Appendix — Teachers Insurance & Annuity Ass'n v. Spirt
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Office- Supreme Court ye |
\ Supreme Cour, US.
84-50 °
ED
JUL 11
No. 84- wos
R L STEVAS,
IN THE 7
Supreme Court of the United States
OCTOBER TERM, 1984
>
TEACHERS INSURANCE AND ANNUITY ASSOCIATION
and COLLEGE RETIREMENT EQUITIES FUND,
Petitioners,
—-V eet
DIANA L. SPIRT, ef al.,
Respondents.
APPENDIX TO THE PETITION FOR WRIT OF
CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE SECOND CIRCUIT
WILLIAM R. GLENDON
(Counsel of Record)
JAMES W. PAUL
JOSEPH A. POST
ROGERS & WELLS
200 Park Avenue
New York, New York 10166
(212) 878-8110
Attorneys for Petitioners
TABLE OF CONTENTS
Opinions
Opinion of the Court of Appeals, dated May 21, 1984
Opinion of the Court of Appeals, dated September 29,
rE oo a nbn oc orbs 4 CAS GRAS Sao ee oe
Opinion of the District Court, dated January 23, 1976
Opinion of the District Court, dated July 1, 1976 (416
Pe Cn dine tteda sabe hee bee bad AS eneee x
Opinion of the District Court, dated August 9, 1979,
and Opinion on Reargument, dated September 12,
ere ED ac banc cceseeveveudouaeies
Opinion of the District Court, dated March 19, 1982 (93
EE I i's oc osc FEES MES EER Oe OR aaa raha
Judgments
Judgment of the Court of Appeals, dated May 21, 1984
Judgment of the Court of Appeals, dated September 29,
Order and Judgment of the District Court, dated Sep-
By A ee nr eT ere Peres Pree
Order and Judgment of the Supreme Court, dated July
SRR eee ge pe at) See ere
Other Materials
Opinion of the United States Court of Appeals for the
Sixth Circuit in Peters v. Wayne State University,
dated October 14, 1982 (691 F.2d 235).............
The McCarran-Ferguson Act, Sections 1 and 2; 15
Jf fog 2 + fer
PAGE
la
lla
39a
43a
55a
93a
143a
145a
147a
149a
ii
PAGE
Title VII of the Civil Rights Act of 1964, Sections
703(a)(1), 706(g) and 713(b); 42 U.S.C. §§ 2000e-
ai), Sig), amd TAG) COPED. nic vcccnsccscscces 163a
Portal-to-Portal Act, 29 U.S.C. § 259 (1982).......... 165a
Ni AO rt Ne Lan ch basis lho,
nd le emt EA eR a abe riba: Ae e
DORI. PP NE 8 Be ee rey or oe A OL mera
la
Opinion of the Court of Appeals
dated May 21, 1984
DIANA L. SPIRT,
Plaintiff-A ppellant-Cross-A ppellee,
—and—
EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, and
AMERICAN ASSOCIATION OF UNIVERSITY PROFESSORS,
Plaintiffs-Intervenors-A ppellees,
—vV —
TEACHERS INSURANCE AND ANNUITY ASSOCIATION, COL-
LEGE RETIREMENT EQUITIES FUND, LONG ISLAND UNI-
VERSITY, and ALBERT B. LEWIS,
Defendants-A ppellees-Cross-A ppellants.
nod
Nos. 79-7715, 79-7737, 79-7739
United States Court of Appeals,
Second Circuit
Submitted October 11, 1983
Decided May 21, 1984
ied
2a
Before:
NEWMAN and PRATT,* Circuit Judges,
and CANNELLA, District Judge.**
-t-
On remand from the Supreme Court for further considera-
tion in light of Arizona Governing Committee for Tax De-
ferred Annuity and Deferred Compensation Plans v. Norris,
103 S. Ct. 3492 (1983).
Judgment of the District Court affirmed as modified.
--
JON O. NEWMAN, Circuit Judge:
This appeal, involving the validity of gender-based mortality
tables in calculating teachers’ pension benefits, is before the
Court upon remand from the Supreme Court “for further
consideration in light of Arizona Governing Committee for
Tax Deferred Annuity and Deferred Compensation Plans v.
Nervis, 463 US. —.. 03 S. Cr. 3492, 76 L. Ed. 2
(1983).” Long Island University v. Spirt, 103 S. Ct. 3566
(1983). Our prior decision, 691 F.2d 1054 2d. Cir. 1982),
determined issues concerning both liability and relief. With
respect to liability, we held that defendants College Retirement
Equities Fund (“CREF”) and Teachers Insurance and Annuity
Association (“TIAA”) (collectively “TIAA-CREF”) must be
deemed to be “employers” for purposes of Title VII of the
Civil Rights Act of 1964, 42 U.S.C. § 2000e ef seq., that use of
’ Judge Pierce, who wrote the prior opinion in this case, 691, F.2d
1054, recused himself for reasons arising after the prior decision.
nis The Honorable John M. Cannella of the United States District
Court for the Southern District of New York, sitting by designation.
ee
3a
gender-distinct mortality tables by TIAA-CREF to compute
annuity benefits violates Title VII, and that Title VII is not
rendered inapplicable to TIAA-CREF by the McCarran-Fergu-
son Act, 15 U.S.C. § 10011 et seg. With respect to relief, our
decision affirmed (a) the provision of the District Court’s
judgment that enjoined Long Island University after June 1,
1980, from contributing, or requiring its employees to contrib-
ute, to any retirement plan that uses gender-distinct mortality
tables and (b) the provision enjoining CREF from using such
tables to calculate annuity benefits for persons retiring after
May 1, 1980; we also directed that the latter provision should
also apply to TIAA.
Upon the reconsideration directed by the Supreme Court,
the plaintiff and intervenors Equal Employment Opportunity
Commission (“EEOC”) and the American Association of Uni-
versity Professors (“AAUP”) urge that we reinstate all of the
operative terms of our September 29, 1982, decision. TIAA-
CREF, noting that “there does not appear to be any reconsid-
eration of liability issues required by Norris,” Brief of
TIAA-CREF upon reconsideration, at 4 n.*, urge us to modify
our decision with respect to one significant aspect of relief.
They read Norris to require abandonment of gender-distinct
mortality tables only with respect to that portion of annuity
benefits derived from contributions made after August 1, 1983,
the date of issuance of the Supreme Court’s decision in Norris,
103 S. Ct. at 3494. They contend that, since they have made
changes necessary to use unisex mortality tables with respect to
annuity benefits derived from post-August 1, 1983, contribu-
tions, no further relief is warranted, and the case should be
dismissed as moot.
The issue before us thus presents what has come to be called
the question of “retroactivity,” a term of somewhat ambiguous
meaning in the context of determining appropriate relief in
Title VII annuity cases. There is no claim in this case for
“retroactivity” in its fullest sense: No one asserts that TIAA-
CREF should be required to make any additional payments to
any person who retired prior to the date of the District Court’s
decision, rendered September 17, 1979. 475 F. Supp. 1298. The
4a
District Court, explicitly mindful of the Supreme Court’s
cautions about retroactive remedies expressed in City of Los
Angeles v. Manhart, 435 U.S. 702, 718-23 (1978), 475 F. Supp.
at 1316, provided that its remedy should apply only in the
future; Judge Ward directed that the prohibition on use of
gender-distinct mortality tables apply to the calculation of
benefits only of those retiring after his judgment, and he
stayed the effective date until May 1, 1980, to afford time to
prepare for compliance with his decree. Nevertheless, his
remedy is retroactive in a limited sense: It affects that portion
of benefits attributable to contributions that were made prior
to the effective date of the District Court’s judgment. Whether
retroactivity in that limited sense is permissible in this case, in
light of the Norris decision, is the precise issue before us.
In Norris the Supreme Court made clear that it considers a
judgment in a Title VII pension benefit case to have retroactive
effect when that judgment, though applicable only to persons
retiring after its date, affects a portion of benefits attributable
to contributions made prior to its date. 103 S. Ct. 3503
(Marshall, J., concurring in the judgment in part); id. at
3509-10 n.10 (Powell, J., concurring in part). It is far less clear,
however, whether the Court proscribed retroactivity in that
sense in the circumstances presented by the TIAA-CREF plans
at issue in this case. The relief provisions invalidated in Norris
would have obligated the employer, the State of Arizona, to
provide additional money to bring the benefits to be paid to
female retirees up to the level of benefits to be paid to similarly
situated male retirees. Writing for the Court majority on the
issue of relief, Justice Powell explicitly assumed that the
retroactivity aspect of the judgment being reviewed would
require employers “to top up women’s benefits.” 103 S. Ct. at
3510 n.11. Justice Powell noted the heavy financial cost of this
“topping up” and observed that in Norris the cost would fall
on the State of Arizona. Jd at 3510. What made retroactivity
inequitable in Norris, contrary to the normal preference to
eliminate the effects of past discrimination, see Albemarle
Paper Co. v. Moody, 422 U.S. 405, 418-22 (1975), was the
ee es
A a We Ms 0
Sa
imposition of heavy financial burdens on employers, especially
public employers, in view of the fact that until Norris, the
Court had not explicitly invalidated an employer’s use of
gender-distinct mortality tables. Justice Powell expressed con-
cern not only for the employers, who would be primarily
obligated to increase the women’s benefits, but also for the
pension plans themselves, which, in the absence of extra
employer contributions, would risk insolvency by shouldering
the cost of “topping up.” Justice O’Connor expressed the same
concerns: “A retroactive holding by this Court that employers
must disburse greater annuity benefits than the collected con-
tributions-can support would jeopardize the entire pension
fund . . . . This real danger of bankrupting pension funds
requires that our decision be made prospective.” 103 S. Ct. at
3512 (O’Connor, J., concurring).
The premise of the Norris ruling against retroactivity—that
equalization of women’s benefits requires the employer or the
plan to pay out extra sums of money—is inapplicable to the
case before us. This is so because of the fundamental dif-
ference between the plan in Norris and the TIAA-CREF
arrangements. In Norris the Arizona Deferred Compensation
Plan provided sufficient certainty concerning the amount of
annuity payments to enable the District Court to calculate,
long before the plaintiff’s retirement, the amount of her
monthly annuity. 486 F. Supp. 645, 648. It was this expectation
of a determinable benefit that the Supreme Court majority in
Norris did not wish to have jeopardized by imposing added
financial burdens on the plan. As Justice O’Connor observed,
“Many working men and women have based their retirement
decisions on expectations of a certain stream of income during
retirement. These decisions depend on the existence of ade-
quate reserves to fund these pensions.” 103 S. Ct. at 3512
(O’Connor, J., concurring). By contrast, the TIAA-CREF
plans do not guarantee retirees “a certain stream of income.”
As we previously noted, CREF “guarantees plan participants
no specified amount of monthly payments. The TIAA-CREF
publication which explains the CREF system states that: “The
6a
CREF annuity pays you a retirement income that varies year
by year, reflecting primarily the experience of the securities in
CREF’s portfolio.” ’ 691 F.2d at 1068-69. Similarly, the TIAA
benefit, based on investment results, is not ascertainable. Jd. at
1068. Thus, with one possible exception to be noted below, the
limited form of retroactive relief in the District Court’s judg-
ment need not be rejected because of any fear that either the
employer or TIAA-CREF will be burdened with any additional
financial obligations.
However, noting the absence of new burdens upon the
employer or the plan does not automatically mean that we may
reinstate our prior decision. The retroactive aspect of the
District Court’s judgment will unquestionably have an adverse
economic impact. The elimination of gender-distinct mortality
tables and the consequent equalization of benefits for similarly
situated men and women will mean that male retirees, as a
class, will receive less dollars than whatever amounts they
would have received if gender-distinct tables continued to be
used to determine the portion of benefits derived from pre-
judgment contributions. The significance of this reduction
depends on whether it is considered in the aggregate or individ-
ually. The American Council of Life Insurance and the Health
Insurance Association of America, amici curiae, point to an
aggregate sum of $2 billion that will be effectively transferred
from male to female annuitants by the use of unisex tables.
Brief for Amici Curiae at 14. On the other hand, our prior
opinion noted that for 60% of the men the use of unisex tables
will have no consequence because they elect a joint-survivor
option that continues benefits for the lifetime of their surviving
wives and that for the remaining 40% of the men use of unisex
tables will mean a reduction of between 1% and 8% of
whatever benefits they would otherwise receive. 691 F.2d at
1069 n.12. TIAA-CREF contends that Norris proscribes re-
troactivity in this case because of the adverse consequence to
some of the male annuitants. The plaintiff, the REOC, and the
intervenor AAUP (representing thousands of male and female
members) disagree, arguing that reduction in benefits to males
7a
is not inequitable in the absence of any settled expectation of
the males concerning the level of their future benefits.
After careful consideration of the majority opinion in Norris
on the issue of relief, we conclude that the Court did not
intend to bar retroactivity in the circumstances of this case.
The entire thrust of Justice Powell’s opinion focuses on the
burdens that retroactivity would impose upon the employer or
the plan. The prospect of adverse consequences to male annui-
tants is not mentioned, presumably because the majority was
satisfied that the District Court’s judgment in that case would
not result in red"ction of benefits to any male; equalization
was to be achieved solely by “topping up” the benefits to
females. The absence from the majority opinion on relief of
any discussion of benefit levels of male annuitants is especially
striking in view of the explicit consideration of this matter by
the Justices who joined that portion of Justice Marshall’s
opinion dissenting on the issue of relief. 103 S. Ct. at 3502-04.
Justice Marshall, for the four-member dissent, expressed the
view that the availability of retroactive relief should turn on
whether unisex tables could be applied to that portion of
benefits attributable to contributions made prior to the
Manhart decision “without violating the male employee’s con-
tractual rights.” Jd. at 3504. He would have remanded for
determination of whether male participants “had any contrac-
tual right to a particular level of benefits that would have been
impaired by the application of sex-neutral tables to their
pre-Manhart contributions.” /d.
Admittedly, the absence from the majority opinion of any
mention of the dissent’s preferred resolution of the case leaves
us somewhat uncertain as to the meaning of the Norris deci-
sion. It is possible that the majority considered the dissent to
be in error in thinking that the record was uncertain as to
whether male annuitants had contractual rights to specified
benefit levels. Perhaps the majority thought it absolutely clear
that the male annuitants had such rights. That seems to be the
more plausible interpretation; otherwise, it is difficult to un-
derstand why the opinion of Justice Powell explicitly assumed
8a
that “topping up” was a necessary consequence of the District
Court’s judgment. On the other hand, it is also possible that
the majority considered the dissent to be irrelevant, that the
majority intended to bar any form of retroactivity whether or
not contractual rights of the male annuitants would be de-
feated by use of unisex tables. That seems to be the less
plausible interpretation; it is difficult to imagine why Justice
Powell’s opinion was so emphatic in cautioning against the
imposition of financial burdens on employers and plans if in
Norris it was contractually possible to make retroactive use of
unisex tables and thereby equalize benefits without imposing
any financial burdens on the employer or the plan.
If, as TIAA-CREF contends, the Norris majority intended to
bar retroactivity in all annuity cases simply because equaliza-
tion of benefits must inevitably burden someone, we would
have expected to see some intimation of that view in Justice
Powell’s opinion. Instead, we see only a prohibition of relief
provisions that impose added financial burdens on employers
or plans. If the Supreme Court were confronted with a relief
provision that reduced the benefits of male annuitants from
specified benefit levels (or levels readily calculable, for exam-
ple, from an annuitant’s recent salary), it might well consider
such provisions inequitable. And inequity might also arise if a
group were so female dominated that retroactive use of unisex
tables would cause a substantial reduction even of unspecified
benefit levels of males. But we see nothing in Norris that
proscribes retroactive provisions simply because unspecified
benefit levels for some male annuitants will be slightly lower
than whatever they would have been under gender-distinct
tables.
In our prior decision we explicitly considered whether the
retroactive aspect of the District Court’s judgment would be
inequitable to those male annuitarts who would receive lower
benefits. We agreed with the District Court that it would not
because “no employees could have had settled expectations as
to the amount of monthly benefits” and the references in
TIAA-CREF literature to the impact of gender upon benefit
9a
levels “are neither so clear, nor are they highlighted in such a
way, that it is plausible to think that male plan participants
relied upon them in any meaningful way.” 691 F.2d at 1069. We
also noted that any reliance on gender-distinct tables was
“unjusitfied in light of the visibility of the issue of the legality
of using such tables, at least since it was brought to the
attention of all participants in 1973.” Jd. This assessment of
the equities remains unaltered by the decision in Norris.
In one minor respect, however, we think it would be prudent
to modify our prior decision. Though the benefit level for
TIAA participants depends primarily on the investment success
of the TIAA portfolio, TIAA guarantees that benefit levels
will reflect at least a 2-1/2% return on investments. In our
prior decision, we noted that this minimum guarantee was so
low “that there is no danger that the male participants’
expectation that they will receive the minimal guaranteed
benefit will be jeopardized by the relatively minor changes
. . . necessitated by the relief ordered.” 691 F.2d at 1068. We
still consider the likelihood that TIAA will fail to earn 2-1/2%
on its investment to be an insignificant risk. However, since
Norris appears to foreclose any possibility of the retroactive
imposition of added financial burdens upon employers or
plans, we will direct the District Court to modify its judgment
to provide that unisex tables need not be used in calculating the
portion of benefits attributable to pre-judgment contributions
to whatever extent may be necessary in any year to ensure that
the use of such tables will not impose added financial burdens
upon the employer or TIAA beyond those resulting from the
obligation to pay benefits reflecting a 2-1/2% return on invest-
ment. We leave it to the parties to suggest to the District Court
appropriate language for precluding this unlikely eventuality.
The judgment of this Court rendered September 29, 1982, is
reinstated, subject only to the modification set forth in the
preceding paragraph. As thus modified, the judgment of the
District Court is affirmed.
lla
Opinion of the Court of Appeals
dated September 29, 1982
DIANA SPIRT,
Plaintiff-Appellant-Cross-A ppellee,
—and—
EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, and
AMERICAN ASSOCIATION OF UNIVERSITY PROFESSORS,
Intervenors-Appellees,
—_—_V.—
TEACHERS INSURANCE AND ANNUITY ASSOCIATION,
COLLEGE RETIREMENT EQUITIES FUND, LONG
ISLAND UNIVERSITY, and ALBERT B. LEwISs,
Defendants-Cross-A ppellants-A ppellees.
*
Nos. 79-7715, 79-7737, 79-7739
United States Court of Appeals,
Second Circuit
Argued June 18, 1982
Decided September 29, 1982
am
Before:
NEWMAN and PIERCE, Circuit Judges,
and CANN LLA, Senior District Judge.*
aoe
* The Honorable John M. Cannella, Senior United States District
Judge for the Southern District of New York, sitting by designation.
12a
Appeal from a judgment of the United States District Court
for the Southern District of New York, Robert J. Ward, J.,
granting and denying motions and cross-motions for summary
judgment and to dismiss. The court below found that defen-
dants Teachers Insurance And Annuity Association (“TIAA”)
and College Retirement Equities Fund (“CREF”) violated Title
VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e ef seq.,
by calculating retirement benefits based on sex-distinct mortal-
ity tables, and granted judgment against CREF, while finding
that TIAA was exempt from the mandate of Title VII by virtue
of the McCarran-Ferguson Act, 15 U.S.C. § 1011 ef seq.
Affirmed in part; reversed in part, and remanded.
+
PIERCE, Circuit Judge:
It is plaintiff’s claim, in this action which was filed in the
United States District Court for the Southern District of New
York more than eight years ago, that defendants Teachers
Insurance and Annuity Association (“TIAA”) and College
Retirement Equities Fund (“CREF”) have violated the equal
employment provisions of the Civil Rights Act of 1964, 42
U.S.C. § 2000e et seg. (“Title VII”), by using sex-based mor-
tality tables to calculate the benefits to which pension plan
participants, including plaintiff, are entitled upon retirement.
As a result of the use of such tables female retirees, who made
contributions equal to those of similarly-situated males, receive
a smaller monthly retirement benefit than do such male retir-
ees. The district judge found that defendants’ use of sex-based
mortality tables violated Title VII, and granted summary
judgment on this issue. He went on to hold, however, that
TIAA—but not CREF—was exempted from compliance with
Title VII by virtue of the McCarran-Ferguson Act, 15 U.S.C.
§ 1011 et seq. Therefore, the district court enjoined CREF—
but not TIAA—from using sex-based mortality tables to calcu-
late the number of annuity units to which a retiree is entitled
upon retirement on or after May 1, 1980, and enjoined Long
Island University (“LIU”), plaintiff’s employer, from either
making contributions on behalf of its employees, or requiring
13a
its employees to contribute, to any retirement plan continuing
to use sex-based mortality tables to calculate periodic benefits
after June 1, 1980.
Plaintiff also claimed below that TIAA and CREF’s
methods of calculating retirement benefits violated the equal
pay provisions of the Fair Labor Standards Act of 1964, 29
U.S.C. § 206(d), and infringed her right to equal protection of
the laws in violation of 42 U.S.C. §§ 1983 and 1985. Finding
no state action, the district judge granted defendants TIAA-
CREF’s motion for summary judgment on the §§ 1983 and
1985 claims. Plaintiff’s equal pay claims apparently were not
the subject of motions for summary judgment below, and were
not dealt with by the district court.
Defendants TIAA-CREF and plaintiff have appealed vir-
tually every final order of the district court pursuant to 28
U.S.C. § 1291.
We affirm in part and reverse in part.
I. Facts
Plaintiff Diana L. Spirt is a tenured professor at Long Island
University. LIU has adopted a retirement program managed by
TIAA and CREF for its tenured professors and certain other
employees. Participation in this program is mandatory for
most eligible employees, including plaintiff.
TIAA and CREF manage retirement plans for faculty and
staff members at 85% of all private four-year colleges and
universities and over 40% of all public colleges and universities
in the United States. More than 400,000 employees at approxi-
mately 2800 colleges and universities participate in the TIAA-
CREF system. TIAA is a non-profit, legal reserve life
insurance company which was organized in 1918 by the Carne-
gie Foundation for the Advancement of Teaching. It is “ ‘an
educational service organization [providing] insurance an-
nuities especially designed for employees of educational institu-
tions in the United States and Canada.’ ” Peters v. Wayne State
University, 476 F. Supp. 1343, 1346 (E.D. Mich. 1979).
In 1952, TIAA’s companion organization, CREF, was
created in order to allow the investment of pension funds in
l4a
financial instruments other than those traditionally permissible
for annuity funds like TIAA. It, like TIAA, is a non-profit
corporation, created by special act of tae New York State
Legislature.
Under the LIU retirement plan the employee and the univer-
sity each contributes 5% of the first $4800 of an employee’s
yearly earnings to the pension fund. In addition, LIU contri-
butes 11% of all earnings in excess of $4800, while the
employee contributes 5% of all such earnings. Employees may
also make voluntary additional payments into their pension
fund accounts, on either a regular or an occasional basis. After
receipt by TIAA-CREF, all contributions, plus minimum in-
terest and dividends thereon, are immediately credited to
individual employees’ accounts as they accumulate. Pursuant
to contract, all accumulated benefits are fully vesicd and fully
“portable” at all times. Thus each employee has an immediate
property interest in the benefits that accrue by virtue of the
contributions made on the employee’s behalf. In addition,
each employee retains this ownership right if and when that
employee moves on to other employment, either inside or
outside the field of higher education. If a plan participant
moves to another university that has adopted a TIAA-CREF
retirement program for its employees, the new employer will
pay its own pension contributions and those which it withholds
from the employee’s salary into the employee’s existing ac-
count. If a plan participant obtains employment in a different
field or at a teaching institution that does not use TIAA-CREF
to provide its retirement program, that participant can never-
theless make additional contributions to the TIAA-CREF ac-
count on either a regular or occasional basis. Even ir the
employee fails to make such contributions, the participant will
retain the right to receive, upon retirement, the benefits to
which the participant is entitled by virtue of the contributions
that were accumulated on his or her behalf. If a plan partici-
pant dies before retirement, the funds accumulated in the
account are paid to a designated beneficiary as a death benefit.
After retirement, TIAA provides a life-long fixed dollar
annuity, which pays the retired plan participant a specified and
aaa
lSa
definite amount of benefit on a monthly basis.' CREF, on the
other hand, provides its annuitants with a variable annuity.
Under this plan the annuitant receives a periodic payment, the
amount of which reflects the results of CREF’s investment
policies. Plan participants may allocate their contributions
between TIAA and CREF in whatever proportions they
choose, and under certain conditions, they may transfer contri-
butions from one system to the other. Upon an employee’s
retirement, both the amount of the fixed benefit to be received
monthly from TIAA and the amount of CREF units to be used
in determining the amount of benefits to which an employee
will be entitled each year under the CREF variable-annuity
program are calculated, and the retiree’s contract with TIAA-
CREF is “settled.” This calculation of benefits is based in
large part on life expectancy projections, which are deter-
mined, in turn, by use of sex-segregated mortality tables.
Because women as a class live longer than men as a class, and
women as a group are expected, as a result, to receive annuity
payments over a longer period of time than similarly-situated
men, the use of tables which reflect this male-female difference
results in female retirees, who have made pension contribu-
tions that are equal to those made by similarly-situated men,
receiving monthly payments that are smaller than those re-
| Although it is assumed that most TIAA-CREF participants will
receive their retirement benefits on a monthly basis, an annuitant may choose
to receive annuity payments quarterly, semi-annually, or annually, rather than
monthly. JA 196. Also, rather than simply receiving benefit payments for the
duration of one’s own life (a single life annuity), a retiree can opt for a life
annuity with a ten or twenty year guaranteed period, or for a joint-life
option, under which benefits will continue throughout the lives of both the
retiree and a named beneficiary. JA 383.
2 Under the TIAA-CREF system a retiree has no right to receive a
lump sum payment for the full value of contributions paid into the fund.
However, upon retirement a participant may choose to receive up to 10% of
accumulated contributions for use in dealing with transitional costs. Receipt
of such a payment results, of course, in a corresponding decrease in the
amoun: of moneys available for annuity payments.
l6a
ceived by their male counterparts.* It is stipulated among the
parties that “[c]lommencing at age 65, the amount of each
periodic payment to male annuitants under the single life
option is approximately 11.3% greater than the amount pay-
able to female annuitants of the same age.” JA 182. It is this
result that is challenged as violative of Title VII.
Il. Procedural History
Plaintiff initiated this action against TIAA and CREF by
filing her complaint on April 15, 1974. On May 29, 1975, she
moved for class certification and partial summary judgment.
On August 20, 1975, defendants TIAA and CREF cross-moved
for summary judgment and to dismiss the complaint pursuant
to Rule 19, Fed.R.Civ.P., for failure to join the individual male
annuitants in the TIAA-CREF system as indispensable parties
to the litigation. On January 23, 1976, the motions for sum-
mary judgment were denied on the ground that there existed
disputed issues of material fact. At that time decision on the
other motions was postponed. On May 5, 1976, TIAA-CREF
again moved for partial summary judgment on the ground that
plaintiff had failed to properly file with the Equal Employment
Opportunity Commission (“EEOC”) and the New York State
Division of Human Rights the complaints that are jurisdic-
tional prerequisites to suit in the federal district court under
Title VII.* In addition, defendants moved to dismiss for failure
to join plaintiff’s employer, LIU, as an indispensable party. In
an opinion dated July 1, 1976, the district judge denied
defendants’ moticn for partial summary judgment, denied
3 “Similarly-situated” individuals are those who are the same age,
retire on the same date, and have identical amounts of accumulated contribu-
tions in their individual retirement accounts on the date of retirement.
4 We agree with the district judge that neither plaintiff’s failure to file
a complaint with the EEOC prior to initiating her suit in the district court,
nor her alleged failure to pursue her state remedies, served to defeat the
jurisdiction of the district court over this action. See Egelston v. State Univ.
College at Geneseo, 535 F.2d 752, 754-55 (2d Cir. 1976).
17a
plaintiff's motion for class certification, and denied defen-
dants’ Rule 19 motions except to the extent that plaintiff was
directed to file an amended complaint joining LIU as a
defendant in the action. After filing an amended complaint,
plaintiff moved once again for summary judgment. Defen-
dants TIAA and CREF again cross-moved for summary judg-
ment. In their motions both parties relied heavily on a
Stipulation of Facts dated April 21, 1977. On August 9, 1979,
Judge Ward filed an opinion in which he found that TIAA-
CREF’s use of sex-based mortality tables violated Title VII of
the Civil Rights Act of 1964. Therefore, the district judge
granted summary judgment in plaintiff’s favor against CREF
and enjoined CREF from using sex-based mortality tables in
calculating benefits to which retirees would become entitled
upon retirement on and after May 1, 1980. However, because
the district judge also found that TIAA was in the business of
insurance, he granted summary judgment in favor of TIAA on
the ground that it was exempted from the provisions of Title
VII by the McCarran-Ferguson Act, 15 U.S.C. § 1011 ef seq.
Although the district judge entered no order directly against
TIAA, he did enter an order enjoining LIU from making any
contributions, and from requiring its employees to contribute,
to any retirement plan that continued to use sex-distinct mor-
tality tables in calculating the periodic benefits to be received
by persons retiring on or after June 1, 1980.° CREF moved for
reargument, contending that the relief granted was improperly
retroactive since it would alter the value of benefits that men
5 This order obviously meant that LIU could no longer deal with
TIAA unless TIAA “voluntarily” began to use gender-neutral mortality
tables to calculate the benefits to be received by a retiring plan participant. It
was also always clear that TIAA and CREF are so closely intertwined that, as
a practical matter, TIAA would have to make changes in its method of
calculating accrued benefits in order to synchronize with any changes made
by CREF. Indeed, at a hearing after remand, Judge Ward stated, “I have
always visualized TIAA and CREF somewhat like twins and I sort of
separated the Siamese twins but I recognize that though I may have separated
them in one way from a practical and business point of view they must
follow the same course.” JA 683.
18a
would receive as a result of contributions made to CREF prior
to the date of the district court’s decision. This motion was
denied on September 12, 1979. In October, 1979, defendants
TIAA, CREF, and LIU, and plaintiff Spirt all filed Notices of
Appeal from the judgment of the district court. However, these
appeals were withdrawn from the active consideration of this
Court on January 8, 1980, so that the district judge could
supervise the settlement negotiations then proceeding between
the parties. During this period, TIAA and CREF made several
attempts to design and obtain approval for merged-gender, or
“unisex” mortality tables for the caiculation of annuity bene-
fits attributable to contributions made after the proposal’s
adoption.® The first of these plans (“Unisex I”) was disap-
proved by the EEOC. After modification, the plan (“Unisex
II”) was resubmitted and was approved by the EEOC, but was
then disapproved by the New York State Superintendent of
Insurance, Albert Lewis, in January and February, 1981.’
By February 19, 1981, settlement negotiations had collapsed,
and this Court granted a limited remand of the case to allow
consideration of TIAA-CREF’s “good faith reliance” defense
against the imposition of what they, and, apparently, Superin-
tendent Lewis, considered to be retroactive relief, and to
permit the plaintiff to join Superintendent Lewis as a party.
Plaintiff then filed a supplemental complaint and a motion for
summary judgment. TIAA-CREF cross-moved to dismiss the
supplemental complaint for failure to state a claim upon which
6 Apparently no attempt was ever made to design unisex tables for use
in calculating benefits based on contributions accumulated prior to the date
of the district court’s order, although such tables would have been required if
the parties were to comply fully with that order.
7 The disapproval of “Unisex II” was based on the Superintendent’s
view that the change would unfairly deprive male participants of the full
value of contributions made while TIAA-CREF was using sex-based mortal-
ity tables. JA 621. Superintendent Lewis did approve a later merged-gender
proposal (“Unisex III”), but Unisex III was disapproved by the EEOC,
which viewed it as violative of Title VII and the Equal Pay Act.
19a
relief could be granted. In an opinion dated March 19, 1982,
the district judge rejected TIAA-CREF’s good faith reliance
defense, denied plaintiff's motion for summary judgment
against Superintendent Lewis, granted defendants’ cross-mo-
tion to dismiss the supplemental complaint, and granted mo-
tions by the EEOC and the American Association of
University Professors (“AAUP”) to intervene with regard to
the issue of “good faith reliance.” On March 29, 1982, the
district court granted a stay pending appeal of its orders.
TIAA-CREF and plaintiff filed Amended Notices of Appeal
on April 7, and April 12, 1982, respectively. Virtually all of the
issues decided by the district judge are now before us on
appeal.
Ill. 7Vitle VII Violation
Title VII of the Civil Rights Act of 1964 was enacted in
order to deal with the essential unfairness of employment
discrimination. Members of Congress saw its provisions as a
necessary element of the comprehensive anti-discrimination
legislation of which it was a part because “[t]he rights of
citizenship mean little if an individual is unable to gain the
economic wherewithal to enjoy or properly utilize them.” H.R.
Rep. No. 914, 88th Cong., 2d Sess., reprinted in [1964] U.S.
Code Cong. & Ad. News 2355, 2516. Title VII provides that
(a) It shall be an unlawful employment practice for an
employer—
(1) to fail or refuse to hire or to discharge any indivi-
dual, or otherwise to discriminate against any individual
with respect to his 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.
In City of Los Angeles Dept. of Water & Power v. Manhart,
435 U.S. 702, 712 n.23 (1978), the Supreme Court stated that
pension benefits are “compensation” under Title VII, and held
that Title VII was violated by an employer-run pension plan
that paid all similarly-situated employees equal retirement
20a
benefits, but required its female employees, while working, to
make larger contributions to the pension fund than its male
employees were required to make. In Manhart the Court
acknowledged that “[a]s a class women live longer than men,”
435 U.S. at 704, and that the differential treatment received by
individual women was based upon actuarially-sound projec-
tions as to the total amount of benefits likely to be received by
women as a class. The Court pointed out, however, that Title
VIlI’s “focus on the individual is unambiguous. It precludes
treatment of individuals as simply components of a racial,
religious, sexual, or national class.” /d. at 708. In addition, the
Court found that, “[e]ven a true generalization about the class
is an insufficient reason for disqualifying an individual to
whom the generalization does not apply.” /d. Because there is
no way of knowing prior to or at the time of retirement, which
individual female retirees will fulfill actuarial predictions as to
longevity and in fact live longer than the average male retiree,
a requirement that a// female employees make larger contribu-
tions than a// male employees penalizes all female retirees who
do not actually live longer than the average male retiree. Such
a result, the Supreme Court held, violates Title VII because it
does not “pass the simple test of whether the evidence shows
‘treatment of a person in a manner which but for that person’s
sex would be different.’ ” Jd. at 711 (footnote omitted).
Like the district judge, we can discern no meaningful distinc-
tion between the disparate treatment accorded the female
employees in Manhart, who were required to contribute a
larger percentage of their salaries while working in order to
receive monthly retirement benefits equal in amount to those
received by their male counterparts, and the disparate treat-
ment acorded the female TIAA-CREF participants in this case.
Although female TIAA-CREF participants make contributions
to their retirement accounts that are equal in amount to those
made by their male counterparts, they are paid a smaller
monthly benefit upon retirement simply because they are
women. Every federal court that has considered the issue has
found that no legally significant difference exists between
unequal contributions for equal payments and equal contribu-
ee —~—
2la
tions for unequal payments. See, e.g., Retired Public Employ-
ees’ Association of California v. California, 677 F.2d 733, 735
(9th Cir. 1982); Norris v. Arizona Governing Committee for
Tax Deferred Annuity, 671 F.2d 330, 334 (9th Cir. 1982), cert.
pet. filed, Docket No. 82-52 (U.S.L.W. July 27, 1982); EEOC
v. Colby College, 589 F.2d 1139, 1144 (ist Cir. 1978); Women
in City Government United v. City of New York, 515 F. Supp.
295, 298 (S.D.N.Y. 1981); Hannahs v. Teachers’ Retirement
System, 26 FEP Cases 527, 530 (S.D.N.Y. 1981); Peters v.
Wayne State Univ., 476 F. Supp. 1343, 1350 (E.D. Mich.
1979). In fact, it would seem that if there is any meaningful
distinction between the two types of sex-based plans, it is the
TIAA-CREF type of unequal benefit plan that is more in
conflict with the spirit and purposes of Title VII. Each femaie
TIAA-CREF plan participant is maintained at a lower
economic level than her male counterparts for as long or short
a time as she is alive to receive benefits, regardless of whether
she is ultimately one of the few who outlives the average male
participant or is one of the 84% of all women who do not
outlive their male counterparts. See Norris v. Arizona Govern-
ing Committee, supra, 671 F.2d at 332 n.1.
The period of time over which the female TIAA-CREF
participant will receive the lower benefits awarded her under
the present plans is both indefinite and unknowable at the time
of retirement. In addition, this lesser benefit will be received at
a time when most often the recipient must live on a fixed
income, and is unable to increase her benefits as she might
increase her salary by working for a promotion during her
working years. It is also received at a time—in her older
years—when the amount of dollars available to her is apt to
crucially affect her ability to meet her basic needs. It was
largely because of its concern with this dependence on pension
benefits in workers’ retirement years that Congress enacted the
Employee Retirement Income Security Act, 29 U.S.C. § 1001
et seq. (“ERISA”), in 1974. The House Committee stated in
this regard that ERISA’s “most important purpose will be to
assure American workers that they may look forward, with
anticipation, to a retirement with financial security and dignity,
22a
and without fear that this period of life will be lacking in the
necessities to sustain them as human beings in our society.”
H.R. Rep. No. 533, 93d Cong., 2d Sess., reprinted in [1974]
U.S. Code Cong. & Ad. News 4639, 4646.
Defendants attempt to argue that the TIAA-CREF plans are
fair to both men and women because each individual partici-
pant receives a benefit package that is of actuarially equal
value. This argument is unconvincing because it is only by
virtue of defining an individual in terms of the prohibited
classification that the actuarially equal result is reached. It is
this very act of classification that results in unfairness to
individual members of the class in violation of the clear
mandate that compensation, conditions and benefits of em-
ployment are to be tested by their disparate effect on individ-
uals rather than groups.
In the time elapsed since its decision in Manhart the Supreme
Court has not modified in any way its focus on “fairness to
individuals rather than fairness to classes,” 435 U.S. at 709, in
Title VII cases. To the contrary, in Connecticut v. Teal, 50
U.S.L.W. 4716 (U.S. June 21, 1982), the Supreme Court held
that where a promotional examination had a racially disparate
impact on blacks, the employer could not defend the use of the
exam on the ground that a higher than average percentage of
the blacks who did pass the test were in fact promoted, with
the result that the “bottom line” impact was not only nondis-
criminatory, but was actually more favorable to blacks as a
group than to whites. In reaching its decision the Court stated
that “[i]t is clear that Congress never intended to give an
employer license to discriminate against some employees on the
basis of race or sex merely because he favorably treats other
members of the employee’s group.” 50 U.S.L.W. at 4720.
We also reject defendants’ claim that it would be unfair to
equalize the monthly benefits to be received by male and
female annuitants because men, as a class, will then receive less
total benefits than will women as a class. First, this argument
loses sight of the need to focus on impact on individuals as
opposed to impact on a class. Further, under an equal benefit
system each individual male annuitant will be treated in exactly
eee ee
23a
the same way as each of his female counterparts. Under such a
system, an individual male annuitant will be disadvantaged
only as compared to his male counterparts who have in the
past received larger benefits as a result of TIAA-CREF’s
sex-based discrimination in their favor. Male participants in
TIAA-CREF are not being treated unequally when the risk that
each and every annuitant, male and female, will live longer
than the average is spread across the entire covered population
rather than being imposed on one sub-group within that total
population. The fact that such equal spreading of risk may
have the result that, from a statistical point of view, men as a
class subsidize somewhat the benefits received by women as a
class is irrelevant in the context of a statute that seeks fairness
to individuals, and is not, in any event, contrary to the
continuing intent of Congress, as such intent was evidenced in
1978, when it amended Title VII to overrule the Supreme
Court’s decision in General Electric Co. v. Gilbert, 429 U.S.
125 (1976).
In Gilbert the Supreme Court held that an employer’s
disability benefits plan that failed to provide coverage for
pregnancy-related disabilities did not discriminate against
women in violation of Title VII. Congress quickly responded
to this decision by adding 42 U.S.C. § 2000e(k) to Title VII.
That section provided that
The terms ‘because of sex’ or ‘on the basis of sex’ include,
but are not limited to, because of or on the basis of
pregnancy, childbirth, or related medical conditions; and
women affected by pregnancy, childbirth, or related medi-
cal conditions shall be treated the same for all employ-
ment-related purposes, including receipt of benefits under
fringe benefit programs, as other persons not so affected
but similar in their ability or inability to work... .
_ Congress was aware that this amendment would increase the
cost of work-related disability and health insurance plans, see
H.R. Rep. No. 948, 95th Cong., 2d Sess., reprinted in [1978]
U.S. Code Cong. & Ad. News 4749, 4757-58, and specifically
understood and intended that in the case of contributory
24a
programs the amendment would require that a// employees—
not just women—would be assessed their proportionate por-
tion of the incremental cost. Jd., [1978] U.S. Code Cong. &
Ad. News at 4756.
We find, therefore, that TIAA-CREF’s use of sex-distinct
mortality tables constitutes unequal treatment based solely on
an individual’s sex. In order for this practice to violate Title
VII, however, the unequal treatment must be practiced by an
“employer.” It is clear that plaintiff’s contract for retirement
benefits is not with LIU, but with TIAA-CREF, an indepen-
dent insurer. Plaintiff clearly is not an employee of TIAA-
CREF in any commonly understood sense. However, it is
generally recognized that “the term ‘employer,’ as it is used in
Title VII, is sufficiently broad to encompass any party who
significantly affects access of any individual to employment
opportunities, regardless of whether that party may technically
be described as an ‘employer’ of an aggrieved individual as
that term has generally been defined at common law.” Van-
guard Justice Society, Inc. v. Hughes, 471 F. Supp. 670, 696
(D. Md. 1979). See also Baker v. Stuart Broadcasting Co., 560
F.2d 389, 391 (8th Cir. 1977); Sibley Memorial Hospital v.
Wilson, 488 F.2d 1338 (D.C. Cir. 1973); EEOC v. Wooster
Brush Co., 523 F. Supp. 1256, 1261-62 (N.D. Ohio 1981);
Puntolillo v. New Hampshire Racing Commission, 375 F.
Supp. 1089 (D.N.H. 1974).
We agree with the district judge that TIAA and CREF, which
exist solely for the purpose of enabling universities to delegate
their responsibility to provide retirement benefits for their
employees, are so closely intertwined with those universities,
(in this case LIU), that they must be deemed an “employer”
for purposes of Title VII. It is also relevant that participation
in TIAA-CREF is mandatory for tenured faculty members at
LIU, and that LIU shares in the administrative responsibilities
that result from its faculty members’ participation in TIAA-
CREF.
In addition, the language of the Supreme Court in Manhart
would seem to compel a finding that delegation of responsibil-
ity for employee benefits cannot insulate a discriminatory plan
25a
from attack under Title VII. The Court stated therein that it
did not wish to “suggest, of course, that an employer can avoid
his responsibilities by delegating discriminatory programs to
corporate shells. Title VII applies to ‘any agent’ of a covered
employer. . . .” 435 U.S. at 718 n.33. Finally our conclusion
here is in accord with that of a number of other courts. These
courts have recognized that exempting plans not actually ad-
ministered by an employer would seriously impair the effec-
tiveness of Title VII, and have held Manhart applicable to
pension plans run by third-party insurers. See Norris v. Ar-
izona Governing Committee for Tax Deferred Annuity, 671
F.2d 330 (9th Cir. 1982), cert. pet. filed, Docket No. 82-52
(U.S.L.W. July 27, 1982); EEOC v. Colby College, 589 F.2d
1139, 1141 (1st Cir. 1978) (holding TIAA-CREF subject to Title
VII); EEOC v. Wooster Brush Co., 523 F. Supp. 1256, 1266
(N.D. Ohio 1981); Peters v. Wayne State Univ., 476 F. Supp.
1343, 1350 (E.D. Mich. 1979) (holding TIAA-CREF subject to
Title VII).
IV. Impact of the McCarran-Ferguson Act
Having determined that the TIAA-CREF benefit systems
discriminate against women in violation of Title VII, we must
determine whether there is any countervailing federal law or
policy which renders Title VII inapplicable to TIAA and/or
CREF. TIAA and CREF contend that because they are
engaged in the business of insurance they are exempted from
compliance with Title VII by virtue of the McCarran-Ferguson
Act, 15 U.S.C. § 1011 et seq. (“the McCarran Act”).
The McCarran Act provides, in pertinent part, that
[nJo Act of Congress shall be construed to invalidate,
impair, or supersede any law enacted by any State for the
purpose of reguiating the business of insurance, or which
imposes a fee cr tax upon such business, unless such Act
specifically relates to the business of insurance. . . .
15 U.S.C. § 1012(b).
The McCarran Act will exempt defendants TIAA and/or
CREF from conforming their operations to the mandates of
26a
Title VII only if (1) defendants are engaged in the business of
insurance; (2) Title VII does not specifically relate to the
business of insurance; and (3) Title VII, as construed, invali-
dates, impairs, or supersedes a state law enacted to regulate the
business of insurance. The district judge looked to each of
these criteria and concluded that the McCarran Act exempted
TIAA, but not CREF, from the requirements of Title VII. We
find that the McCarran Act exempts neither TIAA nor CREF
from such compliance, and reverse the ruling below as to
TIAA.
Judge Ward found that the McCarran Act did not exempt
CREF from compliance with Title VII because CREF was not
in the business of insurance. We agree. CREF is a variable
annuity company.* As such it does not commit itself to pay a
pre-determined amount of benefit each month. How much it
actually does pay is determined periodically, and directly re-
flects the results of the fund’s investment policies. Thus, a
variable annuity company is not subject to the risk that its
obligations will exceed its return on investments.
As the Supreme Court noted in SEC v. Variable Annuity
Co., 359 U.S. 65, 71 (1959), variable annuity plans like CREF
have a number of the characteristics of insurance. The variable
annuity company pays its annuitant on a periodic basis, and
continues to do so until the death of the annuitant, or for a
fixed period; payments are made from both income and
principal; and the amount of benefit each annuitant receives is
calculated on the basis of traditional actuarial principles which
take into account, inter alia, age and sex. Finally, the issuer
assumes the risk of mortality—that is, that the annuitant will
live longer than predicted on an actuarial basis. Nevertheless,
the Variable Annuity Court found that “absent some guarantee
of fixed income, the variable annuity places all the investment
risks on the annuitant, none on the company. The holder gets
only a pro rata share of what the portfolio of equity interests
reflects—which may be a lot, a little, or nothing.” Jd. (foot-
8 The Supreme Court noted in SEC v. Variable Annuity Co., 359 U.S.
65, 69 (1959), that CREF was the first variable annuity company in the
United States.
27a
note omitted). The Court then went on to hold that since the
“concept of ‘insurance’ involves some investment risk-taking
on the part of the company,” the issuer of variable annuity
contracts is not engaged in the business of insurance and is not
protected from federal regulation by virtue of the McCarran
Act. Id. See also Group Life & Health Ins. Co. v. Royal Drug
Co., 440 U.S. 205, 211-12 (1979). Therefore, the district judge
was correct in holding that CREF is not in the business of
insurance and is required to comply with the mandate of Title
VIL.
On the other hand, TIAA commits itself, at the time a plan
participant retires, to pay the retiree a specific, fixed amount
of money each month. As a result, TIAA is subject to invest-
ment risk. Since its contracts, like those issued by CREF, have
the other characteristics of insurance contracts, we will as-
sume, as TIAA contends and as the district judge found, that
TIAA is in the business of insurance. Our next step, then, is to
determine whether Title VII specifically relates to the business
of insurance. If not, we must then determine whether a holding
that TIAA must pay equal monthly benefits to all of its
annuitants would be a holding in which we construed an Act of
Congress so as to invalidate, impair, or supersede a state law
enacted to regulate the business of insurance in violation of the
McCarran Act.
The McCarran Act was enacted in 1945 in direct reaction to
the Supreme Court’s decision in United States v. South-East-
ern Underwriters Assoc., 322 U.S. 533 (1944), one year before.
In South-Eastern Underwriters the Court held that insurance
companies involved in insurance transactions across state lines
were engaged in interstate commerce and subject to federal
regulation under the Commerce Clause. Therefore, the Court
found, the price-fixing activities of such insurance companies
were subject to attack under the Sherman Antitrust Act. This
holding created the fear that traditional forms of state regula-
tion and taxation of insurance companies doing business
within the state could be invalidated on Commerce Clause
grounds, and that the insurance industry would be thrown into
chaos as a result. Thus, Congress’ purpose in adopting the
28a
McCarran Act was only to ensure that the states would be
permitted to fulfill their traditional role in relation to insurance
regulation. As stated by the Supreme Court, the intent was,
first, “to assure that the States are free to regulate insurance
companies without fear of Commerce Clause attack,” Group
Life & Health Ins. Co. v. Royal Drug Co., supra, 440 U.S.
205, 218 n.18, and, second, to give insurance companies only a
limited exemption from the antitrust laws. Jd. See also SEC v.
National Securities, Inc., 393 U.S. 453, 458-59 (1969) (“Con-
gress was mainly concerned with the relationship between
insurance ratemaking and the antitrust laws, and with the
power of the States to tax insurance companies.”). According
to the legislative history, it was “not the intention of Congress
to clothe the States with any power to regulate or tax the
business of insurance beyond that which they had been held to
possess prior to the decision. . . in the South-Eastern Under-
writers Association case.” H.R. Rep. No. 143, 79th Cong., Ist
Sess., reprinted in [1945] U.S. Code Cong. Svce. 670, 671
(Feb. 13, 1945).
We find, based on the historical context, the legislative
history, and judicial interpretations of that history, that Con-
gress, in enacting a statute primarily intended to deal with the
conflict between state regulation of insurers and the federal
antitrust laws, had no intention of deciaring that subsequently
enacted civil rights legislation would be inapplicable to any and
all of the activities of an insurance company that can be
classified as “the business of insurance.” Accord, EEOC v.
Wooster Brush Co., 523 F. Supp. 1256, 1265 (N.D. Ohio 1981);
Women in City Government United v. City of New York, 515
F. Supp. 295, 302-03 (S.D.N.Y. 1981).
The view that the McCarran Act does not render Title VII
inapplicable to an employment-related pension plan finds
further support in the Congressional debates surrounding the
enactment of ERISA (a statute which clearly “specifically
relates to the business of insurance”) in 1974. It is clear from
those debates that the members of Congress believed that Title
VI’ tid specifically prohibit racial and sex-based discrimina-
tion in pension benefit programs. As summarized by the
Seventh Circuit:
29a
Senator Mondale and Representative Abzug sought to
include in ERISA provisions prohibiting discrimination in
the administration of welfare benefit plans. Senator Wil-
liams assured Senator Mondale that such an amendment
would be unnecessary and might undermine federal anti-
discrimination efforts, stating: ‘! believe that . . . cen-
tralized administration of nondiscrimination in
employment must be maintained. And | believe this can
be done by the Equal Employment Opportunities Com-
mission under terms of existing lav.’ 119 Cong. Rec.
30409 (1973). Representative Dent reiterated in the House
that discrimination could best be prohibited ‘under terms
of existing law.’ 120 Cong. Rec. 4726 (1974). On this
basis, ERISA was not amended to prohibit discrimina-
tion.
Bucyrus-Erie Co. v. Dept. of Industry, Labor & Human
Relations, 599 F.2d 205, 211-12 (7th Cir. 1979), cert. denied,
444 U.S. 1031 (1980). See also Women in City Government
United v. City of New York, 515 F. Supp. 295, 304-05
(S.D.N.Y. 1981).
Furthermore, in this case Title VII is not being construed to
implicitly pre-empt state laws. Title VII contains a broad and
explicit pre-emptive provision. See 42 U.S.C. § 2000e-7. That
section provides that:
Nothing in this subchapter shall be deemed to exempt or
relieve any person from liability, duty, penalty, or punish-
ment provided by any present or future law of any State
or political subdivision of a State, other than any such law
which purports to require or permit the doing of any act
which would be an unlawful employment practice under
this subchapter.
To the extent that New York law either permits, or seeks to
enforce the use, or continued use, of gender-based mortality
tables in violation of Title VII, it is clearly pre-empted under
§ 2000e-7. The McCarran Act was never meant to prevent, and
cou'd not prevent, Congress from explicitly imposing require-
30a
ments on employers and their agents under the civil rights
statutes, the National Labor Relations Act, or any other
statute that seeks to enforce compliance with federal policies in
such fields as civil rights, labor and other areas of national
concern.
We hold, therefore, that Title VII explicitly pre-empts New
York insurance laws to the extent that they “require or permit”
a method of calculating pension benefits that we have found to
be “an unlawful employment practice” under Title VII. There-
fore, the McCarran Act does not exempt TIAA from comply-
ing with the dictates of Title VII. Having so held, we need not
reach the question whether application of Title VII will invali-
date, impair, or supersede New York State insurance law.’
It is to be noted, however, that although the State Superin-
tendent of Insurance has approved two sets of proposed unisex
mortality tables for calculation of benefits based on contribu-
tions made after the date the new plans are approved, he has
indicated that he will not approve such tables for use in
calculating benefits based on contributions made prior to the
effective date of the new pians. Obviously, our holding that
Title VII pre-empts state insurance law with which it conflicts
dictates that where the relief ordered necessarily has an impact
on contributions paid to TIAA and CREF prior to the effective
date of our order, the New York State Superintendent of
Insurance will be precluded from disapproving plans designed
to conform with the order.'°
V. Relief
Judge Ward enjoined CREF from using sex-based mortality
tables to calculate the number of annuity units to which plan
participants are entitled upon their retirement on or after May
9 In light of our holding that Title VII applies to both TIAA and
CREF and that it has been violated by their sex-based method of calculating
retirement benefits, we need not reach the secondary issues raised on appeal.
10 We note that the Superintendent has indicated that he will, of
course, comply with a final order of this Court.
3la
1, 1980. He also enjoined LIU from making contributions on
behalf of its employees, and/or from requiring its employees
to contribute to any retirement plan that continued to use
sex-based mortality tables after June 1, 1980. In reviewing an
award of relief we must determine whether the judge below
abused his discretion “to locate a ‘just result’ in light of the
circumstances peculiar to the case.” A/bemarle Paper Co. v.
Moody, 422 U.S. 405, 424-25 (1975) (quoting Langnes vy.
Green, 282 U.S. 531, 541 (1931)).
In light of our holding that TIAA is subject, as is CREF, to
the mandate of Title VII, any relief awarded to plaintiff will
apply equally against both.
The order enjoining LIU from making contributions to any
pension fund making use of sex-based mortality tables to
calculate benefits accruing as a result of contributions made
after June 1, 1980, logically follows from the holding that the
use of such tables constitutes discrimination on the basis of sex
in violation of Title VII, and must be affirmed. It is also clear
that the part of Judge Ward’s order requiring CREF to use
gender-neutral mortality tables to calculate benefits that result
from contributions made after the effective date of the order,
May 1, 1980, must be affirmed, and extended to include
TIAA. Defendants have already attempted to revise their
practices to conform to the above. However, they have not
presented for approval gender-neutral tables for the calculation
of benefits based on contributions made prior to May 1, 1980,
but first payable upon a plan participant’s retirement after that
date. Instead, they have argued that any further relief would be
improper since it would “retroactively” affect the value of
contributions made prior to the district court’s order in this
case. They contend that the Manhart Court’s rejection of the
plaintiffs’ claims for retroactive relief in that case dictates that
no retrospective relief is available here. Assuming, without
deciding, that the part of Judge Ward’s order that affects the
value of contributions made prior to the entry of judgment in
this case constitutes retroactive relief, nothing in Manhart
proscribes such a result. The Manhart Court itself pointed out
that “[t]o the point of redundancy, the statute stresses that
32a
retroactive relief ‘may’ be awarded if it is ‘appropriate,’ ” 435
U.S. at 719, and that the “presumption in favor of retroactive
liability can seldom be overcome.” /d. The Court then went on
to find that under the special circumstances presented in that
case retroactive relief was not “appropriate.” In so finding the
Court stated:
For several reasons, we conclude that the District Court
gave insufficient attention to the equitable nature of Title
VII remedies. Although we now have no doubt about the
application of the statute in this case, we must recognize
that conscientious and intelligent administrators of pen-
sion funds, who did not have the benefit of the extensive
briefs and arguments presented to us, may well have
assumed that a program like the Department’s was en-
tirely lawful . . . . [P]ension administrators could rea-
sonably have thought it unfair—or even illegal—to make
male employees shoulder more than their ‘actuarial share’
of the pension burden. There is no reason to believe that
the threat of a backpay award is needed to cause other
administrators to amend their practices to conform to this
decision.
435 U.S. at 722-23 (footnotes omitted) (emphasis added). The
Supreme Court then characterized its decision as a “marked
departure,” 435 U.S. at 722, from past practice, and stated
that since retroactive relief in the form of refunds to women of
the additional moneys they had paid into the fund in the past
would constitute an enormous unforeseen liability that would
threaten the solvency of the fund, a “backpay award” was
unjustified. In this case, however, none of the factors that
influenced the Manhart Court is present to render “inappro-
priate” an order of relief that affects the value of contributions
paid to the pension fund prior to the entry of judgment below.
First, Manhart was decided by the Supreme Court over four
years ago. Since the decision of that case a number of federal
district courts and courts of appeals have declared plans like
those at issue here to be unlawful in light of Manhart. See
33a
Retired Public Employees’ Association of California v. Cali-
fornia, 677 F.2d 733 (9th Cir. 1982); Norris v. Arizona Govern-
ing Committee for Tax Deferred Annuity, 671 F.2d 330 (9th
Cir. 1982), cert. pet. filed, Docket No. 82-52 (U.S.L.W. July
27, 1982); EEOC v. Colby College, 589 F.2d 1139 (Ist Cir.
1978); Women in City Government United v. City of New
York, 515 F. Supp. 295 (S.D.N.Y. 1981); Hannahs v. Teachers’
Retirement System, 26 FEP Cases 527 (S.D.N.Y. 1981); Peters
v. Wayne State Univ., 476 F. Supp. 1343 (E.D. Mich. 1979).
The record indicates further that in 1974, as a result of the
Secretary of Labor’s public request for comments on proposed
sex discrimination guidelines, TIAA-CREF wrote to its mem-
ber institutions in order to encourage them to oppose regula-
tions requiring the use of gender-neutral mortality tables. See
JA 485-87. In addition, this suit was filed against TIAA-CREF
in April, 1974. The Peters action was filed in 1976. 476 F.
Supp. 1343, 1345. In 1978 the First Circuit reversed the Maine
District Court’s grant of summary judgment in favor of
defendants in EEOC v. Colby College, 589 F.2d 1139 (1st Cir.
1978), and remanded for further proceedings. Both Pefers and
Colby College, as well as other suits not yet decided, involved
TIAA-CREF, and certainly put defendants TIAA-CREF on
notice as to the questionability of their practices. They have
had ample opportunity to “voluntarily” revise their mortality
tables. The possibility of an order such as that entered by the
district court, and by this court today, was foreseeable at least
since 1974.!'
It also must be recognized that the “retroactive” relief
awarded here is not nearly so drastic as that sought by
11 The pension plan at issue in Manhart had beer altered to equalize
both contributions and benefits for male and female employees by the time
that case reached the Supreme Court. The change was effective on January 1,
1975, see 435 U.S. at 706, prior to the affirmance of the district court’s order
by the Ninth Circuit. The plan at issue in Retired Public Employees’
Association of California v. California, 677 F.2d 733 (9th Cir. 1982), also was
amended in 1977 to equalize contributions and benefits for male and female
employees. /d. at 734 n.1.
34a
plaintiffs and awarded by the district court in Manhart. There
the district court’s order that all female employees and retirees
receive refunds of all excess contributions made to the plan
since April 5, 1972, when Title VII became applicable to
governmental employers, see Manhart v. City of Los Angeles
Dept. of Water & Power, 553 F.2d 581, 583 (9th Cir. 1976),
vacated and remanded, 435 U.S. 702 (1978), required Plan
administrators to remove money from the fund for this pur-
pose. The fund would nevertheless have been required, at the
same time, to meet undiminished obligations. In the present
case a “retroactive” award does not require the wholesale
removal of moneys from TIAA-CREF reserves. The equaliza-
tion of the amount of monthly payments to be received by
similarly-situated mz‘: and female employees can be calculated
sO as not to chang: .he total anticipated obligations of the
funds. A result wh.ch did not affect past contributions and
granted only “prospective relief, as that is defined by defen-
dants, would effectively postpone full conversion to gender-
neutral tables for as much as 30 to 40 years.
Finally, we must reject the argument that an award of relief
that adversely affects the value of contributions made by or on
behalf of male employees prior to the date of the order herein
will unfairly violate those males’ expectations of receiving
pension benefits based on mortality tables that discriminate in
their favor. First, this argument assumes that male employees
had some clearly settled expectations that will be violated. On
the contrary, the literature distributed to TIAA-CREF partici-
pants emphasizes the difficulty involved in accurately predict-
ing the amount of retirement annuity income to be expected by
an individual participant. The literature states that:
The amount of your retirement income will depend on the
number of years you participate in the plan, the amount
of premiums paid each year during your participation,
your age at time of retirement, the experience of TIAA
and CREF, the income option you select at retirement,
and other factors. Although it is not possible to predict
the effect of each of these factors upon your retirement
35a
income, the remaining portion of this booklet should be
helpful in caiculating the benetits that would be produced
under certain conditions.
“TIAA-CREF: Your Retirement Annuity” at 14, JA 233. Later
in the same publication it is stated that “[jJust as you can’t
predict your future salary or retirement age, neither can TIAA
predict economic and social conditions. Therefore, the TIAA
annuity amounts may be greater or less than those shown
because of the following factors: . . .” /d. at 16, JA 234. It is
then stated, infer alia, that on three months’ notice TIAA can
establish a new rate schedule for future premiums. /d. While
TIAA does guarantee its participants certain minimal monthly
payments, the amounts guaranieed are so low—since they are
figured on the basis of a 22% return on investments, see JA
197--that there is no danger that the male participants’ expec-
tation that they will receive the minimal guaranteed benefit will
be jeopardized by the relatively minor changes in the value of
past benefits necessitated by the relief ordered herein.
CREF, on the other hand, guarantees plan participants no
specified amount of monthly payments. The TIAA-CREF
publication which explains the CREF system states that:
The CREF annuity pays you a retirement income that
varies year by year, reflecting primarily the experience of
the securities in CREF’s portfolio. When you retire, your
accumulation units are converted into a lifetime monthly
income of a fixed number of ‘annuity units.’ . . . The
number of annuity units payable to you each month for
life depends on such factors as how many accumulation
units you own at time of retirement, the age at which you
retire, your sex, and whether you choose an income
method that continues payments to a beneficiary after
your death.
“TIAA-CREF—CREF Units at Work” at 3; JA at 415. Based
On statements such as this, no employees could have had
settled expectations as to the amount of monthly benefits they
would receive upon retirement.
36a
While it is true that the above-quoted literature states, as
does other literature sent to TIAA-CREF participants, that sex
will be considered in calculating the amount of monthly bene-
fits to be received after retirement, these statements are neither
so clear, nor are they highlighted in such a way, that it is
plausible to think that male plan participants relied upon them
in any meaningful way. In any case, such statements would not
be a major factor in inducing men to participate in TIAA-
CREF plans. First, at least at LIU, participation has been
mandatory for most covered employees. Second, the unique-
ness of TIAA-CREF, particularly its qualities of immediate
vesting and portability, would constitute inducements to parti-
cipation more powerful than the belief that men’s benefits
would be paid at a rate higher than those paid to similarly-situ-
ated women. It is also not clear that men could actually do
better purchasing a plan on the open market than they will by
participating in TIAA-CREF plans that make use of gender-
neutral tables, given the economies of scale that would presum-
ably be present in the administration of such a large group
plan. Further, the benefits to be received by many male
participants will be unaffected by the shift to gender-neutral
tables because approximately 60% of all male participants
select a joint-survivor option which provides for an income
that continues for the duration of their wives’ lifetimes as well
as their own. See TIAA-CREF, The Participant (March, 1980)
at 2, JA 550. Since in these cases actuarial projections as to the
wives’ likelihood of surviving, based on sex-based mortality
tables, have always been figured into the calculation of the
amount of benefits to be received by their husbands upon
retirement, the change will have little or no impact on the
benefits to be received by these men. /d.'”
Finally, reliance on the continued use of sex-distinct mortal-
ity tables by male pension plan participants was unjustified in
12 Thus, the changes mandated by this decision will reduce the benefits
that would be received by approximately 40% of male TIAA-CREF partici-
pants, based on sex-distinct mortality tables, by between 1% and 8%. See
TIAA-CREF, The Participant (March, 1980) at 2, JA 550.
37a
light of the visibility of the issue of the legality of using such
tables, at least since it was brought to the attention of all
participants in 1973. See TIAA-CREF, The Participant (July,
1973), JA 477-8«
A delayed award such as that which defendants contend is
proper would fly in the face of the primary purpose of Title
ViIi—to “make persons whole for injuries suffered on account
of unlawful employment discrimination.” A/bemarle Paper
Co. v. Moody, 422 U.S. 405, 418 (1975). We therefore hold
that CREF was properly enjoined from using sex-distinct
mortality tables to calculate the number of annuity units to
which all persons retiring after May 10, 1980 [sic] are entitled,
and TIAA is now similarly enjoined from using sex-distinct
mortality tables to calculate the amount of monthly benefits to
which its participants are entitled upon retirement. This order
will affect all calculations of retirement benefits made after
May 1, 1980, as per the stipulation between the parties dated
March 29, 1982. JA 792-93. In addition, LIU was properly
enjoined from making contributions to, or requiring its em-
ployees to make contributions to, any pension fund that
continues to use gender-based mortality tables to calculate
retirement benefits for employees retiring after June 1, 1980.
See JA 792-93.
Affirmed in part, reversed in part, and remanded for further
proceedings not inconsistent with this opinion.
~~
39a
Opinion of the District Court dated January 23, 1976
DIANA L. SPIRT, etc.,
Plaintiff,
—against—
TEACHERS INSURANCE AND ANNUITY ASSOCIATION, ef ano.,
Defendants.
—
No. 74 Civ. 1674
United States District Court,
Southern District of New York
January 23, 1976
aoe
Plaintiff Diana L. Spirt (“Spirt”) moves pursuant to Rule
56, Fed. R. Civ. P., for partial summary judgment declaring
certain actuarial tables used by defendants in annuity contracts
with plaintiff to be violative of the Constitution and statutes of
the United States and for class action certification pursuant to
Rule 23, Fed. R. Civ. P. Defendants Teachers Insurance and
Annuity Association of America (“TIAA”) and College Retire-
ment Equities Fund (“CREF”) cross-move pursuant to Rule
56, Fed. R. Civ. PB, for summary judgment dismissing this
action.
Pending decision of the crosS-motions for summary judg-
ment, plaintiff's motion for class action certification was
adjourned. After that postponement, defendants moved under‘
Rule 12(h)(2), Fed. R. Civ. P., for dismissal of the complaint
for failure to join indispensable parties as required by Rule 19,
Fed. R. Civ. P. Rule 19 is expressly “subject to the provisions
of Rule 23.” Inasmuch as it involves determinations of the
appropriate classes of persons involved in this litigation, defen-
dants’ motions will be considered in conjunction with plain-
tiff’s Rule 23 motion.
40a
Plaintiff, a female professor at Long Island University,
charges sex discrimination in the operation of a pension plan
administered by defendants. This pension plan utilizes ac-
tuarial tables which indicate that women at retirement age have
a longer life expectancy than do men at that same age.
Consequently, the amount of each periodic payment made to a
female annuitant selecting a single-life option is smaller than
that paid her male counterpart. Use of sex-based tables and the
disparity in treatment which results, Spirt claims, constitute
violations of the Fourteenth Amendment to the Constitution,
42 U.S.C. § 2000(e)(1) et seg. (“Title VII”), 42 U.S.C. § 1981
et seq., and the Equal Pay Act of 1963, 29 U.S.C. § 209(d).
TIAA and CREF deny that their pension plan unlawfully
discriminates asserting instead that the plan has a demon-
strably rational and equitable basis.
Summary judgment is appropriate only if the record clearly
indicates that no genuine issue of material fact exists. In
several recent cases, the Second Circuit has indicated that
summary judgment should be selectively granted. Heyman v.
Commerce & Industry Insurance Company, Docket No. 75-
7230 (2d Cir. Oct. 24, 1975); Judge v. Buffalo, Docket No.
75-7314 (2d Cir. Oct. 24, 1975). In the words of the Court of
Appeals:
[T]he “fundamental maxim” remains that on a motion
for summary judgment the court cannot try issues of fact;
it can only determine whether there are issues to be tried.
American Manuf. Mutual Ins. Co. v. American Broad-
casting Paramount Theatres, Inc., 388 F.2d 272, 279 (2d
Cir. 1967); Cali v. Eastern Airlines, Inc., 442 F.2d 65, 71
(2d Cir. 1971). Moreover, when the court considers a
motion for summary judgment, it must resolve all ambi-
guities and draw all reasonable inferences in favor of the
party against whom summary judgment is sought, United
States v. Diebold, Inc., 369 U.S. 654, 655 (1962), with the
burden on the moving party to demonstrate the absence
of any material factual issue geniunely in dispute, Adickes
v. Kress & Co., 398 U.S. 144, 157 (1970). Heyman, supra.
4la
See also, Jaroslawicz v. Seedman, Docket No. 75-7299 (2d Cir.
Dec. 19, 1975).
In language which speaks directly to this action the Second
Circuit recently stated:
The fact that both sides in the instant case sought
summary judgment does not make it more readily avail-
able. American Manuf. Mutual Ins. Co. v. American
Broadcasting—Paramount Theatres, Inc., 388 F.2d 272,
279 (2 Cir. 1967). Although all the litigants claim that the
insurance policy is unambiguous, they sharply disagree
over the meaning of the batch clause and the intent
behind its addition to the contract; the affidavits also
place in issue the understanding and custom of the insur-
ance industry regarding such clauses. Since these issues of
material fact are controverted by the parties, further
proceedings on the merits are needed. National Life
Insurance Co. v. Solomon and Schuster, Docket No.
75-7294 (2 Cir. December 9, 1975), slip op. 939.
Home Insurance Co. v. Aetna Casualty & Surety Co.,
Docket Nos. 75-7357, 75-7359 (2d Cir. Jan. 13, 1976).
Faced with such a clear directive from the Court of Appeals,
this Court is compelled to deny summary judgment if issues of
fact remain outstanding.
Comparison of the statements of material facts submitted by
the parties indicates that questions of fact do exist. For one,
there is an apparent dispute as to whether Spirt complied with
the procedures mandated by 42 U.S.C. § 2000 e-5, which defer
filing of a charge with the Equal Employment Opportunities
Commission (“EEOC”) until 60 days after proceedings have
been commenced before a state or local unlawful employment
practices agency. Defendants claim that no proceedings were
instituted before the New York State Division of Human
Rights. Plaintiff responds by submitting a copy of a letter
received from the EECO which she contends, “reflects the
appropriate deference to the state and full compliance with
Title VII.” The letter, however, simply instructs plaintiff to
communicate with the state agency to ensure that proceedings
42a
were properly commenced. There is no indication that such
action was taken. And, Love v. Pullman, 404 U.S. 522 (1972)
cited by plaintiff, does not support her argument since in that
instance there was evidence of an indication by the state agency
that it declined to act. 404 U.S. at 525. The jurisdictional point
raised presents a fact issue which prevents the Court from
granting summary judgment.
Furthermore, the parties disagree over whether the contracts
between TIAA and CREF and the annuitants constitute terms
and conditions of employment. This mixed question of fact
and law is essential to plaintiff’s Title VII claim.
The tone, as much as the substance of the statements of
material facts, indicates how inadvisable summary judgment
would be at this juncture. Defendants have submitted what
they denominate “Response to Plaintiff’s Statement of Mater-
ial Facts and Supplemental Statement of Material Facts.” They
proceed to take issue with plaintiff’s statement, characterizing
one item as “untrue” and claiming that another ignores certain
facts. Throughout their papers the parties seem to be at odds
over the most crucial aspect of this case: the actuarial tables
themselves. The use and interpretation of these statistical
compilations lies at the heart of the action and is essential to a
determination of the issue on which plaintiff seeks partial
summary judgment.
As noted above, summary judgment is inappropriate so long
as issues of fact exist. It is evident that fact questions remain in
this action. The claim in this case is a complex mix of fact and
law, challenging, as it does, the use and construction of
Statistical data; a trial on the merits is indicated to disentangle
the important questions presented. Accordingly, both plain-
tiff’s motion for partial summary judgment and defendants’
cross-motion for summary judgment are denied. The remain-
ing motions are adjourned for thirty days from the date of this
decision to enable the parties to submit any additional papers
in connection with those motions.
It is so ordered.
/s/ ROBERT J. WARD
U.S. D. J.
43a
Opinion of the District Court
dated July 1, 1976
DIANA L. SPIRT, etc., Plaintiff,
—_—_V.—
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF
AMERICA et al., Defendants.
as
No. 74 Civ. 1674
United States District Court,
Southern District of New York
July 1, 1976
i
OPINION
ROBERT J. WARD, District Judge.
Plaintiff Diana L. Spirt (“Spirt”) moves for class action
certification pursuant to Rule 23, Fed.R.Civ.P. Defendants
Teachers Insurance and Annuity Association of America
(“TIAA”) and College Retirement Equities Fund (“CREF”)
cross-move for an order pursuant to Rule 56, Fed.R.Civ.P,,
granting partial summary judgment in their favor and for an
order pursuant to Rules 12(c) and 19(a), Fed.R.Civ.P., dismiss-
ing this action for failure to join indispensable parties. For the
reasons hereinafter stated, the motions are denied with the
exception of the motion to dismiss for failure to join indispen-
sable parties which is conditionally granted in part.
Plaintiff, a female professor at Long Island University
(“LIU”), charges sex discrimination in the operation of a
pension plan administered by defendants. This pension plan
utilizes actuarial tables which indicate that women at retire-
ment age have a longer life expectancy than do men at that
same age. Consequently, the amount of each periodic payment
made to a female annuitant selecting a single-life option is
44a
smaller than that paid her male counterpart. Use of sex-based
tables and the disparity in treatment which results, Spirt
claims, constitute violations of the Fourteenth Amendment to
the Constitution, 42 U.S.C. § 2000(e)(1) et seq. (“Title VII”),
42 U.S.C. § 1981 et seq., and the Equal Pay Act of 1963, 29
U.S.C. § 206(d). TIAA and CREF deny that their pension plan
unlawfully discriminates asserting instead that the plan has a
demonstrably rational and equitable basis.
1. Defendants’ Motion for Partial Summary Judgment.
Defendants move for partial summary judgment claiming
that plaintiff has failed to comply with the jurisdictional
prerequisites to a suit under Title VII. Two lapses in this regard
are cited. First, the complaint in this action was filed on April
15, 1974 while no charge was filed with the Equal Employment
Opportunities Commission (“EEOC”) until on or about Octo-
ber 19, 1974. The EEOC issued a Notice of Right to Sue on
August 4, 1975.
A Right to Sue letter has been held to have the effect of
ratifying a prior filed suit. The Court in Black Musicians of
Pittsburgh v. Local 60-471, American Federation of Musi-
cians, 375 F.Supp. 902, 906-07 (W.D.Pa.1974) stated:
Here, . . . the suit was brought before the issuance of
the right to sue letter, even before the filing of the charge
with the EEOC. Asserting one’s rights too late is quite a
different matter from asserting them too soon. Henderson
v. Eastern Freight Ways. [460 F.2d 258 (4th Cir.
1972)] . . .. [T]he issuance of the right to sue letter, in
effect, validated the pending suit making it unnecessary to
file another suit. Under the circumstances, we do not
think a dismissal of the complaint at this stage would
fulfill the purposes of the [Civil Rights] Act.
Defendants renew their argument that plaintiff has not
pursued her remedies at the state level, as mandated by the
statute. In dealing with this matter, ‘he Court is mindful of the
recent decision by the Court of Apveals in Egelston v. State
45a
University College at Geneseo, 535 F.2d 752 (2d Cir. June 7,
1976). The Court of Appeals noted that summary judgment
must be used sparingly and observed:
There is an additional factor equally vital to the resolu-
tion of this case. Title VII is rife with procedural require-
ments which are sufficiently labyrinthine to baffle the
most experienced lawyer, yet its enforcement mechanisms
are usually triggered by laymen. Were we to interpret the
statute’s procedural prerequisites stringently, the ultimate
result would be to shield illegal discrimination from the
reach of the Act. Prior decisions, both of the Supreme
Court and of this Circuit have, for this reason, taken a
flexible stance in interpreting Title VII’s procedural provi-
sions. We follow this realistic approach today.
Finally, the Court expressed a preference that such issues be
left to trial.
Defendants’ initial motion for summary judgment based
upon plaintiff’s alleged failure to pursue her state remedies was
denied because factual questions remained. They now seem to
have multiplied. A determination of the extent and nature of
communications between Spirt and her attorney and the state
authorities is best left to trial, where, for example, testimony
could be adduced as to “the standard practice of the New York
State agency.” At that time also perhaps the meaning of the
EEOC phrase “Failure to Proceed,” can be clarified. At this
point, these factual questions are open. This coupled with the
Court of Appeals’ implied directive that issues of compliance
with Title VII’s procedural demands be resolved at trial com-
pels the Court to deny defendants’ motion for partial summary
judgment.
Il. Defendants’ Motion to Dismiss for
Failure to Join Indispensable Parties
TIAA-CREF move to dismiss for failure to join indispensa-
ble parties. They claim that joinder of both the employer
educational institution, LIU, and of all the male participants in
ihe challenged pension system is mandated.
46a
Rule 19(a), Fed.R.Civ.P., states in pertigent part:
(a) Persons to be Joined if Feasible. A person who is
subject to service of process and whose joinder will not
deprive the court of jurisdiction over the subject matter of
the action shall be joined as a party in the action if (1) in
his absence complete relief cannot be accorded among
those already parties, or (2) he claims an interest relating
to the subject of the action and is so situated that the
disposition of the action in his absence may (i) as a
practical matter impair or impede his ability to protect
that interest or (ii) leave any of the persons already parties
subject to a subsiantial risk of incurring double, multiple,
or otherwise inconsistent obligations by reason of his
claimed interest.
Briefly outlined, the operation of defendants’ pension pro-
gram, as described in their papers, is as follows. The plan is
commonly established by resolution of the board of trustees of
the educational institution. Provision is made for a particular
perceniage of salary to be contributed both by the institution
and by the employee. There is no contract between TIAA and
CREF and the institution; instead, an individual contract is
sent by defendants to the employee.
TIAA-CREF claim that, should plaintiff succeed in this
action, costs of the pension program will rise and these
increased costs will likely be borne by the participating institu-
tions. Therefore, LIU, as such an institution, has an interest in
this litigation which requires its joinder. Additionally, defen-
dants argue complete relief is impossible in the absence of the
employer.
These contentions would appear to have merit. In Barninger
v. National Maritime Union, 349 F.Supp. 803, 805
(S.D.N.Y.1972), it was determined that trustees of a pension
plan would remain as party defendants where their involve-
ment concerned more than “a mere administrative detail of
pension trust administration.” Here, LIU has chosen to adopt
defendants’ system and to contribute to it; this constitutes
affirmative, active participation.
47a
To join LIU is not to suggest its liability. Hodgson v. School
Board, New Kensington-Arnold School District, 56 F.R.D. 393
(W.D.Pa.1972) involved a claim under the Equal Pay Act in
which the defendant School Board sought to join the Union
representing the employees whose compensation was at issue.
The Court, in granting the School Board’s motion, observed:
This action endemically involves the potential for al-
tering and restructuring the compensation provisions of
the collective bargaining agreement between the defen-
dant and the proposed defendants.
56 F.R.D. at 395.
The absence of a contract per se between the University and
TIAA-CREF is not significant; the instant suit may yet alter
the relationship between these institutions as embodied in and
effectuated through the resolution and the individual con-
tracts.
Additional support for the joinder of LIU is offered by
McDonald vy. General Mills, Inc., 387 F.Supp. 24 (E.D.
Cal.1974). In that action, a female student at Sacramento State
College charged sex discrimination by employers who had
interviewed through the College’s Graduate Placement Center.
The court joined the College as a party, “so that complete,
consistent, and efficient setilement of the controversy can be
achieved.” 387 F.Supp. at 38.
Here, too, resolution of Spirt’s claim that defendants’ pen-
sion program is discriminatory requires the presence of her
employer LIU. Without the University’s participation, the
challenged program could not operate. When an entity is more
accurately describea as an “active participant,” rather than
merely a “key witness,” joinder is indicated. Haas v. Jefferson
National Bank, 442 F.2d 394, 398 (Sth Cir. 1971).
It should also be noted that in her charge to the EEOC, Spirt
named both LIU and TIAA-CREF. Clearly, the relationship
out of which the alleged discrimination grows is a triangular
one. Rule 19(a), Fed.R.Civ.P., mandates the presence of LIU
and the Court directs its joinder.
48a
Defendants have also moved for the joinder of all the male
participants in the pension plan, asserting that if the changes
demanded by plaintiff are effectuated, the males will bear the
burden of increased costs and may sue TIAA-CREF on a
reverse discrimination theory. Thus, it is claimed, the males
have an interest in the outcome of this suit and their absence
poses a risk to the defendants.
Among the authorities cited by TIAA-CREF is English v.
Seaboard Coast Line Railroad Company, 465 F.2d 43 (Sth Cir.
1972). That case does indeed include a helpful discussion.
While bowing to the discretion of an experienced trial judge in
joining white employees in a suit by black workers charging
racially discriminatory employment practices, the Court of
Appeals observed that, “it is clear that Rule 19(a) has never
required joinder in every case in which ‘interests’ of white
persons may be adversely affected by a court decree terminat-
ing racially discriminatory practices.” 465 F.2d at 46.
The Supreme Court, too, has recently dealt with the ques-
tion of reverse discrimination. Franks v. Bowman Transporta-
tion Co., 424 U.S. 747, 96 S.Ct. 1251, 47 L.Ed.2d 444, 44
U.S.L.W. 4356 (U.S. Mar. 24, 1976). In awarding retroactive
seniority status to a class of black employees, the court
confronted the argument that this would conflict with the
economic interest of other workers.
[I]t is apparent that denial of seniority relief to identifi-
able victims of racial discrimination on the sole ground
that such relief diminishes the expectations of other,
arguably innocent, employees would if applied generally
frustrate the central “make-whole” objective of Title VII.
These conflicting interests of other employees will of
course always be present in instances where some scarce
employment benefit is distributed among employees on
the basis of their status in the seniority hierarchy. But, as
we have said, there is nothing in the language of Title VII,
or in its legislative history, to show that Congress intended
generally to bar this form of relief to victims of illegal
discrimination, and the experience under its remedial
49a
model in the National Labor Relations Act points to the
contrary. Accordingly, we find untenable the conclusion
that this form of relief may be denied merely because the
interests of other employees may thereby be affected. “If
relief under Title VII can be denied merely because the
majority group of employees, who have not suffered
discrimination, will be unhappy about it, there will be
little hope of correcting the wrongs to which the Act is
directed.” United States v. Bethelehem Steel Corp., 446
F.2d 652, 663 (C.A.2, 1971).
424 U.S. at 774, 96 S.Ct. at 1269, 44 U.S.L.W. at 4364.
In a footnote to this statement, the court cited the Fifth
Circuit’s decision in Volger v. McCarty, Inc., 451 F.2d 1236,
1238-39 (1971):
Adequate protection of Negro rights under Title VII may
necessitate, as in the instant case, some adjustment of the
rights of white employees. The Court must be free to deal
equitably with conflicting interests of white employees in
order to shape remedies that will most effectively protect
and redress the rights of the Negro victims of discrimina-
tion.
424 U.S. 775, 96 S.Ct. at 1269, 44 U.S.L.W. at 4364 n. 35.
Title VII forbids sex discrimination as well as racial bias. In
fashioning a remedy to correct violations of the Act, the courts
cannot be deterred by fears of potential adverse impact upon
beneficiaries of a discriminatory status quo. There can be no
vested interest in an unlawful practice.
Since the male participants cannot legitimately assert a
protectable interest, they need not be joined pursuant to Rule
19(a). And, their absence poses no threat to TIAA-CREF. if
the challenged pension program is found to violate the laws
prohibiting sex discrimination and defendants are ordered to
alter its operation, the affected men could not succeed in a
claim asserted against good faith compliance with such a
decree. Accordingly, the male participants need not be joined.
50a
Ill. Plaintiff’s Motion for Certification
as a Class Action.
Lastly, plaintiff’s motion for certification as a class action
must be determined. The Court is guided by the following
provisions of Rule 23, Fed.R.Civ.P.:
(a) Prerequisites to a Class Action. One or more mem-
bers of a class may sue or be sued as representative parties
on behalf of all only if (1) the class is so numerous that
joinder of all members is impracticable, (2) there are
questions of law or fact common to the class, (3) the
claims or defenses of the representative pariies are typical
of the claims or defenses of the class, and (4) the repre-
sentative parties will fairly and adequately protect the
interests of the class.
(b) Class Actions Maintainable. An action may be
maintained as a class action if the prerequisites of subdivi-
sion (a) are satisfied, and in addition:
* * * * * *
(2) the party opposing the class has acted or refused to
act on grounds generally applicable to the class, thereby
making appropriate final injunctive relief or correspond-
ing declaratory relief with respect to the class as a whole.
The discussion of the class action format in employment
discrimination suits found in Bradford v. Peoples Natural Gas
Company, Inc., 60 F.R.D. 432, 435 (W.D.Pa.1973) is worth
noting:
As a general rule of thumb it might be said that where
employment discrimination is urzed on the basis of spe-
cific circumstances relating to the individuals involved, a
class action would be inappropriate. The same would be
true if the issue depended on construction or application
of particular language in a statute or collective bargaining
contract, where relitigation would normally be effectively
barred by res judicata. The class action technique would
be more appropriate however, where a general policy
Sla
adverse to the advancement of womankind is involved,
not directed towards particular individua's nor involving
specific issues of law or fact, but having a general adverse
impact on numerous individuals arising as a consequence
of such policy.
In the Court’s view, the instant action falls within the second
category.
Defendants’ practice of using sex-based actuarial tables is
under attack in this action. This usage constitutes a definite
fact issue. It does not relate to the discrete grievance of a single
individual. Nor does it involve a generalized amorphous policy
of refusing to hire or promote or confer certain benefits upon a
specific disadvantaged group.
The issue in this suit is a narrow one and specifically directed
at the actuarial tables utilized by defendants in the operation of
their pension programs. The resolution of the question of
whether their use constitutes sex discrimination would not be
assisted by maintenance of this suit as a class action.
Judge Friendly, in Galvan v. Levine, 490 F.2d 1255, 1261 (2d
Cir. 1973), cert. denied, 417 U.S. 936, 94 S.Ct. 2652, 41
L.Ed.2d 240 (1974), stated:
[Rule 23(b)(2)] authorizes maintenance of a class action
when “the party opposing the class has acted or refused to
act on grounds generally applicable to the class, thereby
making appropriate final injunctive relief or correspond-
ing declaratory relief with respect to the class as a whole.”
But insofar as the relief sought is prohibitory, an action
seeking declaratory or injunctive relief against state offi-
cials on the ground of unconstitutionality of a statute or
administrative practice is the archetype of one where class
action designation is largely a formality, at least for the
plaintiffs. As we have recently noted in Vulcan Society v.
Civil Services Comm’n, 490 F.2d 387, 399 (1973), what is
important in such a case for the plaintiffs or, more
accurately, for their counsel, is that the judgment run to
the benefit not only of the named plaintiffs but of all
others similarly situated, see Bailey v. Patterson, 323 F.2d
52a
201, 206-207 (5 Cir. 1963), cert. denied, 376 U.S. 910, 84
S.Ct. 666, 11 L.Ed.2d 609 (1964); cf. United States v.
Hall, 472 F.2d 261, 266 (5 Cir. 1972), as the judgment did
here. The State has made clear that it understands the
judgment to bind it with respect to all claimants; indeed
even before entry of the judgment, it withdrew the chal-
lenged policy even more fully than the court ultimately
directed and stated it did not intend to reinstate the policy.
The practical significance of the denial of class action
designation was thus limited to the claim for a mandatory
injunction ordering monetary restitution. |
TIAA-CREF admit, in their memorandum opposing this mo-
tion that, “a decision in [plaintiff’s] favor, practically speak-
ing, would equally affect all participants in the future.”
Clearly, if defendants must abandon their use of sex-based
actuarial tables they must do so with regard to all of those in
the pension program, not simply the instant plaintiff.
Consequently, class action status here would be in Judge
Friendly’s words “largely a formality.” Where certification
would be unduly burdensome either to the Court or to one of
the parties, the Court should not acquiesce in such a formal-
ism.
One valid aim of a class action may be to secure, in a single
suit, numerous small damage claims. Although monetary relief
incidental to the grant of an injunction and declaratory judg-
ment may be awarded in a Rule 23(b)(2) class action, Lynch v.
Sperry Rand Corporation, 62 F.R.D. 78, 85 (S.D.N.Y.1973), it
does not seem appropriate here. Back payments would only
fal! due if unisex actuarial tables were used retroactively. And,
such back payments would be owed only to those women who
had received pensions when sex-based tables were in use.
Defendants divide participants in the pension program into
two categories: “deferred annuitants,” those who are presently
contributing, and “immediate annuitants,” those who have
chosen an option and are receiving their retirement benefits.
Spirt is a “deferred annuitant” having not yet retired. She is
not yet the recipient of a pension and therefore would not be
53a
entitled to back payments owed to those whose retirement
benef*ts were computed pursuant to a discriminatory formula.
Consequently, Spirt cannot represent a class of such persons
and her action cannot be certified as a class action for purposes
of monetary relief.
This is not to suggest that plaintiff as an individual lacks
standing to seek injunctive and declaratory remedies to halt
TIAA-CREF in their use of certain tables. In Rosen v. Public
Service Electric & Gas Co., 477 F.2d 90, 94 (3d Cir. 1973),
which challenged a private firm’s pension plans, an active
employee was found to have “a sufficient personal stake in the
outcome of this case to assure that concrete adverseness will
occur.” Spirt’s stake in the outcome, as a woman of 51 with
vested rights in the program, is likewise sufficiently concrete so
that she may press individually for a declaratory judgment and
the grant of an injunction.
One further consideration militates against class action certi-
fication. Spirt purports to represent all the female participants
in defendants’ pension plans. These women are employed at
many different institutions throughout the nation. The Court
has determined that Spirt’s employer, LIU, raust be joined. If
this suit were certified as a class action, logic would compel the
conclusion that all the institutional participants in TIAA-CREF
must be joined. Or, since Rule 19, Fed.R.Civ.P., is expressly
“subject to the provisions of Rule 23,” LIU could be saddled
with the responsibility of being the class representative for all
the institutions. Either alternative would be unduly burden-
some to the Court and to the involuntary defendant Univer-
sity: neither would advance the litigation.
In summary, class action certification of Spirt’s suit for an
injunction and declaratory judgment would be a formality. She
is not an appropriate class representative for the assertion of
claims for incidental money damages. Moreover, the presence
of LIU as a necessary party with its unavoidable implication
that class action status would mandate joinder of scores of
other institutions argues forcefully against certification.
54a
IV. Conclusion
For the foregoing reasons, the Court denies plaintiff’s mo-
tion for class action certification as well as defendants’ motion
for partial summary judgment. Defendants’ motion to join
certain parties is denied as to the male participants in the
pension program and granted as to the plaintiff’s employer,
LIU. The Court directs that LIU be joined as a party pursuant
to Rule 19(a), Fed.R.Civ.P., and plaintiff is given 30 days from
the date of this decision to file an amended complaint joining
LIU as a party defendant.
It is so ordered.
5Sa
Opinion of the District Court dated August 9, 1979
and Opinion on Reargument dated September 12, 1979
DIANA L. SPIRT,
Plaintiff,
—
TEACHERS INSURANCE AND ANNUITY ASSOCIATION, COL-
LEGE RETIREMENT EQUITIES FUND, and LONG ISLAND
UNIVERSITY, ag ee
Defendants.
aos
No. 74 Civ. 1674
United States District Court,
Southern District of New York
August 9, 1979
On Motion for Reargument September 12, 1979
—-
OPINION
WARD, District Judge.
This is an action alleging sex discrimination in the operation
of certain retirement annuity programs administered by defen-
dants Teachers Insurance and Annuity Association (“TIAA”)
and College Retirement Equities Fund (“CREF”). Plaintiff
Diana L. Spirt (“Spirt”), a college professor who is required by
her employer, defendant Long Island University (“LIU”), to
participate in the TIAA and CREF plans, has moved for
summary judgment, pursuant to Rule 56, Fed.R.Civ.P., alleg-
ing that the retirement annuity plans in question violate both
the Civil Rights Act of 1964, 42 U.S.C. § 2000e ef seq. (“Title
VII” or “the Act”) and the Equal Protection Clause of the
Fourteenth Amendment to the United States Constitution.
Defendants TIAA and CREF have cross-moved for summary
56a
judgment.' For the reasons hereinafter stated, Spirt’s motion is
granted in part and denied in part; TIAA and CREF’s cross-
motion is granted as to TIAA and denied as to CREF.
The parties have submitted a detailed Stipulation of Facts
which indicates the following: TIAA is a non-profit, legal
reserve life insurance company, organized in 1918 by the
Carnegie Foundation for the Advancement of Teaching. It
functions as a service organization, providing retirement and
insurance plans for educational institutions and their staff
members. Eligibility is limited to colleges, universities, inde-
pendent schools, and certain other non-profit institutions that.
are engaged primarily in education or research. CREF is a
companion non-profit corporation to TIAA with the same
limited eligibility. The purpose of both TIAA and CREF is to
offer educational institutions retirement and other benefit
plans suited to the needs of their teaching staffs and other
employees. The essential difference between the two corpora-
tions is that TIAA provides fixed dollar annuities, while CREF
provides variable annuities. Over 85 percent of all private
four-year colleges and universities and over 40 percent of all
public colleges and universities have adopted retirement plans
managed by TIAA and CREF. In all, more than 450,000
employees of approximately 2,800 participating institutions are
insured by the TIAA and CREF system.
LIU is one of the institutions which has adopted a retirement
program for its employees managed by TIAA and CREF.
Pursuant to a resolution of LIU’s Board of Trustees, both the
employee and the university contribute 5 percent of the first
$4,800 of earnings; thereafter, the employee’s contribution
remains at 5 percent, and the institution contributes 11 per-
l Defendant LIU joins in neither motion. Rather, it “avers that it has
always acted in good faith towards its male and female employees. . .,”
adopts a position of neutrality with respect to the issues before the Court,
and “submits its rights and interests to the protection of [the} [C]Jourt
”
.
2 See footnote 4 infra.
57a
cent. Participation in the plans by tenured professors at LIU,
such as Spirt, is mandatory.
Plaintiff’s claim of sex discrimination does not rest upon the
contribution formula under the TIAA and CREF plans, which
is identical for men and women. Rather, the asserted dis-
crimination derives from TIAA and CREF’s use of sex-segre-
gated mortality tables in determining the benefits purchased
with the contributions. These tables reflect the fact, that, taken
as a group or class, women have a greater life expectancy than
men. Based upon the uncontested rationale that women as a
class will receive annuity payments for a longer period of time
than men as a class, female participants in the plans receive
smaller monthly payments than male participants of the same
age, years in the plans, salary, and rate of contribution. Spirt
contends that this discrimination violates Title VII and/or the
Equal Protection Clause.
1. Title VII
A. The McCarran-Ferguson Act
TIAA and CREF first assert that application of Title VII to
them in this case is barred by the McCarran-Fergusen Act
(“the McCarran Act”), 15 U.S.C. § 1011 et seg., which pro-
vides in pertinent part:
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, or which
imposes a fee or tax upon such business, unless such Act
specifically relates to the business of insurance.
Id. § 1012(b).
The McCarran Act was passed in response to the Supreme
Court’s decision in United States v. South-Eastern Under-
writers Ass’n, 322 U.S. 533, 64 S.Ct. 1162, 88 L.Ed. 1440
(1944), which, overruling Paul v. Virginia, 8 Wall. 168, 75 U.S.
168, 183, 19 L.Ed. 357 (1869), held that insurance transactions
were subject to federal regulation under the Commerce Clause.
The purpose of the statute was “broadly to give support to the
58a
existing and future state systems for regulating and taxing the
business of insurance . . . by removing obstructions which
might be thought to flow from [congressional] power” and by
declaring continued state regulation of the business of insur-
ance to be in the public interest.’ Prudential Ins. Co. v.
Benjamin, 328 U.S. 408, 429-30, 66 S.Ct. 1142, 1155, 90 L.Ed.
1342 (1946); Accord, SEC v. National Securities, Inc., 393
U.S. 453, 458, 89 S.Ct. 564, 21 L.Ed.2d 668 (1969). The effect
of the legislation was to make federal statutes inapplicable to
the business of insurance, returning to the states the plenary
regulatory power they had enjoyed prior to the South-Eastern
Underwriters decision, unless (1) federal legislation specifically
related to the business of insurance; or (2) the challenged
activity by the defendant did not constitute the business of
insurance; or (3) the state had not enacted any law for the
purpose of regulating the business of insurance which would be
invalidated, impaired, or superseded by application of the
federal law. Group Life & Health Ins. Co. v. Royal Drug Co.,
440 U.S. 205, 218, 99 S.Ct. 1067, 1076 & nn. 16, 18, 59
L.Ed.2d 261 (1979); SEC v. National Securities, Inc., supra,
393 U.S. at 458-61, 89 S.Ct. 564; Prudential Ins. Co. v.
Benjamin, supra, 328 U.S. at 429-30, 66 S.Ct. 1142; Cochran
v. Paco, 606 F.2d 460, 464 (Sth Cir. 1979); Hamilton Life Ins.
Co. v. Republic Nat’l Life Ins. Co., 408 F.2d 606, 611 (2d Cir.
1969); Monarch Life Ins. Co. v. Loyal Protective Life Ins.
Co., 326 F.2d 841, 844 (2d Cir. 1963), cert. denied, 376 U.S.
952, 84 S.Ct. 968, 11 L.Ed.2d 971 (1964).
Federal legislation is deemed to “specifically relate to the
business of insurance” within the meaning of the McCarran
3 In this regard, the statute contains the following “declaration of
policy”:
Congress declares that the continued regulation and taxation dy
the several States of the business of insurance is in the public
interest, and that silence on the part of the Congress shall not be
construed to impose any barrier to the regulation or taxation of
such business by the several States.
15 U.S.C. § 1011.
59a
Act only if it contains an express indication to that effect.
Prudential Ins. Co. v. Benjamin, supra, 328 U.S. at 429-30, 66
S.Ct. at 1155; Cochran v. Paco, supra, 606 F.2d at 464-465;
Hamilton Life Ins. Co. v. Republic Nat’! Life Ins. Co., 291
F.Supp. 225, 230 (S.D.N.Y.1968), aff’d, 408 F.2d 606, 611 (2d
Cir. 1969); Ben v. General Motors Acceptance Cerp., 374
F.Supp. 1199, 1201 (D.Colo. 1974); Gerlach v. Allstate Ins.
Co., 338 F.Supp. 642, 649 (S.D.Fla. 1972). The federal statute
relied on here, Title VII, is a law of general applicability to
employers in commerce with no explicit reference to insurance.
Compare § 514(a) of ERISA, 29 U.S.C. § 1144(a), discussed in
Hewlett-Packard Co. v. Barnes, 571 F.2d 502 (9th Cir.), cert.
denied, 439 U.S. 831, 99 S.Ct. 108, 58 L.Ed.2d 125 (1978).
Thus, the supremacy of state regulation of the TIAA and
CREF plans cannot be overridden on this basis.
The next consideration under McCarran Act analysis is
whether the activities of defendants challenged by plaintiff
constitute the “business of insurance.” Although neither Con-
gress nor the courts has defined the exact contours of the term,
the general parameters were set by the Supreme Court in SEC
v. National Securities, Inc., 393 U.S. 453, 459-60, 89 S.Ct.
564, 569, 21 L.Ed.2d 668 (1969):
Insurance companies may do many things which are
subject to paramount federal regulation; only when they
are engaged in the “business of insurance” does the
statute apply. Certainly the fixing of rates is part of this
business; that is what South-Eastern Underwriters was all
about. The selling and advertising of policies, FTC v.
National Casualty Co., 357 U.S. 560, 78 S.Ct. 1260, 2
L.Ed.2d 1540 (1958), and the licensing of companies and
their agents, cf. Robertson v. California, 328 U.S. 440, 66
S.Ct. 1160, 90 L.Ed. 1366 (1946), are also within the
scope of the statute. Congress was concerned with the
type of state regulation that centers around the contract
of insurance, the transaction which Paul v. Virginia held
was not “commerce.” The relationship between insurer
and insured, the type of policy which could be issued, its
60a
reliability, interpretation, and enforcement—these were
the core of the “business of insurance.” Undoubtedly,
other activities of insurance companies relate so closely to
their status as reliable insurers that they too must be
placed in the same class. But whatever the exact scope of
the statutory term, it is clear where the focus was—it was
on the relationship between the insurance company and
the policyholder. Statutes aimed at protecting or regulat-
ing this relationship, directly or indirectly, are iaws regu-
lating the “business of insurance.”
The activity challenged in the instant case—the use of sex-seg-
regated mortality tables in the computation of annuity bene-
fits—is an integral part of the relationship between the
insurance company and the policyholder and specifically cen-
ters on the type of policy which can be issued. As such, it
would appear to fall squarely within the “business of insur-
ance” as defined by National Securities.
However, the Supreme Court has also interpreted the word
“insurance” under the McCarran Act to require some invest-
ment risk-taking on the part of the insurance company. SEC v.
Variable Annuity Co., 359 U.S. 65, 79 S.Ct. 618, 3 L.Ed.2d
640 (1959); accord, Group Life & Health Ins. Co. v. Royal
Drug Co., supra, 99 S.Ct. at 1073-74. Thus, the Court has held
that variable annuity companies, which assume only the risk of
mortality but no investment risk* do not issue insurance within
4 The Supreme Court has compared a variable annuity to the tradi-
tional fixed annuity as follows:
While all the States regulate “annuities” under their “insurance”
laws, traditionally and customarily they have been fixed annuities,
offering the annuitant specified and definite amounts beginning
with a certain year of his or her life. The standards for investment
of funds underlying these annuities have been conservative. The
variable annuity introduced two new features. First, premiums
collected are invested to a greater degree in common stocks and
other equities. Second, benefit payments vary with the success of
the investment policy. The first variable annuity apparently ap-
peared in this country about 1952 when New York created the
College Retirement Equities Fund to provide annuities for teachers.
It came into existence as a result of a search for a device that would
6la
the meaning of the Act. SEC v. Variable Annuity Co., supra,
359 U.S. at 69-73, 79 S.Ct. 618. While TIAA offers fixed
annuities which subject it to investment risk, CREF is a
variable annuity company.’ Under the rationale of SEC v.
Variable Annuity Co., therefore, it cannot be exempted from
the dictates of Title VII as a result of state regulation of its
policies. Consequently, the Court rejects this ground of
CREF’s motion for summary judgment.
Having met the first two conditions for supremacy of state
regulation of the business of insurance, TIAA must still dem-
onstrate that New York State has enacted a law for the purpose
of regulating the business of insurance which would be invali-
dated, impaired, or superseded by the application of Title VII
in the instant case. Plaintiff argues that New York State has
avoid paying annuitants in depreciated dollars. The theory was that
returns from investments in common stocks would over the long
run tend to compensate for the mounting inflation. The holder of a
variable annuity cannot look iorward to a fixed monthly or yearly
amount in his advancing years. It may be greater or less, depending
on the wisdom of the investment policy. In some respects the
variable annuity has the characteristics of the fixed and conven-
tional annuity: payments are made periodically; they continue until
the annuitant’s death or in case other options are chosen until the
end of a fixed term or until the death of the last of two persons;
payments are made both from principal and income; and the
amounts vary according to age and sex of the annuitant. Moreover,
actuarially both the fixed-dollar annuity and the variable annuity
are calculated by identical principles. Each issuer assumes the risk
of mortality from the moment the contract is issued. That risk is an
actuarial prognostication that a certain number of annuitants will
survive to specified ages. Even if a substantial number live beyond
their predicted demise, the company issuing the annuity—whether it
be fixed or variable—is obligated to make the annuity payments on
the basis of the mortality prediction reflected in the contract. This is
the mortality risk assumed both by [issuers of variable annuities]
and by those who issue fixed annuities.
SEC v. Variable Annuity Co., supra, 359 U.S. at 69-70, 79 S.Ct. at 621,
(footnotes omitted).
5 In fact, the Supreme Court in SEC v. Variable Annuity, supra,
makes explicit reference to CREF as the provider of the first variable annuity
plan in the United States. 359 U.S. at 69, 79 S.Ct. 618, quoted in footnote 4
supra.
62a
not regulated the question before the Court. The McCarran
Act does not specify the extent to which a state must have
regulated the business of insurance before application of a
federal statute will be deemed to “invalidate, impair, or su-
persede” state law. However, this language has been judicially
construed as satisfied whenever the state has either occupied
the field of regulating the business of insurance or else has
regulated the same general subject within the business of
insurance as that potentially affected by the federal statute. See
Lowe v. Aarco-American, Inc., 536 F 2d 1160, 1162 (7th Cir.
1976); Cochran v. Paco, Inc., 409 F.Supp. 219, 222 (N.D.
Ga.1975), rev’d on other grounds, 606 F.2d 460 (Sth Cir. 1979);
Ben v. General Motors Acceptance Corp., supra, 374 F.Supp.
at 1201; Gerlach v. Allstate Ins. Co., supra, 338 F.Supp. at
649-50.° This interpretation is supported by the legislative
intent that, except as otherwise expressly provided, plenary
power to regulate the business of insurance rests in the states.
SEC v. National Securities, Inc., supra, 393 U.S. at 459-60, 89
S.Ct. 564; Prudential Ins. Co. v. Benjamin, supra, 328 U.S. at
429-30, 66 S.Ct. 1142; Cochran v. Paco, Inc., supra, 606 F.2d
at 462-464.
In the instant case, New York has occupied the field of
regulating the business of insurance through one of the most
comprehensive insurance codes in the country. It has also
pervasively regulated the subject of discrimination between
6 This interpretation parallels that accorded the antitrust proviso to
the statute which states that the Sherman Act, the Clayton Act and the
Federal Trade Commission Act “shall be applicable to the business of
insurance to the extent that such business is not regulated by State law.” 15
U.S.C. § 1012(b). See FTC v. National Casualty Co., 357 U.S. 560, 564-65,
78 S.Ct. 1260, 2 L.Ed.2d 1540 (1958); Crawford v. American Title Ins. Co.
$18 F.2d 217, 218-19 (Sth Cir. 1975) (per curiam); Commander Leasing Co. v.
Transamerica Title Ins. Co., 477 F.2d 77, 83-84, 86 (10th Cir. 1973);
California League of Independent Ins. Producers v. Aetna Casualty & Surety
Co., 175 F.Supp. 857, 860 (N.D.Cal.1959). Although cases construing the
antitrust proviso are not dispositive of the issues presently before this Court,
“they do serve as useful guides for construing the terms of the statute.”
Cochran v. Paco, Inc., supra, 606 F.2d at 463-464.
63a
policyholders. For example, § 209 of the Insurance Law pro-
vides inter alia that no life insurance company doing business
in the state shall make or permit any unfair discrimination
between individuals of the same class and of equal expectation
of life in premiums, rates, dividends or benefits of policies for
life insurance or annuities. The restriction of § 209’s proscrip-
tion to discrimination between individuals of the same class
evidences a legislative acceptance of discrimination between
individuals based on their membership in classes or groups
which, from an actuarial point of view, are known to present
different insurance risks. Indeed, such risk classification is a
concept fundamental to the operation of insurance systems.
The Supreme Court, 1977 Term, 92 Harv.L.Rev. 57, 302
(1978); Note, Sex Discrimination and Sex-Based Mortality
Tables, 53 B.U.L.Rev. 624, 625-26 & nn. 9-10, 627 n.18,
653-54 (1973). Since defendants’ use of sex-segregated mortal-
ity tables is based on the demonstrated difference in longevity
between men as a class and women as a class, it is the type of
discrimination contemplated by New York’s regulatory
scheme. Consequently, application of Title VII to enjoin the
use of such tables by TIAA would invalidate, impair, or
supersede New York law.
Other provisions of the New York Insurance Law not only
regulate the subject of discrimination between policyholders,
but also evidence a legislative belief that discrimination on the
basis of sex in the rates and benefits of annuity contracts is not
unlawful. For example, implicit in §§ 159(1)(d) and 160(c),
which refer to remedies for misstatements of age and sex in
annuity contracts, is the notion that New York views sex as a
permissible factor in setting annuity rates and benefits. The
same conclusion is suggested by a comparison of § 40(10) with
§ 40-e. The former section contains a sweeping prohibition of
discrimination in “any . . . manner whatsoever” on accoun.
of race, color, creed, or national origin. By contrast, sex
discrimination is subject to a separate, limited prohibition in
§ 40-e, which makes it unlawful for an insurer to refuse to
issue Or to cancel or decline to renew a policy on account of the
64a
sex of the applicant. See January 28, 1975 Opinion and Report
Pursuant to Section 278 of the Insurance Law; News Memo-
randum re Chapter 564, issued by the Executive Chamber of
the State of New York, August 4, 1975.
The Court is persuaded on the basis of this evidence that
New York State has regulated the business of insurance, includ-
ing the subject of discrimination between policyholders, in a
pervasive manner and that, within that comprehensive system
of regulation, discrimination on the basis of sex in computing
rates and benefits is considered to be perinissible. Conse-
quently, application of Title VII to TIAA in the instant case
would invalidate, impair, or supersede New York law regulat-
ing the business of insurance. Accordingly, the Court holds
that application of Title VII to TIAA in this case is precluded
by the McCarran Act.’
7 Spirt’s additional arguments as to the inapplicability of the McCar-
ran Act border on the frivolous. The Court finds nothing in SEC v. Variable
Annuity Co., supra, or Group Life & Health Ins. Co. v. Royal Drug Co.,
supra, which supports plaintiff’s argument that the McCarran Act’s immu-
nity from federal legislation applies only to such state regulation as was in
existence at the time of the grant. Moreover, the Supreme Court’s statement
in Prudential Ins. Co. v. Benjamin, supra, that “Congress’ purpose was
broadly to give support to the existing and future state systems for regulating
and taxing the business of insurance,” 328 U.S. at 429, 66 S.Ct. at 1155
(emphasis added), makes clear that Spirt’s interpretation of the case law
construing the statute is erroneous. In any event, the Court believes that New
York’s regulation of insurance at the time the McCarran Act became
effective was such as to be invalidated, impaired, or superseded by applica-
tion of Title VII herein. Sections 159, 160 and 209, for example, were
enacted in 1939, six years prior to the passage of the McCarran Act.
Plaintiff has also argued that the McCarran Act is an antitrust exemption
Statute, and that other newly enacted federal statutes preempt state statutory
regulation of insurance unless the federal statute provides otherwise. The
Court finds nothing in /msurers’ Action Council, Inc. v. Heaton, 423 F.Supp.
921 (D.Minn.1976), or Lowe v. Aarco-American, Inc., 536 F.2d 1160 (7th
Cir. 1976), cited by plaintiff or elsewhere which supports this view.
65a
B. Title VII Procedural Prerequisites
TIAA®* and CREF make the additional preliminary argument
that plaintiff’s Title VII claim must be dismissed because she
has failed to comply with the statute’s elaborate procedural
requirements. Among the jurisdictional prerequisites to the
maintenance of a civil action under Title VII is that the
grievant have filed timely charges of employment discrimina-
tion with the Equal Employment Opportunity Commission
(“EEOC”) and received from that agency a statutory notice of
the right to sue. 42 U.S.C. § 2000e-5(a), (e), (f); McDonnell
Douglas Corp. v. Green, 411 U.S. 792, 798, 93 S.Ct. 1817, 36
L.Ed.2d 668 (1973); Silver v. Mohasco Corp., 602 F.2d 1083,
1085-1086 (2d Cir. 1979); Weise v. Syracuse University, 522
F.2d 397, 412 (2d Cir. 1975). When the alleged unlawful
employment practice occurs within a state having a law prohib-
iting such a practice, an aggrieved person must also preliminar-
ily seek relief from the relevant state authority. The EEOC may
not act upon the charge until 60 days after state proceedings
have been commenced, unless state proceedings have been
terminated earlier. 42 U.S.C. § 2000e-5(c); Love v. Pullman
Co., 404 U.S. 522, 524-25, 92 S.Ct. 616, 30 L.Ed.2d 679
(1972); Silver v. Mohasco Corp., supra, 602 F.2d at 1085-1086;
Weise v. Syracuse University, supra, 522 F.2d at 411.
In the instant case, Spirt filed her complaint commencing
this action on April 14, 1974, prior to filing charges with either
the EEOC or the New York State Division of Human Rights
(“NYSDHR”), the state agency responsible for complaints
alleging discrimination in emp! vyment on the basis of sex.” On
October 25, 1974, she submitted a charge to the EEOC. By
letter dated November 6, 1974, the EEOC informed plaintiff
that her complaint had been forwarded to the NYSDHR and
8 Although the Court has held that the McCarran Act bars application
of Title VII to TIAA, it has indicated throughout this opinion additional
arguments made by that defendant, since TIAA has argued for summary
judgment on behalf of CREF as well as on its own behalf.
9 The applicable statute is New York’s Human Rights Law, Executive
Law § 290 et seg. (McKinney 1972 & 1978 Supp.).
66a
asked plaintiff to “contact [the state agency] immediately to be
certain that all requirements for commencing proceeding in
your case have been met.” A week later, by letter dated
November 13, 1974, a Supervisor at the NYSDHR wrote to
Spirt, confirming that her charge had been referred to that
agency by the EEOC. In the letter, the Supervisor indicated
that he had tried unsuccessfully to call Spirt and her attorney
and asked that Spirt call him since, before he could proceed, he
needed answers to several questions posed by her charge to the
EEOC. Nevertheless, allegediy due at first to substantial delays
in receipt of the letter and then to the Supervisor’s failure to
return Spirt’s attorney’s calls, the sixty day deferral period
expired without either Spirt or her attorney’s ever establishing
communication with the Supervisor at the NYSDHR. Once the
deferral period had elapsed, Spirt’s attorney, believing that the
procedural requirements of the statute had been satisfied,
made no further efforts to contact the state agency. The EEOC
also believed the deferral requirement satisfied after 60 days
and as of that time considered Spirt’s charge to have been
formally filed with it. When 180 days passed after the date of
formal filing without a disposition of Spirt’s charge by the
EEOC, her attorney requested and received from that agency a
Right to Sue letter, closing the EEOC file and entitling Spirt to
maintain a lawsuit on the charge. Upon receipt of the Right to
Sue letter, plaintiff proceeded with the instant action.
TIAA and CREF argue that the jurisdictional prerequisites
to the maintenance of this action have not been satisfied
because Spirt commenced this lawsuit without recourse to
either the EEOC or the NYSDHR. Defendants assert that this
action is also jurisdictionally defective because plaintiff’s attor-
ney’s delayed response to the November 13, 1974 letter de-
prived the NYSDHR of a bona fide opportunity to consider
and act upon her complaint.
The first of these arguments has already been rejected by this
Court in a prior opinion. Spirt v. TIAA, 416 F.Supp. 1019,
1020 (S.D.N.Y.1976).'° The recent decision by the United
10 This Court’s conclusion recently received additional support in
Oscar Mayer & Co. v. Evans, ___. U.S. __., 99 S.Ct. 2066, 60 L.Ed.2d 609
67a
States Supreme Court in Oscar Mayer & Co. v. Evans,
suit 4 , 99 S.Ct. 2066, 60 L.Ed.2d 609 (1979), has
made it clear beyond peradventure that defendants’ second
argument as to jurisdiction is also without merit. Indicating
that the virtually identical language of § 14(b) of the Age
Discrimination in Employment Act, 29 U.S.C. § 633(b) and
§ 706(b) of Title VII, 42 U.S.C. § 2000e-S(c), requiring a
sixty-day period of deferral to state authorities were to be
construed in pari materia, 99 S.Ct. at 2071, the Court inter-
preted the burden on the grievant under those sections as
limited to the commencement of state proceedings by the filing
of a written and signed statement of the facts upon which the
proceeding is based. Jd. at 2073-76. The Court recognized that
such a statutory construction could conceivably permit griev-
ants to avoid state intervention by failing to comply with
state-imposed requirements, thereby frustrating the congres-
sional intent that federal litigation be used as a last resort. Jd.
at 2075. Nevertheless, it interpreted the statutory language,
which relates the proscription of further action only to the
commencement of state proceedings'' and which specifically
excludes state-imposed requirements other than the filing of a
(1979). There the Supreme Court ordered the federal district court to retain
jurisdiction, holding the suit in abeyance, pending plaintiff’s resort to the
state agency. Id. 99 S.Ct. at 2076. The Court stated: “Suspension of
proceedings is preferable to dismissal with leave to refile. . . .‘To require a
second “filing” by the aggrieved party after termination of state proceedings
would serve no purpose other than the creation of an additional procedural
technicality. Such technicalities are particularly inappropriate in a statutory
scheme in which laymen, unassisted by trained lawyers, initiate the process.’
Love v. Pullman Co., 404 U.S. 522, 526-527, 92 S.Ct. 616, 30 L.Ed. 2d 679
(1972) . . . . For this reason, suspension pending deferral is the preferred
practice in the federal courts.” 99 S.Ct. at 2076 n. 13 (citations omitted).
il Section 706(b) of Title VII, proscribes further action by the EEOC
before the expiration of sixty days after proceedings have been
commenced under the State or local law, unless such proceedings
have been earlier terminated... .
42 U.S.C. § 2000e-5(c) (emphasis added).
68a
written and signed statement of the facts from the definition of
“commencement,” as indicative of a congressional intent that
the failure to meet additional state procedural requirements
not foreclose federal relief. Jd. at 2073. The Court also found
this statutory construction supported by the legislative purpose
of merely giving state agencies a limited opportunity to settle
grievances in a voluntary manner on the local level. /d. at
2074. See also Silver v. Mohasco Corp., supra, 602 F.2d at
1083; Voutsis v. Union Carbide Corp., 452 F.2d 889 (2d Cir.
1971), cert. denied, 406 U.S. 918, 92 S.Ct. 1768, 32 L.Ed.2d
117 (1972).
In the .nstant case, defendants do not dispute that plaintiff’s
charge with the EEOC, which included a copy of the complaint
in this action, was referred to the NYSDHR by the EEOC, that
the charge was received by that agency and that the EEOC
deferred to the NYSDHR for 60 days. Regardless then of
whether the NYSDHR had a sufficient opportunity to consider
Spirt’s grievance, it is clear under Oscar Mayer that the
jurisdictional requirement of § 706(b) has been fulfilled.
C. The Merits
Turning to the substance of the Title VII claim, Spirt relies
primarily’? on § 703(a)(1) of the Act, 42 U.S.C. § 2000e-
2(a)(1), which provides:
12 Section 706(b) continues:
If any requirement for the commencement of such proceedings is
imposed by a State or local authority other than a requirement of
the filing of a written and signed statement of the facts upon which
the proceeding is based, the proceeding shall be deemed to have
been commenced for the purposes of this subsection at the time
such statement is sent by registered mail to the appropriate State or
local authority.
42 U.S.C. § 2000e-5(c).
13 Spirt also claims that she is entitled to summary judgment under
§ 703(a)(2) of Title VII, which-makes it unlawful for an employer “to limit,
segregate, or classify his employees or applicants for employment in any way
which would deprive or tend to deprive any individual of employment
69a
(a) It shall be an unlawful employment practice for an
employer—
(1) to fail or refuse to hire or to discharge any
individual, or otherwise to discriminate against any
individual with respect to his compensation, terms,
conditions, or privileges of employment, because of
such individual’s race, color, religion, sex, or na-
tional origin. . .
This section was construed by the Supreme Court in the
context of an employee pension plan providing different terms
for men and women in City of Los Angeles v. Manhart, 435
J.S. 702, 98 S.Ct. 1370, 55 L.Ed.2d 657 (1978). Manhart
struck down as violative of § 703(a)(i) an employer-operated
pension fund which required women employees to contribute
more than their male counterparts in order to receive equal
periodic benefits upon retirement.
The Court found the plan unlawfully discriminatory al-
though its differentiation in treatment was based upon the
unquestionably accurate generalization that women as a class
live longer than men as a class. Emphasizing that § 703(a)(1)’s
proscription of discrimination with respect to compensation
referred specifically to the “individual,” the Court held that the
section “precludes treatment of individuals as simply compo-
nents of racial, religious, sexual or national class.” 435 U.S. at
708, 98 S.Ct. at 1375. The Court recognized that unless women
as a class made greater contributions to the plan, they would
be subsidized by the class of male employees. However, it
believed that the language of § 703(a)(1) evidenced Congress’
judgment that fairness to individuals in matters of discrimina-
tion in employment covered by the statute were to take prece-
dence over fairness to various classes affected thereby. /d. at
708-09, 98 S.Ct. 1370. It also found this construction consis-
opportunities or otherwise adversely affect his status as an employee, because
of such individual’s race, color, religion, sex, or national origin.” 42 U.S.C.
§ 2000e-2(a)(2). However, inasmuch as the Court finds plaintiff’s claim
under § 703(a)(1) meritorious, it need not address this alternative basis for
her Title VII action.
70a
tent with the statutory goal of replacing “traditional assump-
tions about groups” with “thoughtful scrutiny of individuals,”
since a significant part of the longevity differential between
men and women might well result from social factors rather
than from innate biological characteristics. Jd. at 709-10, 98
S.Ct. 1370. Finally, while recognizing that insurance is con-
cerned with events that are individually unpredictable, the
Court rejected the possibility that Congress intended a special
definition of discrimination for employee group insurance
plans. Jd. at 710. The City of Los Angeles’ plan was thus
unlawful despite the validity of its general premise for the
simple reason that many individual women would receive
smaller paychecks than their corresponding male colleagues
while working, but would live no longer than the men, thus
receiving no compensating advantage during retirement.
The pension plans under attack in the instant case, like that
involved in Manhart, differentiate in their treatment of women
and men based on the fact that women participants as a class
enjoy greater longevity than their male counterparts. However,
because individual women will not live any longer than men
who made the same contributions to the plans during their
working years, but who receive larger monthly pension checks
upon retirement, the program suffers from the same deficiency
as the plan in Manhart.
TIAA and CREF maintain that Manhart does not control
this case because here the differentiation in treatment of the
sexes is in benefits, not in contributions. The Court, however,
finds this distinction without significance. Section 703(a)(1)
outlaws sex discrimination by employers with respect to “com-
pensation.” Justice Stevens’ opinion for the majority in
Manhart makes clear that both contributions and benefits
constitute “compensation” within the meaning of the statute.
435 U.S. at 712 n. 23, 98 S.Ct. 1370. Thus, absent some
affirmative justification, the discrimination against individual
women in pension benefits involved in the instant case is as
unlawful under § 703(a)(1) as the discrimination in contribu-
tions challenged in Manhart. Bernstein and Williams, Sex
Discrimination in Pensions: Manhart’s Holding v. Manhart’s
Tla
Dictum, 78 Colum.L.Rev. 1241, 1242 (1978); 1977 Supreme
Court, supra, 92 Harv.L.Rev. at 309.
D. Definition of “Employer” Under Title VII
The present case is also distinguishable from Manhart,
TIAA and CREF assert, because it involves a retirement
system administered by private insurance companies, not by
the employer alone. It is their position that they cannot be held
to have violated Title VII because § 703(a) covers only em-
ployer-operated pension plans.
The Court agrees that in most instances pension plans of
private insurers will not be subject to the dictates of Title VII,
since § 703(a) makes unlawful only discriminatory employment
practices of an “employer.” However, the term “employer”
under Title VII has been construed in a functional sense to
encompass persons who are not employers in conventional
terms, but who nevertheless control some aspect of an individ-
ual’s compensatic.. terms, conditions, or privileges of employ-
ment. See, e. g., “ey Memorial Hospital v. Wilson, 160
U.S.App.D.C. 14, 4¢ EF2d 1338 (1973); Puntolillo v. New
Hampshire Racing Comin’n, 375 F.Supp. 1089 (D.N.H.1974);
Hairston v. McLean Trucking Co., 62 F.R.D. 642 (M.D.
N.C.1974), vacated on other grounds, 520 F.2d 226 (4th Cir.
1975). See also Manley v. Mobile County, 441 F.Supp. 1351,
1355-56 (S.D.Ala.1977); Curran v. Portland Superintending
School Committee, 435 F.Supp. 1063, 1072-73 (D.Me.1977).
Holding responsible those who control the aspects of em-
ployment accorded protection under Title VII is consistent
with the congressional intent both that the Act’s effectiveness
not be frustrated by an employer’s delegating authority for its
employees’ compensation, terms. conditions, or privileges of
employment to third parties,'* see Manhart, supra, 435 U.S. at
718 n. 33, 98 S.Ct. 1370, and that the Act be interpreted
14 _—s‘ This intent is evident in § 701(b) of the Act, which defines employer
under Title VII to include “any agent” of a covered employer. 42 U.S.C.
§ 2000e(b).
72a
liberally in order to achieve its remedial purpose of eradicating
discrimination in employment.'* See, e. g., Silver v. Mohasco
Corp., supra, 602 F.2d at 1087; Craig v. Department of
Health, Education & Welfare, 581 F.2d 189, 193 (8th Cir.
1978); Bell v. Brown, 181 U.S.App.D.C. 226, 230, 557 F.2d
849, 853 (1977); Puntolillo, supra, 375 F.Supp. at 1091-92.
Although in the present case LIU is plaintiff’s employer in
the usual sense, Spirt contends that TIAA and CREF have
been delegated authority with respect to her pension plan
sufficient to require them to share LIU’s responsibility as
“employer” for purposes of § 703(a)(1). The Court agrees..
Educational institutions such as LIU have delegated their
responsibility for and control over employee annuity plans to
TIAA and CREF. To hold that discrimination in that aspect of
employee compensation cannot be fully remedied under Title
VII because of such delegation would impair the effectiveness
of the Act. It is significant in the Court’s view that TIAA and
CREF are non-profit corporations whose sole reason for exis-
tence is to serve Spirt’s direct employer, LIU, and other similar
institutions by relieving them of the burden of establishing and
administering their own insurance programs for their employ-
ees and that participation in TIAA and CREF is compulsory
for plaintiff as a tenured professor at LIU. Thus, the instant
case is a far cry from the situation implicitly sanctioned by
Manhart, 435 U.S. at 717-18, 98 S.Ct. 1370, in which an
employer has set aside equal retirement contributions for each
employee and let each retiree purchase the largest benefit
which his or her accumulated contributions could command
15 As the United States Court of Appeals for the District of Columbia
has aptly stated:
To permit [a third party] tu exploit circumstances peculiarly afford-
ing it the capability of discriminatorily interfering with an indivi-
dual’s employment opportunities with another employer, while it
could not do so with respect to employment in its own service,
would be to condone continued use of the very criteria for employ-
ment that Congress has prohibited.
Sibley Memorial Hospitai v. Wilson, supra, 160 U.S.App.D.C. at 17, 21, 488
F.2d at 1341.
Cojo Ie PLAT REREAD REPLI AOS
73a
from any private insurer on the open market. EEOC v. Colby
College, 589 F.2d 1139, 1146 (Ist Cir. 1978) (Coffin, C. J.,
concurring); 1977 Supreme Court, supra, 92 Harv.L.Rev. at
309 n. 57. Under the circumstances of this case, the Court
concludes that TIAA and CREF, as well as LIU, are employers
within the meaning of Title VII and thus that CREF is liable
along with the university'® for any violation of § 703(a)(1).
E. Bennett Amendment
TIAA and CREF also claim that their annuity plans are not
proscribed by Title VII by virtue of the Bennett Amendment,
§ 703(h) of the Act, 42 U.S.C. § 2000e-2(h). The Bennett
Amendment provides that an employer’s differentiation on the
basis of sex in determining the wages or compensation paid to
its employees will not violate Title VII if such differentiation is
authorized by the Equal Pay Act, 29 U.S.C. § 206(d). The
Equal Pay Act requires employers to pay men and women
equal wages for equivalent work unless one of four specified
exceptions is met. Defendants contend that the fourth excep-
tion, which authorizes a “differential based on any other
factor other than sex,” 29 U.S.C. § 206(d)(1)(iv), applies here
16 Neither LIU nor TIAA or CREF on its behalf has made the
argument advanced by the defendant college in the analogous case of EEOC
v. Colby College, 589 F.2d 1139 (ist Cir. 1978), that the educational
institution cannot be charged with a violation of Title VII because TIAA and
CREF contract directly with individual faculty members. In any event, this
Court agrees with the First Circuit that the college’s or university’s involve-
ment in the overall program is sufficient to hold it responsible under the Act:
As the Court observed in Colby College, “[The educational institution] is
more than a broker, or other intermediary, that enables the parties to enter
into the arrangement.” Jd. at 1141. The institution’s adoption of the TIAA
and CREF plans “ ‘constitutes affirmative, active participation,’ without
which ‘the challenged program could not operate.’ [The institution] requires
participation in the plan for all eligible employees and the amount of
premium payments is determined under a formula established by [it].” /d.,
quoting Spirt v. TIAA, 416 F.Supp. 1019, 1021, 1022 (S.D.N.Y.1976). The
institution also materially assists TIAA and CREF by collecting the employ-
ees’ contributions through salary deductions and forwarding the contribu-
tions to the insurers.
74a
because the ditterence in benefits provided to men and women
is based on the factor of longevity rather than sex.
Although this argument was expressly rejected by the Su-
preme Court in Manhart, 435 U.S. at 711-14, 98 S.Ct. 1370,
defendants assert that Manhart does not control the present
case because the plan there involved unequal employee contri-
butions and equal benefits while the opposite is involved here.
They appear to base this argument on the fact that the Wage
and Hour Administrator’s regulation, 29 C.F.R. § 800.116,
while silent on the permissibility of different employee contri-
bution rates accompanied by equal benefits, such as the plan in
Manhart involved, expressly provides that either equal em-
ployer contributions or equal benefits will satisfy the dictates
of the Equal Pay Act. 29 C.F.R. § 800.116(d) (1978). However,
Justice Stevens’ opinion makes clear that even assuming that
29 C.F.R. § 800.116 could be interpreted as sanctioning un-
equal employee contributions when accompanied by equal
benefits, the Court found a conflicting regulation of the
Administrator, 29 C.F.R. § 800.151'’ more persuasive. 435
U.S. at 714 n. 26, 98 S.Ct. 1370; see EEOC v. Colby College,
supra, 589 F.2d at 1144 n. 9.
Moreover, in light of Manhart, the Administrator has pro-
posed that 29 C.F.R. § 800.116(d) be amended so as to require
that both employee contributions and benefits be equal under
the Equal Pay Act. 43 Fed.Reg. 38,029 (1978). The Court thus
finds the asserted distinction between Manhart and the present
case without significance. As in Manhart, the record contains
no evidence that any factor other than the employee’s sex was
taken into account in calculating the differentials in benefits
received by men and women. Therefore, as in Manhart, “one
cannot ‘say that an actuarial distinction based entirely on sex is
“based on any other factor other than sex.” Sex is exactly what
it is based on.’ ” 435 U.S. at 712-13, 98 S.Ct. at 1377, 1378,
quoting Manhart v. City of Los Angeles, 553 F.2d 581, 588
17 That regulation condemns wage differentials based on the grouping
of employees by sex for purposes of cost comparisons.
Rr Ded Rete ane
75a
(1976). Accordingly, defendants have not established a defense
based upon the Bennett Amendment.
F. Business Necessity
The Court is also unpersuaded by TIAA and CREF’s argu-
ment that “business necessity” insulates them from what would
otherwise be a Title VII violation. Assuming arguendo that the
business necessity defense is applicable to practices which are
facially discriminatory,'* but see 1977 Supreme Court, 92
Harv.L.Rev. at 305 n. 37, the Court does not agree with TIAA
and CREF that the sex distinctions drawn by them are “reason-
ably necessary to the normal operation” of their plans. See
Manhart, supra, 435 U.S. at 716 n. 30, 98 S.Ct. 1370. Defen-
dants emphasize that insurance deals with risks that cannot be
evaluated for an individual, but which must be accurately
predicted on a group basis to ensure financial reliability. The
short answer to this argument is that the Court in Manhart
made it clear that the impossibility of individual prediction
could not justify resort to classifications proscribed by Title
VII. Id. at 710, 98 S.Ct. 1370.
The insurance industry’s reliance on the concept of equity
also fails to legitimize the instant discrimination. In essence,
TIAA and CREF contend that unless they are allowed to
continue to use sex-segregated mortality tables, men will with-
draw from defendants’ programs and enroll in other plans
which do not require them to assume more than their “ac-
tuarial share” of the annuity burden, resulting in TIAA and
18 TIAA and CREF apparently ignore the fact that the instant case
involves a practice that on its face discriminates against women in contending
that plaintiff cannot establish a violation of Title VII because defendants did
not intend to discriminate. Whatever argument can be made as to the
necessity of proving intent to establish a prima facie violation of § 703(a)(1)
when dealing with a facially neutral plan, see Nashville Gas Co. v. Satty, 434
U.S. 136, 144, 98 S.Ct. 347, 54 L.Ed.2d 356 (1977), it is established that no
intent need be shown where, as here, the practice in question on its face
discriminates against women. See Manhart, supra, 435 U.S. at 716, 98 S.Ct.
1370.
76a
CREF’s eventual insolvency. The Coun finds no suppor for
this dire prediction. Since, as in Manhart, participation in the
plans is generally mandatory, “an employee who wants to leave
the plans must also leave his job, and few workers will quit
because one of their fringe benefits could theoretically be
obtained at a marginally lower price on the open market.”””
435 U.S. at 716 n.30, 98 S.Ct. at 1379 n.30. That male
participants would even consider an adjustment in benefits
sufficient to warrant a change in plans seems particularly
unlikely in the case of TIAA and CREF because their plans
offer attractive features not generally available on the open
market such as portability between employers and immediate
vesting. Bernstein & Williams, Title VII and the Problem of
Sex Classifications in Pension Programs, 74 Colum.L.Rev.
1203, 1228, n. 94 (1974). The Court is also unconvinced that
men would be likely to consider the equalization in treatment
unfair: “The fundamental perception of equality with respect
to compensation turns on the relative daily purchasing power
of individual employees rather than the comparative actuarial
estimates of a pension’s total value. . . . After retirement,
since the primary purpose of pensions is to ensure adequate
cash flow to meet daily short term needs, the size of the
monthly benefits would be the crucial! element.” 1/977 Supreme
Couri, supra, 92 Harv.L.Rev. at 305.
Moreover, contrary to TIAA and CREF’s prediction, the
result in this case will not “revolutionize the insurance and
pension industries.” Manhart, supra, 435 U.S. at 717, 98 S.Ct.
at 1380. It is important to note that although CREF’s activities
fall within Title VII’s jurisdiction in this case, private insur-
ance companies are exempt from the dictates of the Act unless
they are both functioning as employers- within the meaning of
the statute and are engaged in conduct which does not consti-
tute the business of insurance under the McCarran Act. More-
19 Whether men could in fact obtain insurance at a lower price on the
open market is questionable. Because of economies of scale, an individual
usually cannot purchase insurance as cheaply alone as he can as a member of
a group. 1977 Supreme Court, supra, 92 Harv.L.Rev. at 310.
77a
over, tne Coun vcheves Vom vie formalion of appruprienic
relief can avoid drastic changes in the legal rules governing the
plans, which TIAA and CREF contend would jeopardize their
solvency and the insureds’ benefits. Furthermore, nothing in
this decision precludes consideration of the composition of the
work force as a whole in determining the cost of defendants’
annuity plans, see Manhart, supra, 435 U.S. at 718, 98 S.Ct.
1370, or the use of other risk classifications not proscribed by
Title VII to ensure reliability and equity.
For the foregoing reasons, the Court concludes that CREF
and LIU have violated § 703(a)(1) of Title VII. Accordingly,
Spirt’s motion for summary judgment is granted as to these
defendants, and TIAA and CREF’s cross-motion for summary
judgment is denied with respect to CREF.
Il. Equal Protection
Since the Court has concluded that TIAA is exempt from the
dictates of Title VII by virtue of the McCarran Act, it must
consider Spirt’s alternative argument that defendants’ use of
sex-segregated mortality tables in the computation of annuity
benefits denies her her Fourteenth Amendment right to equal
protection of the laws in violation of 42 U.S.C. § 1983 and
§ 1985(3). While TIAA and CREF assert that there can be no
equal protection violation here because defendants are private
parties, and there is no state action, plaintiff takes the position
that there is sufficient state involvement to bring this case
within § 1983. Plaintiff further contends that even if there is
no state action, defendants’ conduct is proscribed by
§ 1985(3), which outlaws purely private conspiracies to violate
constitutional rights.
§ 1983
To state a claim for relief under § 1983, plaintiff must
establish that defendants have deprived her of a right secured
by the Constitution or iaws of the United States and that, in so
doing, defendants acted under color of state law.” Flagg
20 42 U.S.C. § 1983 provides:
78a
Brothers, Inc. v. Brooks, 436 U.S. 149, 155, 98 S.Ct. 1729, 56
L.Ed.2d 185 (1978). The right relied on by Spirt is the Four-
teenth Amendment guarantee of freedom from the denial by
the state of the equal protection of the laws. Thus, Spirt must
demonstrate both that defendants have acted under color of
law and that their actions are properly attributable to the State
of New York. /d. at 156, 98 S.Ct. 1729.
Although TIAA and CREF are private entities, Spirt alleges
that their actions may be considered those of the state because,
as insurance companies, their business involves substantial
public interest and is the subject of substantial regulation by
the State of New York. Plaintiff notes specifically that the New
York Superintendent of Insurance is required to and does
approve all TIAA contracts, CREF certificates and various
other materials. The TIAA contracts as well as some of the
other materials set forth the sex-segregated rate and mortality
tables used by
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