# Petition for Writ of Certiorari — Communications Workers v. Ameritech Benefit Plan Committee

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 2001
- **Citation:** 531 U.S. 1127

## Text

(i) PILED

yee 8 6 4 NOV 2 8 2000

OFFICE OF THE CLERK

Supreme Court ate the Gnited States

COMMUNICATIONS WORKERS OF AMERICA, AFL-CIO,
BERNADETTE BERNABEI, ANNETTE FOSTER-HALL, ef ai.,

Petitioners,

AMERITECH BENEFIT PLAN COMMITTEE, et ai..,

Respondents.

On Petition for a Writ of Certiorari to the
United States Court of Appeals
for the Seventh Circuit

PETITION FOR A WRIT OF CERTIORARI

MICHAEL B. ERP
LAURIE M, BURGESS

KATZ, FRIEDMAN, EAGLE,

EISENSTEIN & JOHNSON
77 W. Washington St.
20th Floor

Chicago, IL 60602
(312) 263-6330

Counsel for Annette
Foster-Hall, et al.

ROBERT J. TSCHOLL

740 United Bank Building
220 Market Ave.

South Canton, OH 44702
(330) 456-7702

Counsel for Bernadette
Bernabei

*Counsel of Record

MARY K. O’MELVENY*
501 Third Street, N.W.
Washington, D.C. 20001
(202) 434-1213
Counsel for Communications
Workers of America,
AFL-CIO

DOUGLAS M. MOREHART

HAVERKAMP, BRINKER,

REBOLD, & RIEHL

5856 Glenway Ave.

Cincinnati, OH 45238

(513) 922-3200

Counsel for Annette Foster-Hall,
et al.

ERIC SCHNAPPER
University of Washington
School of Law

1100 N.E. Campus Parkway
Seattle, WA 98105

(206) 616-3167

Counsel for Petitioners

——
WILSON-EPES PRINTING Co., INC. — (202) 789-0096 -— WASHINGTON, D.C. 20001

@ <eSe co

TT a HEE Se

we

QUESTION PRESENTED

Do Title VII, the Equal Pay Act, and ERISA permit an
employer to pay reduced retirement benefits, or deny early
retirement opportunities, io female workers by utilizing facially
discriminatory pregnancy leave rules that were Originally
adopted prior to the 1978 Pregnancy Discrimination Act?

(i)

PARTIES

The petitioners are the Communications Workers of
America, AFL-CIO, Annette Foster-Hall, Bernadette Bernabei,
and 945 other female present or former employees of the
Ameritech Corporation, its predecessors or wholly owned
subsidiaries. These additional petitioners are listed in Appendix
D to the petition.

The respondents are the Ameritech Corporation, the
Ameritech Pension Plan, the Ameritech Benefit Plan
Committee, the Ameritech Management Pension Plan, the
Ameritech Employees’ Benefit Committee, and twenty-four
wholly owned subsidiaries of the Ameritech Corporation.
Those subsidiary firms are listed in Appendix E to the petition.”

Since the commencement of this litigation, the Ameritech
Corporation has been acquired by the SBC Corporation. SBC now
combines the telephone companies formerly known as Ameritech,
Southwestern Bell, Pacific Bell, and Southern New England Telephone
Co.

There is another case raising the same issues now pending against the Bell
Atlantic Corporation. EEOC v. Bell Atlantic Corp., 80 FEP Cases 164, 1999
U.S. Dist. LEXIS 8813, 1999 WL 386725 (S.D.N.Y. 1999). It is anticipated
that a new action raising these issues will be commenced in the near future
against AT&T. The resolution of this case would be largely determinative of
pending EEOC charges or future claims by a large number of female
employees against all of the corporations that prior to 1984 were subsidiaries
or part of AT&T.

TABLE OF CONTENTS

TABLE OF AUTHORITIES ....cssssessesseessernseensessesnes
COPURCUOINES BELOW oss ssennnsssenssovreoeessseoesnsseesnsns
SURI TIONG ccscsccacecennnceesssccovnsscsovsnneorneseeeensnrccsn
STATUTES INVOLVED ocscseocsscensssosersscsrecorenesoessssees
STATEMENT OF THE CASE .n.scssosssssssecsseeesnneeeesntes
REASONS FOR GRANTING THE WRIT .......soossessee

Il.

Il.

This Case Presents An Issue of National
Importance Which Will Affect, Inter Alia, The
Retirement Rights of Tens of Thousands of
Current and Retired Female Employees Who
Worked for AT&T and Its Subsidiaries Prior to
the Pregnancy Discrimination ACt.........:s:s++s++

The Decision Below Is In Conflict With
Decisions In Four Other Circuits and With
EEOC’s Interpretation of Title VII...........sses

The Decision Below Is In Conflict With
Numerous Decisions of This Court.................0++

CONCLUSION .....ccccccoscssscesscsssecccccsocsenerscsssscessonssssooseess
APPENDICES
Appendix A: Opinion of the Court of Appeals (July

Appendix B: Memorandum Opinion and Order of
the District Court (July 20, 1998) ............sssseeserseeeeees

Appendix C: Order of the Court of Appeals
Denying Rehearing and Rehearing En Banc
(August 31, 2000) ........scccscsseer sessesessersenensnensnenenenensnes

la

20a

iv
TABLE OF CONTENTS—Continued

Appendix D: Names of Individual Petitioners .......... 42a

Appendix E: Corporate Subsidiaries of Ameritech |
SITTIN sncenscicicentsscrinesiststinssieiianininneleiioaniteiaiatdiiilin 56a

Vv

TABLE OF AUTHORITIES
Cases: Page
Acha v. Beame, 570 F.2d 57 (2d Cir. 1978)........... 18
Anderson v. Zubieta, 180 F.3d 329 (D.C.Cir.
LDDPD sacsccssiicccccesessinscctcneshntensdeniinnioinnastienbieusbinabees 18
Arizona Governing Committee v. Norris, 463
U.S. 10°73 (1983) .ncccorcescrcsrccsssecasescecsccsaseseressszense 23
Ashley v. Boyles Famous Corned Beef, 66 F.3d
164 (Sth Cir. 1995)........cccccccccrsoscccssccceccssevssseess 18

AT&T Corp. v. EEOC, 99 Civ. 1444 (TFH)
(D.D.C. July 13, 2000), appeal docketed, No.

00-5280 (Aug. 4, 2000)........secseeereeeseneeserseees 12
Bazemore v. Friday, 478 U.S. 385 (1986) .........0+. 20
Bazemore v. Friday, 751 F.2d 662 (4th Cir.

RODD ccscictniaeisniiecinndenbchniinisininicntbind ‘. 8, 14, 18, 20-21, 23
Bell Atlantic Cash Balance Plan v. E.E.0.C., 182

F.3d 906 (4th Cir. 1999) ....csccccccccccssrscccsesscccsoeses 12
California Brewers Assn. v. Bryant, 444 U.S. 598

(TSB DY sccincssescsnsvssasscssvnnscescrecssibintetetontocssbimneaoteese 23
Carter v. West Publishing, 225 F.3d 1258 (11th

Che, FED ccnscitesntasrsnsicisincnsssstscnsseininvoniasanesnsanbeite 18
Cox v. City of Memphis, 230 F.3d 199 (6th Cir.

DOOD iciicincssscincissionssstcneciesiniasbtnsincseteinsanimanesients 19
Eberts v. Westinghouse Elec. Corp., 581 F.2d

957 (3d Cle, 1976) ncccssrccsestnsscscsosescssassscnssscsesnncees 17

EEOC v. Bell Atlantic Corp., 80 fep cases 164,

1999 WL 386725 1999 U.S. Dist. LEXIS 8813

(S.D.N.Y.. 1999) .ccssorcccccseccssscccssccccsoscessossssssseseooe ii, 15
General Electric Co. v. Gilbert, 423 U.S. 822

(1G TG) once scccnsnsinsrenrnetsneianinisenscbirsinitonsanbiuaanentnete 21-22
Greenspan y. Automobile Club of Michigan, 495

F.Supp. 1021 (E.D.Mich. 1980)..........ssssssssesesees 10
Guardians Ass’n of New York City Police Dept.

v. Civil Service Comm'n of City of New York,

633 F.2d 232 (2d Cir. 1980)..........scceeceerreesereeees 19

vi
TABLE OF AUTHORITIES—Continued
Page
Harriss v. Pan American World Airways, Inc.,
649 F.2d 670 (9th Cir. 1980) .........ccccccecceseeenees 10, 17
International Brotherhood of Teamsters v.
United States, 431 U.S. 324 (1977) ..ccccccccccceeeeee 22 )
Lorance v. AT&T Technologies, 490 U.S. 900 )
( , 23
Los Angeles Dept. of Water & Power v. Manhart,
GSD GB. FB (RF Pep ctternncsnvsniicnnnstteritniactensiteati 23
Mullins v. Crowell, 228 F.3d 1305 (11th Cir.
OED cacsererenenssneeneninvinnaniensiaainndiainien 18-19

Nashville Gas Co. v. Satty, 434 U.S. 136 (1977)... 22
Pallas v. Pacific Bell, 940 F.2d 1324 (9th
Cir. 1991), cert. denied, 502 U.S. 1050

( _’ | nN eR Se re 5, 6, 8-20
Patterson v. American Tobacco, 456 U.S. 63

CRED cecencosnssevsussvinsntinesissnniiveisnsansitiiuhsbaahisiiientibbiaienas 22-23
Pollis v. New School for Social Research, 132

FSS BED CAG Cam. BGI T rcecsscsccsccscnsescisnestecssensesses 8, 18
Redding v. AT&T Corp., 124 F.3d 217 (10th Cir.

SDN TF ) cecensesenssensssnnsessniiisensesntinstibidatiinniistisiaiiiieaitahibiid 17-18
Southwestern Bell Tel. Co. Maternity Benefit

Litigation, 602 F.2d 845 (8th Cir. 1979)............ 17

Sweeney v. Employees’ Benefit Committee of
Ameritech, No. 93-CV-74302 (E.D.Mich.

Swint v. Pullmaa-Standard, 456 U.S. 273 (1982).. 23
United. Air Lines v. Evans, 431 U.S. 553

6 jee a 8, 14-15, 18, 19, 21
Whitehead v. Oklahoma Gas & Electric Co., 187
Bl ott ols 8, eee 15
Statutes:
29 Usbac. G BELL) ctiteectinnidinieeiees passim

29 USC. § VIDE T MANE) crccccrcccceccscsccscnesecescsee passim

vii
TABLE OF AUTHORITIES—Continued

Page
BD DBA. BE RICE HOI D cvcecssccsscnnssstsmnenennennsioneans 3
ee ie SD citcenicinrcentsetetignmaniabiaeiinis passim
GB Ui Ace F I ED cccssecssccecczcsnsnsencsccencesmanenntes 2, 22
SEE | | ENT 2
GB UBL, F Bee ea prcvcncescscsssscscncscscnccssscenseess passim
Ae Cs F sO Gh sncascscecnczscsnecnestessnsscesecentingmanes passim
Other Authorities:
es B BOAO cecentinstnieetccinncicemenintn 16
29 C.F.R. § 1610.11, Appendix A ............cccceeeeees 16
H.R. Rep. No. 948, 95th Cong. ............c.sscessseseeees 16
SS BRO, BOR, FE, FEE CIGIE, cccccsccccsmncncnsnesccnscsesseess 9, 16
EEOC Compliance Manual, No. 915.003 (Oct. 3,
2000), “Employee Benefits,” § Ill, B................. 16
EEOC v. Ameritech Services, Inc., No. 97 CV
2106 (N.D.Ohio Aug. 15, 1997) .0........ecceeeeeees 7, 16
EEOC, et al. v. Bell Atlantic Corp., et al., 97 CIV
6723 (S.D.N.Y. Sept. 10, 1997) ....ccccccccccesecsseeses 16
Brief Amicus Curiae, Carter v. AT&T Corp., No.
TS ee 16

Brief Amicus Curiae, California Employment
Law Council, Pallas v. Pacific Bell, et al. (9th
| eee 20
Brief Amicus Curiae, Equal Employment
Advisory Council, Pallas v. Pacific Bell, et al.
My ee 20
Respondent's Brief in Opposition to Petition for
Writ of Certiorari, Pallas v. Pacific Bell, et al.
Cs Cae BIT) Gee. DED) cccccccccccnescsocecesscesnes 20

Petitioners Communications Workers of America, AFL-
CIO, Annette Foster-Hall, Bernadette Bernabei, et al., respect-
fully pray that this Court grant a writ of certiorari to review the
judgment and opinion of the United States Court of Appeals for
the Seventh Circuit entered on July 13, 2000.

OPINIONS BELOW

The July 13, 2000, opinion of the court of appeals, which is
reported at 220 F. 3d 814 (7th Cir. 2000), is set out at pp. la-
19a of the Appendix to this Petition (“App.”). The August 31,
2000, order of the court of appeals denying rehearing and re-
hearing en banc, is set out at pp. 40a-41a of the Appendix. The
July 20, 1998, opinion of the district court, which is not offi-
cially reported, is reported at 1998 U.S.Dist. Lexis 11363
(N.D.I1.) and at 1998 WL 419483 (N.D.I1.), and is set out on
pp. 20a-39a of the Appendix.

JURISDICTION

The decision of the court of appeals was entered on July 13,
2000. A timely petition for rehearing was denied on August
31, 2000. The jurisdiction of this Court is invoked pursuant to
28 U.S.C. §1254.

STATUTES INVOLVED

Section 701(k) of Title VI, 42 U.S.C. §2000e-(k), as
amended by the Pregnancy Discrimination Act of 1978, 92
Stat. 2076, provides in pertinent part:

The terms “because of sex” or “on the basis of sex” in-
clude, 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

2

but similar in their ability or inability to work, and nothing
in section 2000e-2(h) of this title shall be interpreted to
permit otherwise.

Section 703(a) of Title VII of the 1964 Civil Rights Act, 42
U.S.C. §2000e-2(a), provides in pertinent part, “It shall be an
unlawful employment practice for an employer . . . to discrimi-
nate against any individual with respect to his compensation .. .
because of such individual’s ...sex....”

Section 703(h) of Title VII, 42 U.S.C. §2000e-2(h), provides
in pertinent part,

Notwithstanding any other provision of this title, it shall
not be an unlawful employment practice for an employer
to apply different standards of compensation, or different
terms, conditions, or privileges of employment, pursuant
to a bona fide seniority system ....

Section 706(e)(1) of Title VII, 42 U.S.C. §2000e-5(e)(1),
provides in pertinent part,

A charge under this section shall be filed within one hun-
dred and eighty days after the alleged unlawful employ-
ment practice occurred . . . except that in a case of an
unlawful employment practice with respect to which the
person aggrieved has initially instituted proceedings with a
State or local agency with authority to grant relief or seek
relief from such practice . . . such charge shall be filed by
or on behalf of the person aggrieved within three hundred
days after the alleged unlawful employment practice oc-
curred ....

Section 706(e)(2) of Title VII, 42 U.S.C. §2000e-5(e)(2), as
amended by the 1991 Civil Rights Act, provides:

For the purposes of this section, an unlawful employment
practice occurs, with respect to a seniority system that has
been adopted for an intentionally discriminatory purpose
in violation of this title (whether or not that discriminatory

3

purpose is apparent on the face of the seniority provision),
when the seniority system is adopted, when an individual
becomes subject to the seniority system, or when a person
aggrieved is injured by the application of the seniority sys-
tem or provision of the system.

Section 206(d)(1) of the Equal Pay Act, 29 U.S.C.
§206(d)(1), provides in pertinent part:

No employer having employees subject to any provisions
of this section shall discriminate, within any establishment
in which such employees are employed, between employ-
ees on the basis of sex by paying wages to employees in —
such establishment at a rate less than the rate at which he
pays wages to employees of the opposite sex in such es-
tablishment for equal work on jobs the performance of
which requires equal skill, effort, and responsibility, and
which are performed under similar working conditions,
except where such payment is made pursuant to (i) a sen-
iority system ...

Section 404 of ERISA, 29 U.S.C. §1104(a)(1)(A)(@), pro-
vides in pertinent part that ERISA fiduciaries must act “solely
in the interest of the participants and beneficiaries.” Section
502 of ERISA, 29 U.S.C. §1132(a)(1)(B), authorizes a benefi-
ciary to bring a civil action “to recover benefits due to him un-
der the terms of the plan.”

STATEMENT OF THE CASE

This case concerns the current utilization of rules, originally
adopted prior to the Pregnancy Discrimination Act (“PDA”),
which expressly discriminate against pregnant female employ-
ees. Before April 29, 1979, the effective date of the PDA,
Ameritech’ avowedly treated pregnancy-related disabilities

' The respondents in this case, in addition to Ameritech, include two
dozen Ameritech subsidiaries and certain employer run benefit commit-
tees. Ameritech itself only came into existence in the wake of the 1984

4

differently than other disabilities. Ameritech permitted all
other employees who were absent from work because of a
physical disability to continue to accrue seniority during the en-
tire period of their disability leave. But until the PDA came
into effect, female workers who were on pregnancy leave were
treated less favorably. “For most of the time prior to the advent
of the PDA, Ameritech had counted only a maximum of 30
days of an employee’s pregnancy or maternity leave towards
her N{et] C[redited] Sfervice]. . . . In contrast, employees with
other disabilities were granted full . . . credit for their disability-
related leaves.” App. 3a.”

In determining whether a worker is eligible for a pension,
and in calculating the amount of her benefits, Ameritech re-
duces her total term of employment in the manner provided by
its pre-PDA pregnancy leave policies. App. 4a, 23a. Begin-
ning in 1991, Ameritech’s utilization of pre-PDA pregnancy
leave policies to calculate a worker’s total term of employment
became a matter of significant importance to thousands of its
female employees. Between 1991 and 1994, Ameritech created
several different early retirement plans, each of which provided
generous financial incentives for eligible workers who chose to
retire before the age of 65. The most important of these was
the Ameritech Pension Plan Early Retirement Program
(“APPEP”); it provided that, for purposes of determining re-
tirement eligibility and in calculating the amount of benefits,
workers who retired between February 22, 1994 and September
30, 1995, would have three years of age added to their actual
age and three years of employment added to their term of em-
ployment. App. 2a, 4a, 22a-23a. The APPEP provided other
lucrative benefits to eligible early retirees, including up to

AT&T dive: :ture. For simplicity, however, we refer to all of these enti-
ties as Ameritech.

? For much if not all of this period Ameritech engaged in other practices
which had the effect of prolonging the period of pregnancy leave. App. 3a.

5

$3,000 for pre-approved educational expenses and a one-time
cash payment of approximately $25,000. App. 4a.

Many female “employees who had taken pregnancy or ma-
ternity leaves prior to April 29, 1979 . . . did not receive the
added 1994 benefits even though they would have been eligible
if they had been disabled in any other way.” App. 4a. Disputes
about the interpretation and legality of these early retirement
plans arose as soon as the first of them was announced in 1991.
Ultimately a total of 1,800 female workers filed claims with
Ameritech, asking that their term of employment not be re-
duced by the period of time when they were on pregnancy
leave.” Many of these workers were represented by petitioner
Communications Workers of America, (“CWA”), which also
sought without success to resolve the dispute through negotia-
tions with Ameritech.

Much of the dispute focussed on a Ninth Circuit decision in
Pallas v. Pacific Bell, 940 F. 2d 1324 (9th Cir. 1991), cert. de-
nied, 502 U.S. 1050 (1992). The Ninth Circuit in Pallas had
held that both Title VII of the 1964 Civil Rights Act and
ERISA forbade Pacific Bell, when determining eligibility for a
newly adopted early retirement plan, from deducting a worker’s
pre-PDA pregnancy leave from her service credit. In negotia-
tions with Ameritech officials, representatives of the CWA
invoked Pallas and argued that the company should comply
with the holding in that case. Many of the hundreds of written

*In 1996 a district court in Michigan held that this reapplication of
Ameritech’s pre-PDA pregnancy leave rules to one of the pre-APPEP early
retirement plans violated section 1104 of ERISA. Sweeney v.
Employees’ Benefit Committee of Ameritech, No. 93-CV-74302 (E.D.Mich.
1996) (Memorandum Opinion of March 29, 1996). The court’s conclusion
was premised on its finding that utilization of these pre-PDA policies vio-
lated Title VII itself. Subsequently the parties to this action agreed to a set-
tlement, and jointly stipulated to an order vacating this opinion and dismiss-

6

_ appeals filed by female employees expressly cited and relied on
Pallas.’

Ameritech’s attorneys, however, advised the company that
the Ninth Circuit’s decision in Pallas was incorrect, and urged
the company to disregard it.° They also insisted that prior to
the PDA it was perfectly legal for Ameritech to deny to preg-
nant workers the service credit that was accorded to all other
disabled employees.° In the wake of that advice, company offi-
cials were expressly instructed that they should not consider the
Pallas decision.’ In rejecting the employee appeals that had
invoked the Pallas decision, Ameritech officials responded that
in the company’s view the Ninth Circuit had misconstrued fed-
eral law.”

The first lawsuit to challenge the administration of APPEP
was an individual action commenced by petitioner Bernadette
Bernabei in February, 1995, in the district court for the North-
erm District of Ohio. Bernabei asserted that reutilization of the
pre-PDA pregnancy leave policies to deny APPEP benefits
violated Title VII, the Equal Pay Act, ERISA, and state law.
App. 4a.

In March, 1997, Ameritech commenced an action of its own
in the Northern District of Ilinois. It sued two unions (includ-
ing petitioner CWA), as well as petitioner Foster-Hall and
thirty-six other workers as representatives of 4 class of some

* Seventh Circuit Appendix of Appellants, Nos. 98-3096, 98-3101, and
98-3102, p. 162.

, Joint Exhibits, v. 3, exhibit 24. Letter of Michael S. Horne to Walter
Oliver, March 15, 1995, pp. 13-16.

° Id. at 1, 7-10.

” See e.g., Plaintiffs’ Exhibits, v. 3, Exhibit 4 to Deposition of Harry
Malone, pp. 000040424, 000040426.

* Seventh Circuit Appendix of Appellants, supra, pp. 151, 169.

eee as fe

7

7,000° female employees who had taken pregnancy leaves
prior to the PDA. Ameritech sought a declaratory judgment
that the use of its pre-PDA policies to determine a new retire-
ment benefit did not violate Title VII, ERISA, the Equal Pay
Act, or various state laws. Petitioners CWA and the named
employees counterclaimed for relief under those statutes, and
more than 910 other female Ameritech employees, also peti-
tioners here, intervened in the Illinois proceeding. In August,
1997, EEOC filed suit in the Northern District of Ohio on
behalf of the same 7,000 Ameritech workers, contending that
the continued use of pre-PDA pregnancy leave policies to cal-
culate current pension eligibility violated Title VII and the
Equal Pay Act.'° Ultimately, Bernabei’s lawsuit was trans-
ferred to the Illinois federal court and consolidated with the
Ameritech declaratory judgment action.'' App. 4a-Sa.

In August, 1997, the Illinois district court granted the parties’
joint request to certify a class consisting of all female employ-
ees and retirees who had taken pregnancy leaves between the
effective date of Title VII and the effective date of the Preg-
nancy Discrimination Act.'? The parties subsequently filed
cross-motions for summary judgment. App. 5a.

On July 20, 1998, the district court granted Ameritech’s mo-
tion. The court acknowledged that the dispute presented “close
and difficult questions,” and that Ameritech’s actions would be

* In addition to approximately 1,800 female employees who filed claims
regarding the early retirement plans, this action, as well as that of the EEOC,
also sought resolution of the rights of some additional 5,200 female em-
ployees.

'0 EEOC v. Ameritech Services, Inc., No. 97 CV 2106 (N.D. Ohio August
15, 1997).

'! The Ohio district court never acted on Ameritech’s motion to transfer
the EEOC action to Illinois. Proceedings in that action have remained in
abeyance pending final disposition of the Ameritech and Bernabei actions.

'2 The class was certified as to the Title VII, ERISA, and state law claims,
but not the Equal Pay Act issues. App. 10a.

8

illegal under both the Ninth Circuit decision in Pallas and a
Second Circuit decision in Pollis v. New School for Social Re-
search, 132 F, 3d 115 (2d Cir. 1997). App. 30a, 34a-35a. The
district judge, however, insisted that both Pallas and Pollis
were wrongly decided. App. 30a, 35a. The district court con-
cluded that Ameritech’s reutilization of the pre-PDA policies
did not violate the PDA, Title VII, the Equal Pay Act, or
ERISA.”* App. 38a-39a.

The court of appeals affirmed this interpretation of those
federal statutes. The Seventh Circuit recognized, as had the
Ninth Circuit in Pallas, that the controlling question was
whether the legality of the practices in question was controlled
by this Court’s decision in Bazemore v. Friday, 478 U.S. 385
(1986), or by United Air Lines v. Evans, 431 U.S. 553 (1977).
Compare App. 12a with Pallas, 940 F. 2d at 1326-27. The
court below acknowledged that the distinction between
Bazemore and Evans was “subtle at best” (App. 14a); unlike
the Ninth Circuit in Pallas, however, it concluded that Evans
controlled.

For the court of appeals, the critical issue was that, prior to
the adoption of the PDA, Ameritech had already calculated a
“net credited service” date for each of its female employees.
The Seventh Circuit held that Ameritech’s pregnancy leave
policies were lawful before the adoption of the PDA itself.
App. 15a. Once a net credited service date calculation had
been made pursuant to those policies, the court believed,
Ameritech could thereafter choose to use that net credited ser-
vice date to deny benefits under later, newly created retirement
programs. App. 14a-16a.

The Seventh Circuit, however, disapproved the class certifi-
cation. The court recognized that its decision left all of the
non-party Ameritech employees in the Seventh Circuit free to

'? The court also held that the disputed practices did not violate state law.
(App.—).

9

bring new actions against the company. The panel also noted
that the EEOC’s Ohio action could therefore proceed. 10a-
Ila.

On July 27, 2000, Ameritech filed a timely petition for re-
hearing and suggestion for rehearing en banc seeking review of
the panel’s disapproval of class certification. That petition was
denied on August 31, 2000.

REASONS FOR GRANTING THE WRIT

I. THIS CASE PRESENTS AN ISSUE OF
NATIONAL IMPORTANCE WHICH WILL
AFFECT, INTER ALIA, THE RETIREMENT
RIGHTS OF TENS OF THOUSANDS OF
CURRENT AND RETIRED FEMALE EMPLOY-
EES WHO WORKED FOR AT&T AND ITS
SUBSIDIARIES PRIOR TO THE PREGNANCY
DISCRIMINATION ACT

This case presents a problem of national scope and increas-
ing urgency threatening the retirement rights of large numbers
of women because of their pregnancies in the 1960s and 1970s.
A significant proportion of this generation of women was, like
the petitioners, denied credited service because of their preg-
nancies, while men with any type of disability were given full
credit. This practice was widespread prior to the adoption in
1978 of the Pregnancy Discrimination Act. See, e.g. S. Rep.
No. 95-331, pp. 6,8. Today, the generation of women who
were the victims of this discrimination is reaching retire-
ment age. Because the amount of a worker’s accrued serv-
ice usually determines eligibility for, and the amount of,
retirement benefits, large numbers of women are at risk of

‘““{OJur ruling in this action will not formally preclude the EEOC in its
Ohio action, since the Commission is also not a party before this court. The
Ohio court, and the Sixth Circuit in turn should an appeal be taken, will have
the right to come to their own conclusions on these issues.” App. | la.

10

receiving smaller pensions and other retirement benefits than
men who were hired at the same period and who held the same
jobs. Most litigation to date has concerned the denial, as here,
of early retirement benefits; the magnitude of the problem will
swell as more women of this generation reach regular retire-
ment age.

The discriminatory policies of pre-divesture AT&T were
typical of this problem, and by themselves affected tens of
thousands of female workers. Prior to divestiture, AT&T and
its subsidiaries in the telephone industry were among the larg-
est private employers of women in the nation. In the case of
Ameritech alone, the retirement benefits of approximately
7,000 women are at stake. A case now pending in the Southern
District of New York, which raises essentially the same issues
regarding the practices of the phone companies in New York
and several New England states, will determine the pension
rights of at least 5,000 older women workers. There are tens of
thousands of female employees at AT&T and its other former
subsidiaries whose retirement benefits remain in question. And
the discriminatory practices that were national policy within
AT&T prior to 1979 were also utilized by other major employ-
ers prior to the adoption of the Pregnancy Discrimination Act.
See e.g. Harriss v. Pan American World Airways, Inc., 649 F.
2d 670 (9th Cir. 1980); Greenspan v. Automobile Club of
Michigan, 495 F. Supp. 1021 (E.D.Mich. 1980).

It is of particular importance that this Court definitively re-
solve now whether female workers can be paid reduced retire-
ment benefits because of pregnancies earlier in their careers.
For many of the victims of the practices at issue in this case,
benefits delayed will be benefits irretrievably denied.

Where, as here, one of the benefits in dispute is the opportu-
nity to take early retirement, any delay in resolving that issue is
likely to nullify the rights of the victims. For example, one of
the key benefits in question at Ameritech was the right to take

Peers

_—

11

early retirement in 1994 or 1995, rather than in 1997-1998. Af-
ter five years of litigation, that opportunity no longer exists; the
plaintiffs have monetary claims, but there is no way they can
get back the three years of retirement that they have now lost.
Another benefit sought in this case was a grant of up to $3000
for education that would permit retirees to obtain training for
new jobs. Even if petitioners ultimately prevail, they will have
lost several years during which they might have utilized that
training to start new careers. Women retiring at the typical age
of 65 to 70 face a more fundamental problem; if there are sub-
stantial delays in resolving disputes about the level of their re-
tirement benefits, an ever increasing portion of this group will
not live long enough to enjoy the result of any ultimate legal
victory. Unless this Court acts expeditiously to resolve the le-
gal issues raised in this case, the ensuing delay will nullify in
many cases the Title VII and other federal rights of a large
number of women.

Employers too have a substantial interest in the prompt and
definitive resolution of these issues. Because at many major
companies there are a very large number of female workers
whose retirement benefits necessarily would turn on the legal
questions presented by this petition, employers need a conclu-
Sive determination of those questions in order to make deci-
sions with substantial financial implications about benefits and
benefit plans. For that reason, employers have taken the un-
common step of commencing suit themselves to resolve these
questions, rather than passively awaiting legal action by em-
ployees. In the instant case, for example, the court of appeals
observed that “[iJn an unusual move, Ameritech jumped into
court with an action for a declaratory judgment
.... App. 2a. In two other recent cases, employers have tried
to resolve the issue by bringing a preemptive suit against
EEOC, seeking a judicial determination that their practices
were lawful and therefore could not be investigated by the

12

Commission.'* In both instances the lower courts concluded
that this method of clarifying the law was not available to em-
ployers under Title VII. And in the instant case the Seventh
Circuit held that Ameritech could not even obtain in the lower
courts a definitive resolution of its obligations to its own em-
ployees, leaving Ameritech still subject to suit by its employees
or by EEOC in the Sixth Circuit, where Seventh Circuit prece-
dent would not be controlling, and even in the Seventh Circuit
by other plaintiffs hopeful that the decision below might ulti-
mately be overturned by the Seventh Circuit en banc or by this
Court.

The inter-circuit conflict described infra makes the need for
action by this Court particularly pressing. Many of the employ-
ers whose retirement practices are at issue have offices and em-
ployees in several states located in different circuits. Respon-
dent Ameritech is now a subsidiary of SBC, a telephone com-
pany with subsidiaries in the Fifth, Sixth, Seventh, Eighth,
Ninth and Tenth Circuits.'® Thus in determining the retirement
benefits which it will pay to its employees, SBC is subject to
conflicting legal standards. Other nationwide employers that
emerged from the 1984 divestiture, including AT&T and Lu-
cent Technologies, also have employees in multiple states and
face a similar situation.

This case provides an appropriate vehicle for definitively re-
solving these issues. The claims and counterclaims in this case
squarely present questions about the legality of Ameritech’s
current practices under all three of the applicable fed-
eral laws—Title VII, the Equal Pay Act, and ERISA. The

'S Bell Atlantic Cash Balance Plan v. E.E.0.C., 916 F. Supp. 376 (E.D.Va.
1997), aff'd, 182 F. 3d 906 (4th Cir. 1999), 1999 WL 485679 (4th Cir, July
12, 1999); AT&T Corp. v. EEOC, 99 Civ. 1444 (TFH) (D.D.C. July 13,
2000), appeal docketed No. 00-5280 (D.C. Cir. Aug. 4, 2000).

'° SBC has subsidiaries in California, Nevada, Illinois, Hawaii, Ohio, Michi-
gan, Indiana, Wisconsin, Texas, Kansas, Missouri, Oklahoma and Arkansas.

————————aaa_a eae

13

documentary record assembled in the district court presents a
Clear picture of the manner in which pregnancy leaves were
handled prior to the PDA, and of the way in which Ameritech’s
pre-PDA pregnancy leave policies are currently being used to
determine eligibility for early retirement benefits and to calcu-
late the amount of regular pension checks. These policies are
representative of the practices that existed throughout the Beli
system prior to the PDA.

ll. THE DECISION BELOW IS IN CONFLICT
WITH DECISIONS IN FOUR OTHER CIRCUITS
AND EEOC’S INTERPRETATION OF TITLE VII

(1) The decision below is squarely inconsistent with the de-
cision of the Ninth Circuit in Pallas v. Pacific Bell, 940 F. 2d
1324, (9th Cir. 1991), cert. denied, 502 U.S. 1050 (1992). In
Pallas the defendants, like Ameritech, had been subsidiaries of
AT&T prior to the 1984 divestiture; the pre-PDA policies in
Pallas were essentially the same as those in the instant case,
and Pacific Bell, as here, had invoked those policies to exclude
women from a post-PDA early retirement program. In deter-
mining how many years of service Ms. Pallas had, and in con-
cluding that she was ineligible to participate in its new early re-
tirement program, Pacific Bell had excluded most of the period
in 1972 when she was on pregnancy leave. The Ninth Circuit
held that that was a current per se violation of Title VIL.

[T]he discriminatory program which gave rise to this suit,
the Early Retirement Opportunity, was instituted in 1987
. . + + In 1987, Pacific Bell instituted a program that
adopted, and thereby perpetuated, acts of discrimination
which occurred prior to the enactment of the Pregnancy
Discrimination Act. While the act of discriminating
against Pallas in 1972 is not itself, actionable, Pacific Bell
is liable for its decision to discriminate against Pallas in
1987 on the basis of pregnancy.

940 F. 2d at 1326-27.

14

The Ninth Circuit in Pallas concluded that, in determining
the legality of the practice at issue in these cases, “(t]he control-
ling Supreme Court precedent is Bazemore v. Friday”, 940 F.
2d at 1327, and held that “[t}he district court erred in relying on
[United Airlines v.] Evans.” 940 F. 2d at 1326. In the instant
case the Seventh Circuit reached the opposite conclusion, in-
sisting that “we should look first to Evans and follow
[Bazemore] only if there is no alternative.” App. 14a. The
Ninth Circuit recognized the rules being utilized were facially
discriminatory.

[T]he net credit seniority system used to calculate eligibil-
ity under the Early Retirement Opportunity is not facially
neutral. The system used to determine eligibility facially
discriminates against pregnant women.

940 F. 2d at 1327. The Seventh Circuit, on the other hand, held
that the identical plan utilized by respondent was not “the kind
of intentional discrimination that would trigger the exception to
the statutory protection afforded to seniority systems.”
App. 15a.

Throughout the dispute about its practices, Ameritech has
been well aware that the manner in which it determines retire-
ment benefits would be illegal in the Ninth Circuit under
Pallas. In March, 1995, Ameritech’s attorneys called its atten-
tion to the decision in Pallas, and correctly noted that what the
respondents proposed to do could only be upheld if the courts
in the Seventh Circuit were to conclude that Pallas was
wrongly decided. Most of the written requests that respondent
received in 1994-95 from women seeking credit for the
period of their pregnancies relied on Pallas; respondent’s rejec-
tion of those claims expressly asserted its view-that Pallas was
wrong.

In upholding the practices in this case, the district court
explained that it “finds Pallas unpersuasive and respectfully
declines to follow it.” App. 30a. A subsequent district court

]
|
|
|
|
;
yl
celiac

15

decision in the Southern District of New York, recognizing the
conflict between Pallas and the decision in this case, chose to
follow Pallas because it was convinced that “the Ameritech de-
cision was wrongly decided.” EEOC v. Bell Atlantic Corp., 80
FEP Cases 164, 1999 U.S. Dist. LEXIS 8813, 1999 WL
386725 *4 (S.D.N.Y. 1999). In the Seventh Circuit the central
contention successfully advanced by respondents was that
“(t]he majority opinion in Pallas was wrong.”

The Seventh Circuit’s decision conflicts as well with the
analysis of the Tenth Circuit in Whitehead v. Oklahoma Gas &
Electric Co., 187 F. 3d 1184 (10th Cir. 1999). The plaintiff in
that case had lost accrued seniority rights when she was fired
because of her pregnancy; although she was later rehired, the
employer declined to restore those lost rights by “bridging” the
period when she was not employed. That loss of seniority later
rendered Whitehead ineligible for certain early retirement bene-
fits. The court of appeals held that the earlier dismissal was no
longer actionable, relying on Evans. However, the loss of sen-
iority would be a current violation, the Tenth Circuit reasoned,
if men who had left the company’s employement had been
permitted to retain previously accrued seniority while women
dismissed because of pregnancy were not.

The proper comparison group for Whitehead’s claim
would be men who also stopped working for OG&E dur-
ing the same time periods. Such men... have not had
their prior time of employment bridged, just like White-
head.

187 F. 2d at 1193. The instant case falls Squarely within the ra-
tionale of Whitehead; the proper comparison group, men who
were disabled, were permitted to continue to accrue service
credit while pregnant women were not.

"” Brief of Appellees, Nos. 98-3096, 98-3101, 98-3102, p. 19.

16

The decision below is also in direct conflict with EEOC’s
longstanding and consistent interpretation of Title VII. The
Commission “disagrees with the court’s analysis in Ameritech
and believes that the Pallas decision states the correct applica-
tion of the law.”'* EEOC Guidelines issued in 1972"? insisted
even before the adoption of the PDA that employers were re-
quired by Title VII to treat disabilities caused by pregnancy or
related medical conditions the same as all other disabilities for
ali employment purposes, including benefit and retirement
plans and seniority accrual. 29 C.F.R. §1604.10; App. A. to
§1610.11.” EEOC’s Compliance Manual explicitly interprets
Title VII to prohibit employers from using discriminatory pre-
PDA pregnancy leave rules today to determine current retire-
ment benefits.”’ The Commission has repeatedly adhered to
that interpretation of Title VII in litigation regarding current
utilization of pre-PDA pregnancy leave seniority practices.”

'S EEOC Compliance Manual, No. 915.003 (Oct. 3, 2000), “Employee
Benefits,” §III, B, n. 96. 4

'? In enacting the PDA, Congress recognized that “these guidelines
rightly implemented the Title VII prohibition of sex discrimination in the
1964 act.” H.R.Rep. No. 95-948, p. 2; S.Rep. No. 95-331, p.2.

2° Title VII has always prohibited an employer from failing to accord a
woman on pregnancy-related leave the same seniority . . . accrual accorded
those on other disability leaves.”

1 REOC Compliance Manual, No. 915.003, (Oct. 3, 2000), “Employee
Benefits,” §III, B (If “[{iJn evaluating eligibility for early retirement in 1996,
the employer has distinguished between employees who took leave prior to
1979 due to a pregnancy-related disability and employees who took leave
prior to 1979 for other temporary disabilities . . . the employer’s decision to
incorporate that denial of service credit in calculating seniority in 1996 is
discriminatory.”)

2 See, e.g., Complaint, EEOC v. Ameritech Services, Inc., 97 CV 2106
(N.D.Ohio August 15, 1997); Complaint, EEOC, et al. v. Bell Atlantic Corp,
et al., 97 CIV 6723 (D.C.) (S.D.N.Y. Sept. 10, 1997); Brief Amicus Curiae,
Carter v. AT&T Corp., No. 95-3213 (6th Cir. 1995).

17

(2) The linchpin of the Seventh Circuit’s holding that
respondents’ pregnancy leave policies are not facially discrimi-
natory was its assertion that those practices had been legal prior
to the adoption of the PDA.. App. 15a. The courts of appeals
are divided about that issue as well. In addition to the Seventh
Circuit, the Eighth Circuit has held that before the PDA it was
legal under Title VII to deny seniority credit to women on
pregnancy leave, even though workers with all other disabilities
received such credit. Southwestern Bell Tel. Co. Maternity
Benefit Litigation, 602 F. 2d 845, 848-49 (8th Cir. 1979). On
the other hand, the Third and Ninth Circuits held that such sen-
iority credit practices were illegal even prior to the adoption of
the Pregnancy Discrimination Act. Eberts v. Westinghouse
Elec. Corp., 581 F. 2d 357, 361-62 (3d Cir. 1978); Harriss v.
Pan American World Airways, Inc., 649 F. 2d 670, 678 (9th
Cir. 1980). If, as the Seventh Circuit believed, the legality of a
current reutilization of pre-PDA pregnancy leave policies de-
pends on whether those policies were lawful prior to the adop-
tion of the Pregnancy Discrimination Act, that premise will
necessarily lead to different results in different circuits.

(3) The Ninth Circuit decision in Pallas also concluded that
the practices at issue here violate ERISA. “Discrimination
constitutes a fiduciary breach for purposes of ERISA.” 940 F.
2d at 1327. The Seventh Circuit below reached the opposite
conclusion, holding that those practices were permissible under
ERISA. App. 17a-19a.

The Tenth Circuit has taken an intermediate position, in an
unreported decision regarding the applicability of ERISA to
practices similar to those in the instant case. Redding v. AT&T
Corp., 124 F. 3d 217, 1997 WL 537882 (10th Cir. 1997). Red-
ding held that a plaintiff could establish a claim under ERISA if
she could show that plan officials had discretion to give her full
credit for the period of her pregnancy leave. The Tenth Circuit
concluded that the plaintiff in Redding had failed to adduce
specific allegations that such discretion existed under the plan

18 .

in that case. 1997 WL 537882 *4. By contrast, the Ninth Cir-
cuit in Pallas held that the practice in Redding is a per se viola-
tion of ERISA.

(4) The conflict between Pallas and the decision below is
part of a wider disagreement among the lower courts about
which practices are governed by this Court’s decision in
Bazemore, and which by the Court’s opinion in Evans. Com-
pare Carter v. West Publishing, 225 F. 3d 1258, 1264-65 (11th
Cir. 2000)(Evans not Bazemore applies to, and bars, claims that
female employees were paid less in dividends from stock op-
tions) with Anderson v. Zubieta, 180 F. 3d 329, 335-36
(D.C.Cir. 1999)(claims regarding differences in housing, travel
and vacation benefits “fall on the Bazemore rather than Evans
side of the line”) and Ashley v. Boyles Famous Corned Beef, 66
F, 3d 164 (8th Cir. 1995) (work assignment claims barred by
Evans, but wage discrimination claims actionable under
Bazemore).

The district court below understood that the practices in this
case would be unlawful in the Second Circuit. App. 35a (de-
clining to follow the decision in Pollis v. New School for Social
Research, {32 F. 3d 115 (2d Cir. 1997), on the ground that it
was “unpersuasive.”) In Pollis and in Acha v. Beame, 570 F.
2d 57, 65 (2d Cir. 1978), the Second Circuit held that a dis-
criminatory denial of seniority credit which had first occurred
outside the relevant limitations period remained actionable,
stressing that “‘a discriminatory policy that results in a wrongful
denial of seniority causes harm not so much at the moment of
denial as in the future.” Pollis, 132 F. 3d at 118. Under the de-
cisions in Pollis and Acha, the practices at issue in the instant
case would be illegal in the Second Circuit.

Most recently in Mullins v. Crowell, 228 F. 3d 1305 (11th
Cir. 2000), the Eleventh Circuit held that the utilization of a fa-
cially discriminatory seniority classification rule could be chal-
lenged years later when that earlier decision was invoked to lay
off the plaintiffs. The plaintiffs there had been assigned to a

19

special undesirable seniority classification for workers with
physical disabilities. The defendant in Mullins insisted that the
plaintiffs could only complain at the time that that assignment
was first made; it reasoned, like the Seventh Circuit below, that
the victims of such discrimination could not object if the em-
ployer later invoked that earlier classification to lay off the
plaintiffs. The Eleventh Circuit rejected that contention, hold-
ing that if the original classification was facially discriminatory,
a subsequent employment action relying on that classification
could be challenged at any time.

[T]he use of the classification system to rif the plaintiffs
gave effect to the discriminatory classifications and started
the running of the limitations period. . . .

228 F. 3d at 1311-12.

On the other hand, the Sixth Circuit, relying on Evans, has
held that if an employer engages in intentional discrimination
in placing employees on a ranked promotion list, the limitations
period begins to run as soon as the list is created. On this view,
Evans precludes legal action if it was not commenced until the
victims were actually denied promotions. Cox v. City of Mem-
phis, 230 F. 3d 199 (6th Cir. 2000). The Sixth Circuit in Cox
expressly acknowledged that the Second Circuit rejects this in-
terpretation of Title VII. Guardians Ass’n of New York City
Police Dept. v. Civil Service Comm’ n of City of New York, 633
F, 2d 232, 247-48 (2d Cir. 1980).

(5) In 1992 this Court had occasion to consider whether to
address these issues when certiorari was sought in Pallas. 502
U.S. 1050 (1992). At that time a number of employer organi-
zations submitted amicus briefs emphasizing the practical im-
portance of a definitive resolution of the issue of whether
women could be paid reduced retirement benefits because of

20

pre-PDA pregnancy leave policies.” But the respondent in
Pallas correctly noted that at that juncture there was no conflict
among the circuits, and predicted—in retrospect incorrectly—
that the adoption of the 1991 Civil Rights Act would end fur-
ther efforts by employers to discriminate in this manner.”
Eight years later, that conflict is open and notorious, the appli-
cation of pre-PDA policies to calculate and limit retirement
benefits continues, and an increasing number of women with
pre-PDA pregnancies are now on the verge of retirement.

Ii. THE DECISION OF THE COURT BELOW IS IN
CONFLICT WITH NUMEROUS DECISIONS OF
THIS COURT

As the Ninth Circuit correctly recognized in Pallas, the prac-
tices in the instant case—and thus the decision below—are in-
consistent with this Court’s decision in Bazemore. The Sev-
enth Circuit acknowledged that, as of the effective date of the
PDA, women had less credited service than men solely because
they had been on pregnancy leave. It reasoned that there was
no post-PDA violation because after 1979 Ameritech had
added to the seniority of male and female workers in a non-
discriminatory manner. App. 12a-16a. That was precisely the
reasoning relied on by the Fourth Circuit, and rejected by this
Court, in Bazemore. Bazemore v. Friday, 751 F. 2d 662, 670
(4th Cir. 1984). The employer in Bazemore had, in the years
following the enactment of Title VII, afforded raises to black
and white workers in a non-discriminatory manner; their pre-
Title VII base pay, however, was the result of intentional pre-
Act discrimination. That arrangement, this Court concluded,
was “a mere continuation of the pre-1965 discriminatory pay

23

3 Brief Amicus Curiae of the California Employment Law Council, No.
91-812, pp. 8-9, 17; Brief Amicus Curiae of the Equal Employment Advi-
sory Council, pp. 13-15, No. 91-812.

*4 Respondents’ Brief in Opposition to Petition for Writ of Certiorari,
pp. 8-11, No. 91-812.

21

structure.” 478 U.S. 397 n. 6. The employer was “under an ob-
ligation to eradicate salary disparities based on race that began
prior to the effective date of Title VII.” 478 U.S. at 397. In the
instant case, Ameritech was under a similar obligation to eradi-
cate, rather than continue, service credit disparities that derived
from pre-PDA discrimination.

The circumstances of this case are clearly controlled by
Bazemore rather than Evans. In Evans the female plaintiff was
similarly situated to male comparators. The employer dealt in
the same manner with every employee who had been fired and
later rehired; all of them lost accrued seniority. Here the oppo-
site is the case; Ameritech does not treat in the same manner all
employees who were absent for work because of a disability.
All men who were absent due to disability continued to accrue
service credit, but women on pregnancy leave received no
credit after 30 days. It was this disparate treatment that was
applied by Ameritech to determine pension checks in the
1990’s.

In Bazemore, current paychecks were based on old policies;
here, current pension payments (or the denial of such benefits)
are based on old policies. If in 1975 Ameritech had penalized
pregnant women by cutting their wages in half, that decision
would necessarily have reduced their pensions as well; as in
Bazemore, every reduced pension check, like every reduced
paycheck, would be a new violation. In the instant case,
Ameritech’s discrimination affects pension checks, not pay-
checks, but that is not a difference of legal significance.
Ameritech’s practice is simply Bazemore in slow motion.

The pivotal premise of the opinion below was that all forms
of discrimination based on pregnancy were lawful before the
1978 enactment of the Pregnancy Discrimination Act. The
court stated: “[P]rior to the adoption of the PDA an authorita-
tive Supreme Court decision had held that Title VII did not
prohibit distinctions based on pregnancy. General Electric Co.

22

v. Gilbert, 423 U.S. 822 (1976).” App. 15a. But only a year af-
ter Gilbert, and before the adoption of the PDA, this Court in
Nashville Gas Co. v. Satty, 434 U.S. 136 (1977), held that some
distinctions based on pregnancy were indeed unlawful under
Title VII. In Satty the employer generally permitted workers to
maintain their accrued seniority during a leave caused by dis-
ability, but denied accumulated seniority to women who
returned from pregnancy leaves. Because that policy had a
palpable discriminatory effect on female workers, this Court
held unanimously that it was illegal under Title VII. In the
instant case, the reutilization of Ameritech’s pre-PDA preg-
nancy leave policies to deny or reduce current benefits clearly
discriminates against female workers, a fact which the
company has never suggested could be justified by business
necessity.

The decision below conflicts as well with this Court’s deci-
sion in International Brotherhood of Teamsters v. United
States, 431 U.S. 324 (1977). The Seventh Circuit recognized
that Title VII does not permit an employer to utilize a seniority
rule that involves intentional discrimination. However, it held
that a policy is only “facially” discriminatory if the type of dis-
crimination apparent on its face was illegal at the time when the
policy was originally adopted. Because the court of appeals be-
lieved that Ameritech’s pre-PDA pregnancy leave policies were
lawful prior to April 1979, it concluded that those policies did
not involve “the kind of intentional discrimination that would
trigger the exception to the statutory protection afforded to sen-
iority systems.” App. 15a. Teamsters, however, expressly held
that a seniority system is not afforded the protection of section
703(h) of Title VII if, prior to the enactment of Title VII, the
system was adopted for the purpose of discriminating on the
basis of race or sex, even though federal law did not forbid -
such discrimination at the time. 431 U.S. at 324 (pre-Act sys-
tem would be unlawful if it “ha{d] its genesis in racial dis-
crimination’’); Patterson v. American Tobacco, 456 U.S. 63

23

(1982)(standard for determining legality of pre-Act seniority
system same as standard for post-Act system); Swint v. Pull-
man-Standard, 456 U.S. 273 (1982)(seniority system adopted
in 1954 unlawful if structured for discriminatory purpose);
California Brewers Assn. v. Bryant, 444 U.S. 598, 611
(1980)(remanding to afford plaintiff an opportunity to prove
seniority system adopted in 1959 was adopted for a discrimina-
tory purpose).

The Seventh Circuit also insisted that an ongoing illegal
practice only constitutes a “continuing violation” if the victims
“had no way of knowing that something bad had happened to
them until much later.” App. 15a. Since women knew in 1979
that their net credited service had not been corrected in the
wake of the PDA, the court below reasoned, the continued
utilization of that discriminatory calculation became legal when
the victims failed to complain immediately about that ongoing
violation once the PDA became law. This holding too is in-
consistent with Bazemore v. Friday. The black employees in
Bazemore also knew full well that the discriminatory pre-Title
VII salary structure had never been corrected. This Court re-
jected the employer’s contention that its discriminatory wage
practices had somehow acquired immunity from challenge be-
cause of its prolonged application; “[t]o hold otherwise would
have the effect of exempting from liability those employers
who were historically the greatest offenders of the rights of
blacks.” 478 U.S. at 385. This Court has repeatedly permitted
plaintiffs to challenge the legality of employment practices
whose discriminatory nature had been known for years. See
e.g. Arizona Governing Committee v. Norris, 463 U.S. 1073
(1983); Los Angeles Dept. of Water & Power v. Manhart, 435
U.S. 702 (1978). The holding in Lorance v. AT&T Technolo-
gies, 490 U.S. 900, 912 (1989) that a facially discriminatory
seniority system “can be challenged at any time” is clearly in-
consistent with the Seventh Circuit’s holding that the very fact
that a discriminatory nature of a practice is express, and thus

24

apparent to its victims, precludes legal challenge at any
time other than the moment when the practice first becomes

unlawful.

CONCLUSION

For the above reasons, a writ_of certiorari should issue to re-
view the judgment and opinion of the Court of Appeals for the

Seventh Circuit.

MICHAEL B. ERP

LAURIE M. BURGESS

KATZ, FRIEDMAN, EAGLE,

EISENSTEIN & JOHNSON

77 W. Washington St.

20th Floor

Chicago, IL 60602

(312) 263-6330

Counsel for Annette
Foster-Hall, et al.

ROBERT J. TSCHOLL

740 United Bank Building

220 Market Ave.

South Canton, OH 44702

(330) 456-7702

Counsel for Bernadette
Bernabei

*Counsel of Record

Respectfully submitted,

MARY K. O’MELVENY*
501 Third Street, N.W.
Washington, D.C. 20001
(202) 434-1213
Counsel for Communications
Workers of America,
AFL-CIO

DOUGLAS M. MOREHART

HAVERKAMP, BRINKER,

REBOLD, & RIEHL

5856 Glenway Ave.

Cincinnati, OH 45238

(513) 922-3200

Counsel for Annette Foster-Hall,
et al.

ERIC SCHNAPPER
University of Washington
School of Law

1100 N.E. Campus Parkway
Seattle, WA 98105

(206) 616-3167

Counsel for Petitioners

APPENDICES

la
APPENDIX A

UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT

Nos. 98-3096, 98-3101, 98-3102

AML«ITECH BENEFIT PLAN COMMITTEE, et al.,
Plaintiffs-Appellees,

Vv.

COMMUNICATION WORKERS OF AMERICA,
ANNETTE FOSTER-HALL, et ai.,
Defendants-Appellants.

and BERNADETTE BERNABEI,
Plaintiff-Appellant,

we

AMERITECH CORPORATION, ef ai.,
Defendants-Appellees.

February 9, 1999, Argued
July 13, 2000, Decided

Appeals from the United States District Court for the
Northern District of Illinois, Eastern Division. Nos. 97-C-
1441, 97-C-2209. Suzanne B. Conlon, Judge.

Before CUDAHY, RIPPLE, and DIANE P. WOOD,
Circuit Judges.

OPINION OF THE COURT OF APPEALS

DIANE P. WOOD, Circuit Judge. This case is about the
present consequences of the way in which Ameritech
Corporation (and its predecessors) computed time for
purposes of its pension plan, early retirement, and similar
benefits, when the reason for an approved absence from work

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was pregnancy rather than any other short-term disability.
(For the sake of convenience, we refer throughout to the
company as Ameritech, even though Ameritech did not come
into being until 1984. The difference in corporate identity
makes no difference to the outcome of this case.) After the
passage of the Pregnancy Discrimination Act (the PDA) in
1979, Pub. L. No. 95-555, codified at 42 U.S.C. § 2000e(k),
the Ameritech Benefit Plan Committee (benefit committee)
did not go back to recompute leave periods for women
employees whose absences were because of pregnancy.

This decision took on immediate importance for the
affected employees in 1994, when Ameritech added benefits
to its pension plan. For these people, indeed, it made the
difference between eligibility to take early retirement and to
enjoy other pension benefits, and lack of eligibility. In an
unusual move, Ameritech jumped into court with an action
for a declaratory judgment, and it attempted to sue a
defendant class of employees. The district court granted
summary judgment for Ameritech, dismissing the class
claims under Title VII, ERISA, the Equal Pay Act, and
various state laws. We affirm. é

For the entire time period relevant to this suit, Ameritech
has used a record-keeping system it calls Net Credited
Service (NCS) for purposes of determining an employee’s
entitlement to pension and other employment benefits. The
NCS system produces a number, created by Ameritech and
assigned to each employee, which reflects an adjusted amount
of “continuous” employment with which the employee is
credited. Each employee’s NCS number is based on several
factors, including credit that Ameritech gives the employee
for time spent working at Ameritech, and credit that it gives
the employee for various leaves of absence. In other words,
employees receive service credit for actual time worked and
for certain leaves, but they do not receive service credit for

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other leaves. The latter time periods are “squeezed out” or
subtracted from the gross time between hire date and the
present, before benefit eligibility is determined. Ameritech
notes, without contradiction from the employees, that the
NCS system is incorporated in both its collective bargaining
agreements and in its pension plans.

The addition of the PDA to Title VI, effective April 29,
1979, forced Ameritech to change its method of calculating
NCS. For most of the time prior to the advent of the PDA,
Ameritech had counted only a maximum of 30 days of an
employee’s pregnancy or maternity leave towards her NCS
(because it was treating pregnancy as a “personal leave”
capped by a 30-day limit, instead of as a disability leave).
Pregnancy leaves in those days typically lasted much more
than 30 days, at Ameritech’s insistence: Ameritech required
pregnant women to begin their pregnancy leaves several
months before their due dates. In contrast, employees with
other disabilities were granted full NCS credit for their
disability-related leaves. The PDA, which established that
discrimination based on pregnancy is sex discrimination and
that pregnancy must be treated the same as any other short-
term disability, made it clear to Ameritech that its NCS
system had to change. Ameritech accordingly began giving
employees full NCS credit for their pregnancy and maternity
leaves. It did not, however, adjust the NCS periods of
employees who had taken pregnancy or maternity leaves
before the effective date of the PDA, April 29, 1979, nor did
it discontinue its use of NCS to calculate various employee
benefits.

Here matters stood for many years. The stakes for the
women who had received only partial credit for their pre-
PDA pregnancy leaves became higher in 1994, however,
which led to the present litigation. On March 7 of that year,
Ameritech amended its pension plan to provide early
retirement benefits to some employees. Under the

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amendments, eligible non-managemeat employees who
retired between February 22, 1994, and September 30, 1995
were entitled to have three years added to their terms of
employment and three years added to their actual ages for
purposes of determining retirement eligibility and calculating
the amount of their pension benefits. The same employees
were made eligible for additional tuition assistance, as well as
cash payments under a Supplemental Income Protection
Program. Ameritech’s plan administrators used the NCS in
calculating each employee’s term of employment in order to
distribute the benefits. Because employees who had taken
pregnancy or maternity leaves prior to April 29, 1979 had
lower NCS numbers than they would have had under a
system that did not discriminate against pregnancy, some of
them did not receive the added 1994 benefits even though
they would have been eligible if they had been disabled in
any other way.

Cheryl Cuprys and Bernadette Bernabei were two Ameri-
tech employees who had taken pre-April 29, 1979 pregnancy
and maternity leaves and were therefore not eligible for the
1994 benefits. Cuprys and Bernabei both challenged their
denial of benefits, but Ameritech’s benefit committee denied
their claims and appeals. Cuprys and Bernabei then turned to
the EEOC and filed charges with it. The EEOC issued a right
to sue letter to Cuprys on February 24, 1995, and to Bernabei
on September 28, 1995. !

On December 20, 1995, Bernabei filed suit in the United
States District Court for the Northern District of Ohio
alleging that Ameritech’s actions violated Title VII, the Equal
Pay Act, ERISA, and state law (Bernabei v. Ameritech Corp.,
et al., 1998 U.S. Dist. LEXIS 11363, No. 97-CV-02209). On
March 3, 1997, Ameritech filed suit against a claimed
defendant class of affected women and against two unions,
the Communications Workers of America, AFL-CIO (the
CWA) and certain local unions affiliated with the

wee.

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International Brotherhood of Electrical Workers (IBEW), in
the Northern District of Illinois. Ameritech’s complaint asked
for a declaratory judgment that it had not violated any of the
same laws invoked in the Bernabei action. Bernabei’s suit
was transferred to Illinois, and in May of 1997 it was
consolidated with Ameritech’s declaratory judgment action.

The putative defendant class and the CWA filed their
answers, along with counterclaims under Title VII, the Equal
Pay Act, ERISA, and the state laws. (Indeed, these claims
mirrored Ameritech’s request for declaratory relief, which

saves this case from undue complication as we explain

below.) In an order dated August 28, 1997, the district court
approved the parties’ joint request for class certification as to
the Title VII, ERISA, and state law claims, apparently under
Fed. R. Civ. P. 23(b)(1) and 23(b)(2). (The order contains no
discussion or explanation of this decision, but these are the
rules cited in the earlier motion for certification.) Later, the
district court granted Ameritech’s summary judgment motion
as to all parties, and denied the cross-motions of the CWA,
the class, and Bernabei. This appeal followed.

II
A. Subject Matter Jurisdiction

The EEOC, through a brief amicus curiae it has filed with
this court, argues that the district court lacked subject matter
jurisdiction over Ameritech’s Title VII and Equal Pay Act
claims, because neither statute provides for suits by the
employer against whom discrimination is alleged. Given the
fundamental nature of this argument, we address it first. In
our view, the district court had subject matter jurisdiction
under 28 U.S.C. § 1331. It is of course true that the Declara-
tory Judgment Act, 28 U.S.C. § 2201, is not an independent
source of subject matter jurisdiction. See GNB Battery
Technologies, Inc. v. Gould, Inc., 65 F.3d 615, 619 (7th Cir.
1995); Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667,

a ee ee

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671, 94 L. Ed. 1194, 70 S. Ct. 876 (1950). It allows suits for
declaratory judgment where federal jurisdiction would exist
in a coercive suit brought by the declaratory judgment
defendant. See GNB Battery Technologies, Inc., 65 F.3d at
619; Franchise Tax Board, 463 U.S. 1, 19, 77 L. Ed. 2d 420,

. 103 §. Ct. 2841 (1983). Had the aggrieved employees (here,

class defendants) brought a suit to enforce Title VII and the
Equal Pay Act against Ameritech, the district court would
have had jurisdiction over the complaint because inter-
pretation and application of these statutes present federal
questions. See Steel Co. v. Citizens for a Better Environment,
523 U.S. 83, 89, 118 S. Ct. 1003, 140 L. Ed. 2d 210 (1998).
Indeed, this is exactly what the employees did when they
filed their counterclaims. One way or the other, the claims on
all sides present federal questions, and so our jurisdiction is
secure.

The Commission is really arguing that the statutes confer
no right on Ameritech to sue as a plaintiff, because they
confer no such rights on employers (i.e. no claim can be
stated) or because it is the wrong party (i.e. it lacks statutory
standing). While these could be important points, they do not
implicate the jurisdiction of the district court. Our basis for
jurisdiction comes from the underlying controversy, not the
particular party initiating suit. We note, however, that the
question whether an employer should have the right to short
circuit the EEOC’s internal processes by running to court and
filing a declaratory judgment action in a Title VII suit is an
important one, which will have to be addressed in a case that
raises it properly. The counterclaims and Bernabei’s direct
action mean that this is not such a case, however, so we leave
further discussion of this point to another day.

B. Ripeness of Ameritech Action

The EEOC argues in the alternative that Ameritech’s suit
was unripe because the parties failed to exhaust their

administrative remedies. At the time Ameritech filed its

those people as defendants. Shortly after Ameritech filed this
action, the Comm

here. Although Bernabei’s suit was transferred to the
Northern District of Illinois from the same Ohio district court,
that court denied Ameritech’s motion to transfer the EEOC
case here, and so the Commission’s action is still pending
there, awaiting the outcome of this appeal.

Had Ameritech not filed its declaratory judgment action,
the Commission could have controlled both the timing and
the forum of this litigation to a far greater degree. (We note,
however, that the Commission is not immune from a transfer
of venue under 28 U.S.C. § 1404(a), and so this right is not

_ unqualified.) The Commission argues that the employer
should not have the right to thwart its enforcement decisions
in the way that Ameritech has done here. In a sense, its
argument is that any employer action that is possible
(assuming arguendo that such actions exist) must be subject
to the same exhaustion requirements that employees face.
This too is a reasonable argument, but not one that can Carry
the day on the facts before us. To begin with, exhaustion is
not a jurisdictional requirement for Title VII Claims. See
Gibson v. West, 201 F.3d 990, 994 (7th Cir. 2000). It is
merely a precondition to bringing a Title VII claim in federal
court, and is therefore subject to the doctrines of waiver,
estoppel, and equitable tolling. See id.

We would have a much more difficult Case on our hands if
Bernabei and Cuprys had never filed charges with the EEOC,
or if the EEOC had not responded to the charges by issuing
right-to-sue letters. We do not need to address that
hypothetical situation here, however, nor is it necessary for us

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to address the question whether an employer must file a
formal charge with the Commission as a prerequisite to
bringing the kind of declaratory judgment action Ameritech
filed. In our case, individual charges were filed and the EEOC
issued right-to-sue letters. Thus, whatever interests in
completion of the Commission’s internal procedures may
exist were satisfied. We are left with the more conventional
problem of competing lawsuits on the same issues in two
different federal districts. This does not seem to have
bothered the parties much, and it is surely not the kind of
fundamental defect that divests the district court of power to
rule on the case.

C. Class Certification

Despite the fact that neither party has addressed the way
that class certification was accomplished in this case, we
cannot proceed without considering this problem as well.
This is so precisely because classes include not only the
parties directly before the court, but absentees, and in some
cases the active participants may sell out the interests of the
others. See, e.g., Crawford v. Equifax Payment Services, Inc.,
201 F.3d 877, 882{7th Cir. 2000); see Pettway v. American
Cast Iron Pipe Co., 576 F.2d 1157, 1169 (Sth Cir. 1978);
Plummer v. Chemical Bank, 668 F.2d 654, 658 (2d Cir.
1982). We look at the alleged defendant class that the district
court certified for Ameritech’s declaratory judgment under
Title VII.

To begin with, there is a potential problem with virtually
all defendant classes that proceed under anything but Rule
23(b)(3). Defendant classes, initiated by those opposed to the
interests of the class, are more likely than plaintiff classes to
include members whose interests diverge from those of the
named representatives, which means they are more in need of
the due process protections afforded by (b)(3)’s safeguards. It
also means that they are less likely to satisfy the requirements
of Rule 23(a). Risks of diverging interests are particularly

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high in actions seeking monetary remedies. In Phillips
Petroleum Co. v. Shutts, 472 U.S. 797,-86 L. Ed. 2d 628, 105
S. Ct. 2965 (1985), the Supreme Court discussed the
analogous problem of the rights of absentee members of a
plaintiff class that sought monetary relief. The Court
concluded that nothing less than the type of notice and opt-
Out opportunity provided by Rule 23(c) (or, in Shutts, the
Kansas equivalent to the federal rule) would Satisfy due
process. Moreover, throughout its discussion, it frequently
drew comparisons between the position of absentee plaintiff
class members and defendants, and virtually every one of
those comparisons implied that defendants have, if anything,
greater rights. We are not aware of a single case that has ever
justified a monetary award (or, as here, a judgment declaring
that a party is entitled to no money) without at a minimum
requiring notice be afforded to that party.

Our decision in Henson v. East Lincoln Township, 814
F.2d 410 (7th Cir. 1987), cert. granted, 484 U.S. 923 (1987),
cert. dismissed, 506 U.S. 1042 (1993), holds that a defendant
class is normally impermissible under Rule 23(b)(2), although
it leaves open the possibility of a debtor’s bringing a class
action against a class of creditors seeking a declaration of
nonliability. This is what Ameritech says it has done, but later
developments in this circuit’s class action jurisprudence make
it clear that the district court should not have brushed over the
requirements of Rule 23 so quickly. We refer to the decision
in Jefferson v. Ingersoll Intern. Inc., 195 F.3d 894 (7th Cir.
1999), in which we made clear that mixed class actions that
seek both equitable and compensatory relief must satisfy the
formalities of Rule 23(b)(3). See also Lemon v. Intern. Union
of Operating Eng’rs, Local No. 139, 2000 U.S. App. LEXIS
12722, 2000 WL 733577, No. 99-4101 (7th Cir., June 9,
2000). As for this, some blame lies at the feet of the class
representatives. Paragraph 1 of the counterclaim begins by
saying “this counterclaim seeks money damages, declaratory
and injunctive relief against Plaintiffs for violations of Title

Ae ihe me earn

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VIl,... ERISA, ... the Equal Pay Act, . . . [and certain state
laws]."” What could be clearer? And yet the record is devoid
of any indication that the absentees had any idea that the case
was going on.

The parties did not ask for class certification for purposes
of the Equal Pay Act claims, because they recognized that the
problems with certifying such a class under the Equal Pay Act
are especially great. There is_no such thing as a Rule 23 class
action in an Equal Pay Act case. The Act, by incorporating
the requirements of the Fair Labor Standards Act, compels
the use of a more restrictive “opt-in” procedure. 29 U.S.C.
$2/6(b). Nothing of the sort occurred here, once again
because neither the district court nor the parties paid
appropriate attention to the certification question.

The problem with ignoring these issues is that the rights of
persons not before the court are necessarily implicated once a
class is certified. We have concluded that the proper way to
proceed is to decide the claims of the parties who are clearly
before the court: the named plaintiffs and anyone who
intervened formally.’ In fact, our resolution of these claims
will have a powerful stare decisis effect on -the claims
absentees might have wanted to assert, but that cannot be

"These plaintiffs include (aside from the unions) Bernadette Bernabei,
the original named individual defendants in Ameritech’s declaratory
judgment suit (Annette Foster-Hall, Brenda Gibson, Wilbur Haynes,
Helen Kloess, H. Carleen Leach, Sharon Parrish, Frances Timmerman,
Phyllis Barnes, Betty Bober, Janet Champer, Linda Croddy, Patricia
Elick, Lesle Gardner, Dolores Harmacinski, Polly Neimeier, Debby Flynn
Adomaitis, Anne Marie Allen, Carol Amato, Vicki Andrews, Evelyn
Dallos, Leanne Grover, Ruth Johnson, Virginia Jones, Francie Wingo,
Sara Sue Adkins, Debra Anderson, Janet Appleton, Sandra Ballard,
Kathryn Kreger, Margaret Perrill, Diane Richard, Brenda Smitherman-

_Muir, Mary Jo Avery, Diana Beattie, Christine Berger, and Shirley

Connell), and those individuals whom the district court allowed to
intervene (see Agreed Amended Motion to Intervene Certain Class
Members, Exhibit A).

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helped. By the same token, our ruling in this action will not
formally preclude the EEOC in its Ohio action, since the
Commission is also not a party before this court. The Ohio
court, and the Sixth Circuit in turn should an appeal be taken,
will have the right to come to their own conclusions on these
issues.

D. The Unions

As the litigation progressed, only the CWA played an
active role in filing papers with the court. Our comments,
however, apply in principle to both unions. Apart from their
potential role as an organizational representation of their
members, the unions had little to say here. Indeed, because
the way in which time of service was computed implicates the
collective bargaining agreements the unions had with
Ameritech, they might have some incentive to defend their
earlier actions. For the same reason we have disregarded the
role of the absentee class members, we do not reach the legal
issues that might be raised in conjunction with the unions’
role. Neither party briefed these questions, and it suffices to
say here that the unions’ participation does not change our
view of the merits of the action.

Il

We turn, finally, to the merits. Because this appeal comes
to us from a grant of summary judgment, we review the
decision of the district court de novo. See Vakharia vy.
~ Swedish Covenant Hosp., 190 F 3d 799, 805 (7th Cir. 1 999).
We construe the record in the light most favorable to the
employees, who are entitled as the non-moving parties to a
reversal if the record reveals a genuine issue of material fact.
See id.

A. Title VI

As we have already noted, Title VII prohibits an employer
from discriminating against an employee or applicant based

12a

on sex, 42 U.S.C. § 2000e-2(a), and the PDA provides that
for purposes of Title VII discrimination based on sex includes
discrimination based on pregnancy. 42 U.S.C. § 2000e(k). In
light of those indisputable facts, Ameritech freely admits that
it could not today calculate its NCS numbers to favor persons
who had not taken pregnancy or maternity leave, or in a way
that imposed some form of discount on that one type of short-
term disability, and then apply those numbers to determine
employee benefits. Its point is a different one: it urges that it
is too late for the employees to complain about a method of
calculation of NCS that applied only to pre-PDA leaves and
that has not been in existence at Ameritech since 1979. A
Title VII charge must be filed within 180 days after the
“alleged unlawful employment practice occurred,” unless the
plaintiff initially filed charges with an appropriate State or
local agency, in which case the charge must be filed within
300 days after the “alleged unlawful employment practice,”
or within 30 days after receiving notice that the State or local
agency has terminated the proceedings—whichever is earlier.
42 U.S.C. § 2000e-5(e)(1).

The outcome of this case turns on which of two competing
lines of authority provide a better “fit” here. The one on
which the employees rely is represented by Bazemore v.
Friday, 478 U.S. 385, 92 L. Ed. 2d 315, 106 S. Ct. 3000 ~
(19806). In Bazemore, the Court found that an employer’s
calculation of a discriminatory base salary structure prior to
the effective date of Title VII did not leave the employer free
to use that tainted base salary structure in determining salaries
after Title VII's effective date. /d. at 395-96. See also Wagner
v. Nutrasweet Company, 95 F.3d 527, 534 (7th Cir. 1996).
Just so here, they say: Ameritech may not use a system for
calculating time of service that was tainted by pregnancy
discrimination when it makes present decisions about
eligibility for benefits.

13a

Intoning the words “bona fide seniority system” does not
help Ameritech, in the employees’ view, because the Civil
Rights Act of 1991 amended 42 U.S.C. §2000e-5(e) to
provide that “an unlawful employment practice occurs, with
respect to a seniority system that has been adopted for a
discriminatory purpose in violation of this title, . . . when a
person aggrieved is injured by the application of the seniority
system or provision of the system.” The employees conclude
that Ameritech’s continued use of pre-1979 NCS compu-
tations is a fresh violation of the statute, which occurred in
1994. It was then that Ameritech afforded early retirement
and various cash benefits to employees who had high enough
NCS numbers to retire between February 22, 1994 and
September 30, 1995. The company could have decided to
give its new benefits to all of its employees based on how
long they had worked for Ameritech, and it could have
calculated that length of time such that all employees who
had been disabled prior to April of 1979 were treated alike.
Instead, in applying the 1994 benefits, it decided to hinge
them on “NCS,” thereby favoring those employees who had
not been pregnant prior to April of 1979.

Ameritech (naturally) relies on the other line of cases,
represented by United Air Lines v. Evans, 431 U.S. 553, 52 L.
Ed. 2d 571, 97 S. Ct. 1885 (1977), and Delaware State
College v. Ricks, 449 U.S. 250, 66 L. Ed. 2d 431, 101 S. Ct.
498 (1980). In Evans, the employer’s discriminatory action
occurred when it forced a female flight attendant to quit
because she got married. 43] U.S. at 554-55. Later, the
employer rehired the flight attendant. The Evans Court held
that the employer’s refusal after the rehiring to “ orrect” the
effects of the past firing by affording her additional seniority
did not violate Title VII, because such a refusal was not a
discriminatory action in itself. Jd. at 557-58. Both male and
female employees who had been fired (whether for a non-
discriminatory reason or for an unchallenged discriminatory
reason) and then re-hired were treated the same for purposes

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of seniority credit. The continuing impact of the earlier
action, within the context of an otherwise neutral system, was
not enough to show a present violation. Ricks is similar.
There, the College’s discriminatory act occurred when it
denied plaintiff Ricks academic tenure, allegedly on the basis
of his national origin. 449 U.S. at 252. The college fired
Ricks a year later, as it fired other academic employees at the
expiration of their terminal 1-year contracts. The Court
concluded that there was no continuing violation, and that
Ricks’ claim accrued at the time of the tenure denial. /d. at
257-58.

For a number of reasons, we think that Ameritech has the
better of this dispute, though we acknowledge hat the line
between continuing violations that arise with each new use of
the discriminatory act (e.g., the Bazemore paychecks) and
past violations with present effects (e.g., the Evans seniority)
is subtle at best. But it is a line the Supreme Court has drawn,
and it is our obligation to apply it if at all possible. First is the
fact, simplistic as it may seem, that our case involves
computation of time in service—seniority by another name—
followed by a neutral application of a benefit package to all
employees with the same amount of time. That suggests that
we should look first to Evans, and follow the other line only
if there is no alternative. It is true that Bazemore was decided
nine years after Evans, but the Bazemore Court said nothing
about overruling Evans, and so we assume that it did not do
so.

The statute itself offers good reason to treat seniority
systems with special care, because it specifically exempts
discriminatory effects that flow from bona fide seniority
systems from the definition of unlawful employment
practices, as long as the differences are not the result of an
intention to discriminate. 42 U.S.C. §2000e-2(h). If the
employees are able to show intentional discrimination, their
action accrues at the time they are injured by the seniority

15a

system—that is, when they are denied benefits. 42 U.S.C.
§ 2000e-5(e).

In our opinion, these employees cannot show the kind of
intentional discrimination that would trigger the exception to
the statutory protection afforded to seniority systems. As
Ameritech points out, prior to the adoption of the PDA an
authoritative Supreme Court decision had held that Title VI
did not prohibit distinctions based on pregnancy. General
Electric Co. v. Gilbert, 429 U.S. 125, 50 L. Ed. 2d 343, 97
S. Ct. 401 (1976). Moreover, the PDA has not been treated as
a retroactive statute, see Condit v. United Air Lines Inc., 631
F 2d 1136, 1139-40 (4th Cir. 1980); Schwabenbauer v. Board
of Ed. of City Sch. Dist. of City of Olean, 667 F.2d 305, 310
n. 7 (2d Cir. 1981); Whitehead v. Oklahoma Gas & Elec. Co.,
187 F.3d 1184, 1193 (10th Cir. 1999), and so Ameritech
would have had no reason to think it had to reshuffle its NCS
list after the Act was passed. Third, the Supreme Court has
held that the fact that a seniority system perpetuates pre-Act
discrimination does not preclude it from being bona fide. See
International Brotherhood of Teamsters v. United States, 431
U.S. 324, 352-53, 52 L. Ed. 2d 396, 97 S. Ct. 1843 (1977).
The employees here protest that they are not talking about a
seniority system, but they are wrong. Under the Supreme
Court’s test in California Brewers Ass'n v. Bryant, 444 U.S.
598, 606, 63 L. Ed. 2d 55, 100 S. Ct. 814 (1980), the key to
deciding whether a decision-making process qualifies as a
seniority system is its reliance on relative lengths of
employment. That is what Ameritech’s NCS system does, and
we think it fits easily into the seniority system !ine of cases.

Last, this is not a case like some continuing violations
where the employees had no way of knowing that something
bad had happened to them until much later. Hostile
environment sexual harassment cases, for example, can only
be brought once it becomes clear that the harassment is severe
Or pervasive enough to constitute an adverse effect on terms

16a

and conditions of employment. Here, the women knew the
minute they took their pregnancy or maternity leaves that
they were not getting full credit for their time off. No later
than the time when Ameritech amended its plan in response
! to the PDA, they knew that their NCS had not been amended.
It is no secret to any employee that seniority rolls like
Ameritech’s NCS make a difference for a host of employee
benefits, some present, and some future. Ameritech informed
each employee periodically of his or her accrued NCS. The
time for bringing a complaint was therefore long ago, and the
district court correctly recognized that these employees had
sued too late.

B. The Equal Pay Act

The employees next challenge Ameritech’s procedures
under the Equal Pay Act. (As before, we are addressing only
the claims of the named plaintiffs and anyone who properly
intervened before the district court.) We assume for the sake
of argument that the employees have satisfied their initial
burden under the statute to show that Ameritech pays women
less than men for “equal work on jobs the performance of
which requires equal skill, effort, and responsibility, and
which are performed under similar working conditions.” 29
U.S.C. § 206(d)(1); see Corning Glass Works v. Brennan,
417 U.S. 188, 195, 94 §. Ct. 2223, 41 L. Ed. 2d 1 (1974). On
the record here, the only difference between the complaining
employees and their colleagues who were able to receive the
1994 benefits is that they were pregnant women before April
of 1979.

But once again, the fact that the disadvantage from which
they suffer is the result of a bona fide seniority system dooms
their claim. The Equal Pay Act provides that there is no
violation if the unequal pay was due to “any other factor other

| than sex,” including “(i) a seniority system; (ii) a merit
| system; [or] (iii) a system which measures earnings by
quantity or quality of production.” 29 U.S.C. § 206(d)(1).

eee Dee er ae enna oN gr

17a

This is an affirmative defense for the employer, see Corning
Glass Works, 417 U.S. at 196, but for the same reasons we
have just reviewed for purposes of Title VII, we find that
Ameritech has met its burden. In addition, we agree with
Ameritech that the Equal Pay Act claim is untimely. Claims
arising under that statute must be filed within two years of
their accrual, 29 U.S.C. $ 255(a), and these claims were not
presented until many years after the initial decision not to
adjust the employees’ time in service for pre-1979 pregnancy
leaves.

C. ERISA

The employees’ final federal claims involve ERISA. First,
they believe that Ameritech violated its duty under ERISA to
act in the best interest of all the plan beneficiaries and
participants when it discriminated against certain female
beneficiaries of the plan. ERISA fiduciaries are required to
act with care and skill “solely in the interest of
the participants and beneficiaries.” 29 U.S.C. § 1104(a).
Ameritech is a fiduciary under ERISA, because it has
discretion and control in implementing the plan. See 29
U.S.C. § 1002(21 (A); Administrative Committee v. Gauf, 188
F.3d 767, 770 (7th Cir. 1999). Second, the employees argue
that Ameritech violated section 510 of ERISA, which
prohibits employers from frustrating their employees’
attainment or enjoyment of benefit rights. 29 U.S.C. § 1140;
see Feldman v. American Memorial Life Ins. Co., 196 F.3d
783, 792 (7th Cir. 1999). Individuals may bring claims to
recover benefits, to enforce rights, and to clarify rights under
29 U.S.C. § 1132(a)(1)(B).

Even if we agreed that the employees’ ERISA claims were
timely, perhaps because they arise more directly out of the
1994 plan amendment than the Title VII or Equal Pay Act
claims, the ERISA claims face an additional hurdle. In order
for the employees to show that Ameritech breached either a
fiduciary duty or section 510, the employees must be able to

18a

show that they were, at some time, eligible for the plan’s

: benefits. Fiduciaries are required to act “in accordance with
the documents and instruments governing the plan.” 29
U.S.C. § 1104. Any breach of the fiduciary duty must derive
from Ameritech’s implementation of the plan. For its part,
section 510 only applies if the employees can show (among
other things) that they were qualified under the plan for the
denied benefits. See Feldman, 196 F.3d at 792. If the plan
itself provides for discriminatory practices, such that they do
not qualify for benefits under its terms, they cannot prevail on
an ERISA claim.

The employees stress that the plan refers to “TOE,” or
“time of employment,” and not NCS. They maintain that
TOE does not necessarily need to be calculated using NCS,
and that they would be-eligible for the benefits of the plan if
their time of employment was calculated in the same way as
it would be for other previously disabled employees.
Nevertheless, Ameritech’s decision to use NCS to calculate
time of employment cannot evidence an intent to discriminate
if the NCS system itself has passed muster under the
antidiscrimination laws.

Furthermore, there may be a problem with shoe-horning a
discrimination claim into the ERISA notion of fiduciary duty,
because ERISA “does not itself proscribe discrimination in
the provision of employee benefits.” Shaw v. Delta Air Lines,
Inc., 463 U.S. 85, 91, 77 L. Ed. 2d 490, 103 S. Ct. 2890
(1983). Shaw found that a state law prohibiting discrimination
was preempted by ERISA, because it “related to” the area of
benefits, which is covered ' ' ERISA. /d. at 99. Ameritech
argues that the Shaw Court . .0 insinuated that ERISA would
not be a source of protection against such discrimination. The
Court said that discriminatory practices would have to be
evaluated under Title VII, rather than a broad state law, and
did not specifically include the option of resorting to ERISA.
Id. at 105-06. But the Shaw Court was not presented with and

2a EOS SON AA NE EAS 5 NC AEN EINE DEIN A NODAL CR AIA RL NAT BN PAUL

OE Ee Ne ee eC neem a

19a

did not answer the question of whether discrimination against
certain plan participants could ever reach the point of
breaching fiduciary duties. We have no need to decide
whether such a claim might be stated in some future case; we
conclude only that this is not such a case.

ERISA’s fiduciary duty was meant to hold plan
administrators to a duty of loyalty akin to that of a common-
law trustee, See John Langbein, “The Supreme Court Flunks
Trusts,” 1990 Sup. Ct. Rev. 207, 210-11. A common-law
trustee was not allowed to favor one class of beneficiaries
over another. Restatement of Trusts § 183. A plan
administrator’s duty to act in the best interest of all the
beneficiaries cannot mean that it must cater to the optimal
needs of each individual beneficiary. All of the beneficiaries’
interests will not always be aligned. The fiduciary must act as
though it were a reasonably prudent business person with the
interests of all the beneficiaries at heart. The question is
whether such a businessperson, facing potential risks of
future litigation as well as possible employee disenchantment
with the plan, would have chosen to adhere to the NCS
system, with the consequent effect of denying the 1994
benefits to the women affected here. See 29 U.S.C.
§ 1104(a)(1)(B). The answer must be yes, since adherence to
the system for all participants meant that the company had a
reliable seniority list upon which everyone could rely for any

appropriate purpose.
IV

The district court’s order granting summary judgment also
awarded judgment to Ameritech on the state law claims,
because they mirrored the federal claims. The appellants have
not contested that part of the court’s decision on appeal, and
SO we consider any possible arguments waived.

For the reasons stated, we AFFIRM the judgment of the
district court.

20a
APPENDIX B

UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS,
EASTERN DIVISION *

No. 97 C 1441, No. 97 C 2209

~ AMERITECH BENEFIT PLAN COMMITTEE, et ai.,
Plaintiffs,
V.

ANNETTE FOSTER-HALL, et al.,
Defendants.

AND BERNADETTE BERNABEI,
Plaintiff,

Vv.

AMERITECH CORPORATION, AMERITECH
MANAGEMENT PENSION PLAN, AND AMERITECH
EMPLOYEES’ BENEFIT COMMITTEE,

Defendants.

July 20, 1998, Decided
July 21, 1998, Docketed

MEMORANDUM OPINION AND ORDER
SUZANNE B. CONLON, United States District Judge.

Ameritech Benefit Plan Committee, Ameritech Pension
| Plan, Ameritech Management Pension Plan and Ameritech
; Corporation and its subsidiaries (collectively “Ameritech”)
sue 36 present and former employees of Ameritech
Corporation, as representatives of approximately 7,000
similarly-situated class members (collectively “the class
defendants”); the Communications Workers of America,

\ Ee enh UneM mane TnnT mn ncr |

2la

AFL-CIO (“CWA”); and the International Brotherhood of
Electrical Workers, Local Nos. 165, 188, 336, 383, and 399
(“IBEW”), Ameritech seeks a declaratory judgment that its
treatment of service credit for pregnancy or maternity-related
leaves taken prior to the effective date of the Pregnancy
Discrimination Act (April 29, 1979) does not violate ERISA,
Title VI, the Equal Pay Act, or any other federal, state, or
local law (Count I). Ameritech also seeks a declaratory
judgment that its treatment of service credit does not violate
the terms of collective bargaining agreements between
Ameritech Corporation and the unions (Count Il).

The CWA, the class defendants, and intervening defend-
ant employees (collectively “the employees”) filed counter-
claims alleging that Ameritech’s denial of additional service
credit for pre-1979 pregnancy leaves in connection with
pension plan enhancement programs offered in 1991 through
1995 violates ERISA and constitutes intentional discrim-
ination based on gender and/or pregnancy in violation of Title
Vil, the Equal Pay Act and various states’ discrimination
laws. In a consolidated action (97 C 2209), Bernadette
Bernabei_ sues Ameritech Corporation, Ameritech
Management Pension Plan and Ameritech Employees’
Benefit Committee for violations of ERISA, Title VII, the
Equal Pay Act, and Ohio discrimination law.' The parties
have filed cross-motions for summary judgment pursuant to
Fed. R. Civ. P. 56.

BACKGROUND

The following facts are undisputed. Ameritech Benefit Plan
Committee (“ABPC”) is a named fiduciary and administrator
of Ameritech Pension Plan (“APP”) and Ameritech
Management Pension Plan (“AMPP”) (collectively “the
pension plans”), Agreed Joint Stipulations of Fact (“Stip.”) 1,

‘Bernabei adopts the arguments set forth in the class defendants’
memoranda.

22a

44 1, 2. The pension plans were established and are main-
tained for the benefit of the participating employees of
Ameritech Corporation, its direct and indirect subsidiaries,
and Ameritech’s predecessors. /d. 4 31. The benefits provided
to eligible employees under the pension pians are determined
in part by each employee's term of employment. /d. ¥ 34.

April 29, 1979 was the effective date of the Pregnancy
Discrimination Act (“PDA”), 42 U.S.C. § 2000e-(k). Prior to
April 29, 1979, Ameritech’s predecessors typically granted
their female employees a maximum of 30 days service credit
for pregnancy or maternity-related leaves of absence. /d. § 36.
In contrast, Ameritech’s predecessors typically granted full
service credit for the entire period of other disability-related
leaves of absence. /d. 4 37. Net credited service dates are part
of a record-keeping system used by Ameritech and its
predecessors to track terms of employment. Rather than
aggregate separate periods of service when service is
interrupted, employees’ hire dates are adjusted to “squeeze
out” those periods of absence that are not credited as service.
Since the PDA became effective, Ameritech and _ its
predecessors have provided service credit for pregnancy and
maternity-related leaves to the same extent as they provide
service credit for periods of disability attributable to other

- conditions. /d. | 39. However, Ameritech has not provided
additional retroactive service credit for pregnancy or
maternity-related leaves taken prior to April 29, 1979. Thus,
the employees’ net credited service dates continue to reflect
the fact they received a maximum of 30 days service credit
for pregnancy leaves taken before April 29, 1979.

In 1991, Ameritech amended the AMPP to implement a
program known as the 1991 Special Enhancement (“1991
Enhancement”). The 1991 Enhancement provided an
: additional three years of age and service under the AMPP for
certain benefit purposes to eligible management employees

———

23a

who retired between July 31, 1991 and December 30, 1991.
Id. 440. In 1992, Ameritech amended the AMPP to
implement a program called the 1992-93 Workforce Resizing _
Program (“WRP”). The WRP provided enhanced pension
benefits for eligible management employees who retired
between July 31, 1992 and March 31, 1993. Jd. ¥ 41.

On March 7, 1994, Ameritech’s board of directors author-
ized an amendment to the APP known as the Ameritech
Pension Plan Enhancement Program (“APPEP”’). /d. 4 42.
The APPEP provided that eligible non-management
employees who retired between February 22, 1994 and
September 30, 1995 would have three years added to their
terms of employment and three years added to their actual
ages for purposes of determining retirement eligibility and
calculating the amount of their pension benefits. /d. In April
1994, Ameritech announced it would offer the Supplemental
Income Protectioy Program (“SIPP’’) to certain non-
management employees. Employees eligible for SIPP could
receive additional payments upon leaving Ameritech, in
addition to benefits provided by the APPEP. /d. 4 45.
Payments under SIPP were calculated in part based upon an
employee’s term of employment. /d.

The APPEP, the WRP and the 1991 Enhancement did not
change the requirements for retirement eligibility or the
method of calculating an employee’s term of employment.
That is, the employees’ terms of employment continue to
reflect the fact they received a maximum of 30 days service
credit for pregnancy leaves taken before April 29, 1979. As a
result, even if employees elected to retire under the APPEP,
the WRP or the 1991 Enhancement they would have
remained ineligible for immediate retirement benefits—where
they would have otherwise been immediately eligible for
retirement benefits under these programs had they received
full service credit for pregnancy leaves taken before April 29,
1979,

24a

Beginning in 1992, employees filed administrative claims
under the pension plans seeking additional service credit for
pre-1979 pregnancy leaves. These claims were denied and the
employees appealed to the Ameritech Benefit Plan
Committee. The ABPC determined the claims were properly
denied, noting that the pension pians did not contain
provisions permitting additional service credit beyond the
service credit to which employees were entitled under
predecessor plan provisions and company leave policies in
effect when the leaves were granted. In 1994, a number of
employees filed charges with the Equal Employment
Opportunity Commission (“EEOC”), alleging that Ameri-
tech’s treatment of service credit for pregnancy leaves taken
prior to April 29, 1979 violated Title VII. In May 1997, the
EEOC issued right-to-sue notices; this suit followed.

On September 3, 1997, this court certified the following
defendant class:

All former and present female employees of Ameritech
Corporation and the other parties identified in Paragraph
8 of Plaintiffs’ Complaint (“Ameritech”) with respect to
whom_the Ameritech Pension Plan or the Ameritech
Management Pension Plan (collectively the “Plans’’)
recognizes service with American Telephone &
Telegraph Company, its pre-January 1, 1984 subsidiaries
and the allied companies of The Southern New England
Telephone Company and Cincinnati Bell Inc. (the “Bell
System Companies”), and who took a pregnancy or
maternity-related leave from a Bell System Company
prior to April 29, 1979, and who were or are participants
in a Plan or Plans.

Agreed Mot. for Class Cert. at 2; See Order, No. 97 C 1441
(N.D. Ill. Sept. 3, 1997).

25a
DISCUSSION
I. SUMMARY JUDGMENT STANDARD

A movant is entitled to summary judgment under Rule 56
when the moving papers and affidavits show there is no
genuine issue of material fact and the movant is entitled to
judgment as a matter of law. Fed. R. Civ. P. 56(c); Celotex
Corp. v. Catrett, 477 U.S. 317, 322, 91 L. Ed. 2d 265, 106 S.
Ct. 2548 (1986); Unterreiner v. Volkswagen of America, Inc.,
8 F.3d 1206, 1209 (7th Cir. 1993). Once a moving party has
met its burden, the non-moving party must go beyond the
pleadings and set forth specific facts showing there is a
genuine issue for trial. Fed. R. Civ. P. 56(e); Becker v.
Tenenbaum-Hill Assoc., Inc., 914 F.2d 107, 110 (7th Cir.
1990). The court considers the record as a whole and draws
all reasonable inferences in the light most favorable to the
party opposing the motion. Fisher v. Transco Services-
Milwaukee, Inc., 979 F.2d 1239, 1242 (7th Cir. 1992). A
genuine issue of material fact exists when “the evidence is
such that a reasonable jury could return a verdict for the
nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986); Stewart
v. McGinnis, 5 F.3d 1031, 1033 (7th Cir. 1993).

Ii. TITLE Vil

Title VII prohibits discrimination “against any individual
with respect to [her] compensation, terms and conditions, or
privileges of employment, because of such individual’s
race, color, religion, sex, or national origin” 42 U.S.C.
§ 2000e-(2)(a). In 1978 Congress enacted the Pregnancy
Discrimination Act (“PDA”), which amended Title VII by
clarifying that discrimination based on pregnancy constituted
discrimination based on sex. The PDA provides as follows:

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;

26a

and women affected by pregnancy, childbirth, or related

. medical conditions shall be treated the same for all
employment-related purposes, including receipt of
benefits under fringe benefits programs, as other persons
not so affected ....

42 U.S.C. § 2000e-(k).

The parties do not dispute that because of the pre-1979
leave policies enforced by Ameritech’s predecessors, women
who took pregnancy leaves before April 29, 1979 currently
have less credited service than otherwise similarly situated
employees who took leaves of absence for other disabilities
during that same period. Nor do the parties dispute [that
whenever Ameritech bases current employment decisions (for
example, eligibility for retirement) on employees’ net
credited service dates, women who took pregnancy leaves
before April 29, 1979 are disadvantaged when compared to
employees who took leaves of absence for other disabilities.
Ameritech characterizes the harm resulting from its reliance
on net credited service dates as the effect of discrete acts
taken before 1979: its predecessors’ refusal to grant more
than 30 days service credit for pregnancy and maternity
leaves and the corresponding adjustments to employees’ net
credited service dates upon their return to work. The
employees characterize the harm resulting from Ameritech’s
current reliance on net credited service dates as a fresh act of
discrimination; in other words, each time Ameritech bases
employment decisions on net credited service dates—without
re-calculating net credited service to remedy the effects of its
predecessors’ pre-1979 leave policies—it makes a fresh
decision to exclude pre-1979 pregnancy leave and
affirmatively adopts a facially discriminatory policy. As a
result of their different characterizations, the parties dispute
whether the employees’ Title VII counterclaims are timely.

Title VII requires employees to file charges of discrim-
ination “within three hundred days after the alleged unlawful

27a

employment practice occurred.” 42 U.S.C. § 2000e-5(e)(1).
The employees argue their Title VII claims are timely based
on three theories: (1) Ameritech’s method of calculating net
credited service is facially discriminatory and may be
challenged at any time; (2) Ameritech’s method of calculating
net credited service may be challenged at any time because it
was adopted for discriminatory purposes; and (3) Ameritech’s
reliance on net credited service constitutes a “continuing
violation” of Title VII. These theories are discussed in turn.

A. Facial Discrimination

The employees argue Ameritech’s method of calculating
net credited service (i.e., relying on net credited service dates
without re-calculating pre-1979 net credited service based on
post-1979 law) is facially discriminatory and may be
challenged at any time. In the employees’ view, the method
of calculating net credited service employed by Ameritech’s
predecessors was a facially discriminatory policy that
Ameritech continues to apply through its refusal to adjust net
credited service dates, much like Bazemore vy. Friday, 478
U.S. 385, 92 L. Ed. 2d 315, 106 S. Ct. 3000 (1986), where a
facially discriminatory salary structure was perpetuated after
enactment of Title VII.

Bazemore warrants close attention. Prior to passage of Title
Vil, the employer (the North Carolina Agricultural Extension
Service) maintained two separate branches of personnel: a
“Negro branch” and a “White branch.” /d. at 390. Although
the employer merged the two branches in 1965 in compliance
with Title VII, the employer did not eliminate the pre-merger
salary disparities that existed between the two branches. /d.
The Court of Appeals held the employer “was under no
obligation to eliminate any salary disparity between blacks
and whites that had its origin prior to 1972 when Title VII
became applicable to public employers.” Jd. at 394. The
Supreme Court rejected this conclusion, reasoning as follows:

28a

... that the Extension Service discriminated with respect
to salaries prior to the time it was covered by Title VII
does _not excuse perpetuating that discrimination after
the Extension Service became covered by Title VII. To
hold otherwise would have the effect of exempting from
liability those employers who were historically the
greatest offenders of the rights of blacks. A pattern or
practice that would have constituted a violation of Title
VII, but for the fact that the statute had not yet become
effective, became a violation upon Title VII's effective
date, and to the extent an employer continued to engage
in that act or practice, it is liable under that statute.

* * *

Each week's paycheck that delivers less to a black than
to a similarly situated white is a wrong actionable under
Title VII, regardless of the fact that this pattern was
begun prior to the effective date of Title VII. The Court
of Appeals plainly erred in holding that the pre-Act
discriminatory difference in salaries did not have to be
eliminated.

Bazemore, 478 U.S. at 395—96 (Brennan, J.). The employees
argue net credited service dates that reflect pre-PDA
pregnancy leave policies are analogous to the paychecks in
Bazemore that were based on discriminatory salary policies
established before Title VII.

Ameritech insists it makes decisions based on an
employee's currently accrued service credit, regardless of
gender. Ameritech points out its seniority system, on its face,
credits all employees with whatever service credit they earned
under prior plans and policies before Ameritech’s pension
plans came into existence in 1984; it does not “re-calculate”
pre-1979 service credits, freshly excluding time spent on
pregnancy leave each time it makes a decision. Ameritech
concedes that its reliance on net credited service dates may

29a

perpetuate the effects of its predecessors’ pre-1979 policies,
but maintains that its current system is facially neutral. See
United Air Lines, Inc. v. Evans, 431 U.S, 553, 52 L. Ed. 2d
571, 97 S. Ct. 1885 (1977); International Bhd. of Teamsters
v. United States, 431 U.S. 324, 52 L. Ed. 2d 396, 97 S, Ct.
1843 (1977),

The court is persuaded that Ameritech’s reliance on net
credited service dates is not facially discriminatory, and that
the employees’ reliance on Bazemore is misplaced. In
Bazemore, there was no facially neutral policy that explained
why “each week's paycheck” delivered “less to a black than
to a similarly situated white.” Bazemore, 478 U.S. at 396. The
original salary disparity in Bazemore was the result of a
facially discriminatory salary structure adopted before Title
VII was made applicable to public employers—a policy that
explicitly paid black employees less salary based on their
race. After Title VII became applicable, the salary disparity
remained. Critically, the salary disparity remained not
because of a facially neutral policy that gave effect to the
prior facially discriminatory policy, but because the facially
discriminatory policy was still the proffered justification for
“each week's paycheck.” The policy at issue in Bazemore
was not facially discriminatory because it resulted in salary
disparities along racial lines, or because salary disparities
were allowed to remain; the policy was facially dis-
criminatory because by its own terms it dictated salary
disparities along racial lines. That is what it means for a
policy to be “facially discriminatory.” At bottom, Bazemore
merely stands for the proposition that an employer does not
have a license to continue enforcing a facially discriminatory
policy merely because that policy was adopted before a
change in the law made the policy illegal. Despite its broad
language, Bazemore does not stand for the proposition that a
facially neutral policy becomes facially discriminatory if the
policy perpetuates discriminatory effects.

30a

Here, Ameritech did not rely on a facially discriminatory
policy to determine eligibility for retirement benefits. Ameri-
tech determined eligibility for retirement benefits based (in
part) on employees’ net credited service dates, regardless of
the employee’s gender, and whether or not the employee had
taken pregnancy leave. Ameritech concedes that its reliance
on net credited service dates may disadvantage employees
who took pre-PDA pregnancy or maternity-related leaves.
But as Ameritech argues, the harm suffered by the employees
does not result from Ameritech’s current and facially neutral
system for tracking years of service. The harm suffered by the
employees is an effect of the pre-PDA policies enforced by
Ameritech’s predecessors. The fact Ameritech has not
remedied the effects of those pre-PDA policies does not
render their system for tracking years of service facially
discriminatory. Cf. International Bhd. of Teamsters v. United
States, 431 U.S. 324, 52 L. Ed. 2d 396, 97 S. Ct. 1843 (1977);
United Air Lines, Inc. v. Evans, 431 U.S. 553, 52 L. Ed. 2d
571, 97 S. Ct. 1885 (1977). The court notes a different
conclusion was reached by a divided panel of the 9th Circuit
in Pallas v. Pacific Bell, 940 F.2d 1324 (9th Cir. 1991)
(relying on Bazemore). To the extent Pallas concludes that
reliance on net credited service dates without re-calculating
pre-1979 net credited service based on post-1979 law is a
facially discriminatory policy, this court finds Pallas
unpersuasive and respectfully declines to follow it.

B. Discriminatory Purpose
Title VII provides in pertinent part that:

. an unlawful employment practice occurs, with
respect to a seniority system that has been adopted for an
intentionally discriminatory purpose . . . (whether or not
that discriminatory purpose is apparent on the face of the
seniority provision), when the seniority system is
adopted . . . cr when a person aggrieved is injured by the
application of the seniority system or provision of the
system.

3la

42 U.S.C. § 2000e-5(e)(2). The employees argue their claims
are timely because Ameritech’s current system for tracking
years of service was adopted with an intent to discriminate.
The employees argue that when Ameritech came into
existence in 1984 and decided to base employment decisions
on net credited service dates, Ameritech made the
concomitant decision to adopt its predecessors’ policies with
respect to pre-1979 pregnancy leaves, and Ameritech
affirmatively re-adopts those policies each time it relies on
net credited service dates to determine employees’ eligibility
for benefits.

As an initial matter, the court does not accept the
employees’ assertion that Ameritech “adopted” its pred-
ecessors pre-1979 pregnancy leave policies. To be sure,
Ameritech adopted net credited service dates that reflect the
effects of its predecessors’ pre- 1979 pregnancy leave policies.
But that is not quite the same as adopting the pre-1979
pregnancy leave policies themselves. For the reasons
discussed in the previous section, this distinction is a
meaningful one.

The important question is whether there is any basis to
conclude Ameritech adopted the net credited service dates for
a discriminatory purpose. As evidence of discriminatory
purpose, the employees point to Ameritech’s “constructive
knowledge” of the passage of the Pregnancy Discrimination
Act and the decisions in Pallas y. Pacific Bell, 940 F.2d 1324
(9th Cir. 1991) and Carter v. AT&T, 870 F. Supp. 1438 (S.D.
Ohio 1994) (following Pallas; vacated by 1996 U.S. Dist.
LEXIS 21836, 1996 WL 656571 (S.D. Ohio Sept. 13, 1996),
per settlement agreement). The Pregnancy Discrimination Act
does not speak to the specific issues presented in this lawsuit;
consequently, knowledge of the PDA is not evidence that
Ameritech chose to rely on net credited service dates for the
purpose of discriminating against women who took preg-
nancy leaves before 1979. Nor are the issues presented by this
lawsuit so straightforward that Ameritech was bound to

34a

The Seventh Circuit recently addressed the distinction
between actionable “continuing violations” and non-
actionable effects of time-barred discrimination. See
Dasgupta v. University of Wisconsin Board of Regents, 121
F.3d 1138 (7th Cir. 1997). Dasgupta claimed that as a result
of national origin discrimination early in his career, his
present salary was much lower than the salaries earned by his
peers, even though they had all received similar raises in
recent years. The court held that Dasgupta’s claim was time-
barred:

There were no new violations during the limitations
period, but merely a refusal to rectify the consequences
of time-barred violations. It is not a violation of Title VI
to tell an employee he won’t get a raise to bring him up
to the salary level he would have attained had he not
been discriminated against at a time so far in the past as
to be outside the period during which he could bring a
suit seeking relief against that discrimination.

121 F.3d at 1140 (Posner, C.J.). Nor is it a violation of Title
VII to refuse to grant an employee additional service credit to
bring her up to the seniority level she would have attained
had she been granted service credit for pregnancy leave(s)
before 1979. Admittedly, this case presents close and difficult
questions about the scope of the “continuing violation”
doctrine in employment discrimination law. But the court is
| persuaded this case is more like Evans, Teamsters, Ricks, and
| Dasgupta than Bazemore and its progeny.

The employees argue that while they “may have had some
hint that Ameritech might choose to continue using [net
credited service dates] for assessing their retirement date
when that day came,” they were not injured until Ameritech
denied their request for additional service credit in connection
with the pension enhancements. Class Mem. at 20—21. The
employees argue that denial of service credit is different from
the forced resignation in Evans, the denial of tenure in Ricks

———V—a—aaLL a

35a

and the lower pay in Dasgupta because these actions had an
“immediate effect,” whereas the harm associated with denial
of service credit occurs “not so much at the moment of denial
as in the future.” Pollis v. New School for Social Research,
132 F.3d 115, 118 (2nd Cir. 1997). Pollis arose under the
Equal Pay Act and involved an allegedly discriminatory pay
scale. In the course of distinguishing another case, Pollis
suggested in dicta that “seniority rights are not of immediate
value, but have determinate effect on the future terms of
one’s employment. . . . As a consequence, a discriminatory
policy that results in a wrongful denial of seniority causes
harm not so much at the moment of denial as in the
future... .” Id.

Pollis cites no authority for the proposition that seniority
rights lack immediate value. To the extent Pollis suggests the
denial of seniority rights does not become 2 legally
cognizable injury until the seniority system is applied to
determine eligibility for benefits, the dicta in Pollis
unpersuasive. Seniority rights at Ameritech have immediate
value similar to the immediate value associated with tenure in
Delaware State College v. Ricks, 449 U.S. 250, 66 L. Ed. 2d
431, 101 S. Ct. 498 (1980). Neither tenure nor seniority rights
are valuable in the abstract; both are valuable because of the
rights and benefits that are associated with either tenure or
seniority. Yet in Ricks, the Supreme Court held the statute of
limitations began to run when Ricks was denied tenure, not
later when his employment contract ran out and—because he
was denied tenure—was not renewed. “When Ricks lost
[tenure] he lost something of value, and so was injured.”
Webb v. Indiana National Bank, 931 F.2d 434 (7th Cir.
1991). ,

Here, it is undisputed that throughout their employment,
management employees of Ameritech and its predecessors
are and were provided with disability and pension benefit
statements that indicate the employees’ net credited service

36a

dates.” Pl. 12(M) 4 45. It is further undisputed that throughout
their employment, non-management employees of Ameritech
and Ameritech’s predecessors are and were provided with (or
had access to) collective bargaining agreements. Stip. § 59.
These collective bargaining agreements state that net credited
service dates are used to determine vacation benefits and
selection, shift selection, promotion and transfer selection,
layoff selection and recall rights, voluntary separation
elections, the amount of separation payments, the amount and
duration of sickness and accident disability benefit payments,
and the date of periodic wage increases. Jd. As for the non-
management employees’ pension benefits, any ambiguity
concerning whether net credited service was effectively the
same as “term of employment” as defined by the Ameritech
Pension Plan (“pension plan”) was resolved by the following
language from the summary plan description for the pension
plan, effective May 1989: “For example, to be eligible to
retire with a service pension at age 65, you must have at least
10 years of net credited service.” Defs. 12(M) 4 75 (emphasis
added). Where an employee’s net credited service determines
the duration and amount of disability payments and all the
other rights and entitlements listed above, it cannot be said
that net credited service lacks immediate value to the
employee. Here, the employees were plainly injured when
Ameritech’s predecessors refused to grant service credit for
their pregnancy leaves. The fact that the effects of that injury
become most severe as the employees near retirement does

? The employees seek to create a genuine issue by arguing that even
though they received benefit statements and the benefit statements
indicated their net credited service dates, they did not know the net
c

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386014_1410%3A1. Public record. Not legal advice.