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Krolnik v. Prudential Insurance, No. 08-2616 (7th Cir. June 29, 2009); Ricci v. DeStefano, No. 07-1428 (U.S. S. Ct. June 29, 2009):

| Jun 28, 2009 | Daily Developments in EEO Law |

Because the web will be afire with instant commentary on the Supreme Court’s Ricci decision, I will lead off with a little benefits case from the Seventh Circuit. As for Ricci, the majority exposes the roots of the case — essentially, a re-match of the affirmative-action battles of the 1980s — and reaches, 5-4, an equivalent result: blanket disapproval of race-conscious solutions to hiring and promotions.

Krolnik v. Prudential Insurance, No. 08-2616 (7th Cir. June 29, 2009):  When an ERISA plan confers authority on an administrator to enforce and interpret the terms of the plan, courts review the administrator’s decision under an “arbitrary and capricious” standard.  Otherwise, the default standard is termed “de novo” (Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989).  In this case — about whether long-term disability coverage was properly cut-off at two years because the claimant suffered a “mental” rather than physical disability — the parties agreed that the latter, default standard applied.  But the district court, apparently thinking discovery to be too costly relative to the probable outcome, barred depositions of the medical witnesses and granted summary judgment.

The panel reverses summary judgment and restates the “de novo” standard in a constructive way:

“Firestone holds that ‘de novo review’ is the norm in litigation under ERISA. Cases such as this show that ‘de novo review’ is a misleading phrase. The law Latin could be replaced by an English word, such as ‘independent.’ And the word ‘review’ simply has to go. For what Firestone requires is not ‘review’ of any kind; it is an independent decision rather than ‘review’ that Firestone contemplates. The Court repeatedly wrote that litigation under ERISA by plan participants seeking benefits should be conducted just like contract litigation, for the plan and any insurance policy are contracts. 489 U.S. at 112-13. In a contract suit the judge does not ‘review’ either party’s decision. Instead the court takes evidence (if there is a dispute about a material fact) and makes an independent decision about how the language of the contract applies to those facts.”

Good language for future reference in ERISA benefit cases, which I hope gets circulated widely.

Ricci v. DeStefano, No. 07-1428 (U.S. S. Ct. June 29, 2009):  The Supreme Court charged itself in this case with the question of whether a public employer may validly refuse to certify the results of a pen-and-paper test for promotions on the ground that its use might violate the disparate impact section of Title VII, 42 U.S.C. § 2000e-2(k). It is thus akin to a vein of cases, decided in the 1980s (such as Wygant and Crosen), about whether racially-conscious “affirmative action” plans might be adopted — consistent with equal protection — to relieve the possible consequences of past racial discrimination in hiring and promotion.  Both then and now, narrow majorities of the Court hold that it is insufficient for a public employer to merely suppose or hypothesize background racial discrimination — it must be able to prove it with a “strong basis in evidence.”

There was perhaps no crying need for the Supreme Court to intervene in this dispute — as even Justice Kennedy notes in the majority opinion, there were “few, if any, precedents in the courts of appeals discussing the issue,” suggestive at least that these cases seldom arise in practice.  Having weighed in, though, the majority (leaving aside Justice Scalia’s separate opinion) wisely sidesteps any analysis of whether there is a potential constitutional infirmity in applying the Title VII disparate impact provisions to public employers, though it lays the seeds for a future challenge (“[w]e also do not hold that meeting the strong-basis-in-evidence standard would satisfy the Equal Protection Clause in a future case”). 

The majority does suggest that a public employer concerned about disparate impact must invest its efforts at the beginning of the process to validate the test, and that once given the test results become a protectable expectation interest: “Title VII does not prohibit an employer from considering, before administering a test or practice, how to design that test or practice in order to provide a fair opportunity for all individuals, regardless of their race. And when, during the test-design stage, an employer invites comments to ensure the test is fair, that process can provide a common ground for open discussions toward that end. We hold only that, under Title VII, before an employer can engage in intentional discrimination for the asserted purpose of avoiding or remedying an unintentional disparate impact, the employer must have a strong basis inevidence to believe it will be subject to disparate-impact liability if it fails to take the race-conscious, discriminatory action.”

Instead of remanding the case for the lower courts to resolve whether New Haven had a “strong basis in evidence” for its decision not to certify the test, the majority — using only the summary judgment record — holds as a matter of law that New Haven flunked the new standard.  While the test statistics showed a wide racial disparity in the results, the majority holds that such evidence alone was not strong enough:

“The problem for respondents is that a prima facie case of disparate-impact liability – essentially, a threshold showing of a significant statistical disparity, Connecticut v. Teal, 457 U. S. 440, 446 (1982), and nothing more – is far from a strong basis in evidence that the City would have been liable under Title VII had it certified the results. That is because the City could be liable for disparate-impact discrimination only if the examinations were not job related and consistent with business necessity, or if there existed an equally valid, less-discriminatory alternative that served the City’s needs but that the City refused to adopt. §2000e-2(k)(1)(A), (C). We conclude there is no strong basis in evidence to establish that the test was deficient in either of these respects.”

The majority holds that there was no evidence at all that the promotion test was not job-related or that equally valid and less discriminatory tests were available to the city, thus entitling to petitioners to judgment as a matter of law.  Thus there is to be no trial, and this does mark a departure form the 1980’s cases.  Public employers in the earlier generation of affirmative-action cases widely tried (and often prevailed on) the existence of past discrimination, but we appear to have entered an age where trials really aren’t important any more for resolving such complex issues.

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