ADEA) (emphasis added) with 42 U.S.C.

S 1201(c) ("shall not be used as a subterfuge to evade the purposes of"

the ADA) (emphasis added). However, I do not believe that this change is

sufficient to avoid the mandate of McMann and Betts.

27

"the making or perceiving of a distinction or difference").

However, we need not wrestle with the question of what

might or might not constitute unlawful insurance

discrimination under the ADA had Congress not addressed

the issue; Congress did address the issue and provided an

explicit answer in section 501(c).

In light of the ease with which Ford's claims can be

resolved under section 501(c), I would not reach the more

difficult issues of: 1) whether a former employee who can

no longer work can meet Title I's "qualified individual with

a disability" requirement; and 2) whether Title III's public

accommodation provision guarantees anything more than

physical access. These issues have divided the circuits, and

I would reserve judgment until we are confronted with a

case in which the unique considerations of insurance plans

are not at stake.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

28