IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT No. 99-14563 JAMES JOHNSON, Plaintiff-Appellant, v. KMART CORPORATION, Defendant-Appellee. On Appeal from the United States District Court for the Middle District of Florida, Tampa Division BRIEF OF THE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION AS AMICUS CURIAE IN SUPPORT OF PLAINTIFF-APPELLANT SEEKING REVERSAL C. GREGORY STEWART General Counsel Designate PHILIP B. SKLOVER Associate General Counsel LORRAINE C. DAVIS Assistant General Counsel CAREN I. FRIEDMAN Attorney EQUAL EMPLOYMENT OPPORTUNITY COMMISSION 1801 L Street, NW, 7th Floor Washington, D.C. 20507 (202) 663-4720 CERTIFICATE OF INTERESTED PERSONS AND CORPORATE DISCLOSURE STATEMENT Johnson v. Kmart Corp., No. 99-14563 The Honorable Henry Lee Adams, Jr., trial judge Bradley M. Bole, counsel for Plaintiff-Appellant Buchanan Ingersoll, P.C., firm representing Defendant-Appellee Lorraine C. Davis, Assistant General Counsel, EEOC Equal Employment Opportunity Commission Caren I. Friedman, Attorney, EEOC James Johnson, Plaintiff-Appellant Kmart Corporation, Defendant-Appellee Mark J. Neuberger, counsel for Defendant-Appellee Philip B. Sklover, Associate General Counsel, EEOC C. Gregory Stewart, General Counsel Designate, EEOC C-1 of 1 TABLE OF CONTENTS CERTIFICATE OF INTERESTED PERSONS AND CORPORATE DISCLOSURE STATEMENT . . . . . . . . . . . . . . . C-1 TABLE OF CITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii STATEMENT OF INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 STATEMENT OF THE ISSUES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 STATEMENT OF THE CASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 STANDARD OF REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 SUMMARY OF ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1. Title I of the Americans with Disabilities Act covers the plaintiff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2. Kmart's long-term disability benefits plan discriminates on the basis of disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 3. The plaintiff's claim of disability-based discrimination is not precluded as a matter of law by the ADA's safe harbor provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 CERTIFICATE OF COMPLIANCE CERTIFICATE OF SERVICE TABLE OF CITATIONS FEDERAL CASES Alexander v. Choate, 469 U.S. 287 (1985) . . . . . . . 3, 16 Bailey v. USX Corp., 850 F.2d 1506 (11th Cir. 1988) . . . . . . .14 Bass v. City of Orlando, 57 F. Supp.2d 1318, 1323-24 (M.D. Fla. 1999), aff'd, No. 99-10867 (11th Cir. Nov. 22, 1999) . . . . .11 Castellano v. City of New York, 142 F.3d 58 (2nd Cir. 1998) . . . . . . .5, 11-14 Chambers v. Thompson, 150 F.3d 1324 (11th Cir. 1998) . . . . . . . 8 EEOC v. CNA Insurance Companies, 96 F.3d 1039 (7th Cir. 1996) . . . . .21 Ford v. Schering-Plough Corp., 145 F.3d 601 (3rd Cir. 1998) . . . . . 5, 11-13, 20, 24 Gonzales v. Garner Food Services, Inc., 89 F.3d 1523 (11th Cir. 1996) . . . . . .5, 8, 10-13 Hishon v. King & Spalding, 467 U.S. 69 (1984) . . . . . . 4 Leonard F. v. Israel Discount Bank of New York, No. 98-7320, 1999 WL 1114700 (2d Cir. Dec. 8, 1999) . . . . . 24-25 Lewis v. Aetna Life Ins. Co., 7 F. Supp.2d 743, 747 (E.D. Va. 1998), vacated Lewis v. Kmart Corp., 180 F.3d 166 (4th Cir. 1999), petition for cert. filed, 68 U.S.L.W. 3311 (Oct. 29, 1999) . . . . . . .26 Lewis v. Kmart Corp., 180 F.3d 166 (4th Cir. 1999), petition for cert. filed, 68 U.S.L.W. 3311 (Oct. 29, 1999) . . . . . 20, 26 Modderno v. King, 82 F.3d 1059 (D.C. Cir. 1996) . . . 24-25 O'Connor v. Consolidated Coin Caterers Corp., 517 U.S. 308 (1996) . . . . . 19 Olmstead v. L.C. ex rel. Zimring, 119 S. Ct. 2176 (1999) . . . . . .18-19, 21 Parker v. Metropolitan Life Insurance Company, 121 F.3d 1006 (6th Cir. 1997) . . . . . .20, 24 Public Employees Retirement Sys. v. Betts, 492 U.S. 158 (1989) . . . . . . 24-25 Robinson v. Shell Oil Co., 519 U.S. 337 (1997) . . . 5, 8-12 Rogers v. Department of Health and Environmental Control, 174 F.3d 431 (4th Cir. 1999) . . . . . . 20 Traynor v. Turnage, 485 U.S. 535 (1988) . . . .3, 16-19, 21 White v. LeMacks, 183 F.3d 1253 (11th Cir. 1999) . . . . . 4 FEDERAL STATUTES Title VII, 42 U.S.C. 2000e et seq. . . . . . . . 5, 9-11 Age Discrimination in Employment Act, 29 U.S.C. 626(f)(2) . . . . . . .24 Americans with Disabilities Act of 1990, 42 U.S.C. 12101 et seq . . . . . 1 12101(b)(1) . . . . . . . . . . . . . . . . . . . . . .14 12101(4) . . . . . . . . . . . . . . . . . . . . . . . .13 12101(5) . . . . . . . . . . . . . . . . . . . . . . . .12 12111(4) . . . . . . . . . . . . . . . . . . . . . . 8, 10 12111(8) . . . . . . . . . . . . . . . . . . . . . . . . 7 12112(a) . . . . . . . . . . . . . . . . . . .6, 7, 14, 22 12112(b)(1) . . . . . . . . . . . . . . . . . . . . . .15 12112(b)(2) . . . . . . . . . . . . . . . . . . . .13, 15 12201(c) . . . . . . . . . . . . . . . . . . . . 6, 22, 25 FEDERAL REGULATIONS 29 C.F.R. 1630.4(f) . . . . . . . . . . . . . . . .14, 16 LEGISLATIVE HISTORY H.R. Rep. No. 485 (II), 101st Cong., 2d Sess. 136, reprinted in 1990 U.S.C.C.A.N. 303, 419 . . . . . . 23-25 S. Rep. No. 116, 101st Cong., 1st Sess., at 85-86 . . . .24-25 COURT RULES 11th Cir. Rule 28-1(i) . . . . . . . . . . . . . . . . . . 3 OTHER AUTHORITIES EEOC: Interim Guidance on Application of ADA to Health Insurance, 8 Fair Empl. Prac. Man. (BNA) 405:7115 (June 8, 1993) . . . . . . 21, 23 IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT No. 99-14563 JAMES JOHNSON, Plaintiff-Appellant, v. KMART CORPORATION, Defendant-Appellee. On Appeal from the United States District Court for the Middle District of Florida, Tampa Division BRIEF OF THE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION AS AMICUS CURIAE IN SUPPORT OF PLAINTIFF-APPELLANT SEEKING REVERSAL STATEMENT OF INTEREST The Equal Employment Opportunity Commission is the agency charged by Congress with the administration, interpretation, and enforcement of Title I of the Americans with Disabilities Act of 1990, 42 U.S.C. 12101 et seq. ("ADA") and other federal anti-discrimination statutes. This appeal raises important issues about the legality under the ADA of long-term disability plans that treat benefits recipients differently depending on whether they have mental or physical disabilities. Because of the importance of these issues to the effective enforcement of the ADA, the Commission offers its views to the Court. STATEMENT OF THE ISSUES 1. Whether Title I of the Americans with Disabilities Act covers the plaintiff, who is no longer able to work because of a disability, where his claim alleges that a post-employment fringe benefit plan discriminates on the basis of disability. 2. Whether the district court erred in concluding that Kmart's long-term disability benefits plan does not discriminate on the basis of disability, where the plan provides benefits up to retirement age for individuals with physical disabilities while limiting benefits to a maximum of 24 months for those with mental disabilities. 3. Whether the plaintiff's claim of disability-based discrimination is precluded as a matter of law by the ADA's safe harbor provision. STATEMENT OF THE CASE James Johnson began his employment with Kmart in 1967. R1-3-3. Over the years, he worked his way up to the position of manager of Kmart's Tampa store. R1-10-1 to -2. In 1996, Mr. Johnson sought medical attention to treat severe depression and emotional illness. R1-10-2. Initially during his treatment, he continued working. R1-10-2. However, in October 1997, Mr. Johnson's physician advised him to stop working due to his mental health condition. R1-10-2. He then applied for, and received, long-term disability benefits from Kmart. R1-10-2. Under Kmart's long-term disability benefits plan ("LTD plan"), employees who are disabled due to a mental illness may receive benefits only for two years. R1-10-2. Employees who are disabled due to a physical illness, on the other hand, continue to receive benefits until retirement. R1-10-2. Mr. Johnson filed a charge of discrimination with the EEOC, alleging that the LTD plan discriminates on the basis of disability in violation of the ADA. R1-3-3. The district court granted Kmart's motion to dismiss for failure to state a claim. Relying primarily on Alexander v. Choate, 469 U.S. 287 (1985) and Traynor v. Turnage, 485 U.S. 535 (1988), the district court concluded that the LTD plan, in distinguishing among disabilities, does not violate the ADA. R1-25-3 to - 4. The court also noted that various circuits have decided that the ADA is not violated by similar LTD plan distinctions. R1-25-4. Finding these rulings persuasive and dispositive, the court granted the motion to dismiss without addressing the question whether the plaintiff is a qualified individual with a disability covered by the ADA. STANDARD OF REVIEW The Court reviews de novo the district court's dismissal for failure to state a claim. White v. LeMacks, 183 F.3d 1253, 1256 (11th Cir. 1999). In so doing, the Court must accept the allegations in the complaint as true and construe them in the light most favorable to the plaintiff. Id. "A court may dismiss a complaint only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Hishon v. King & Spalding, 467 U.S. 69, 73 (1984). SUMMARY OF ARGUMENT The Court should revisit the issue whether a former employee challenging a discriminatory limitation on post-employment fringe benefits is a "qualified individual with a disability" in light of the Supreme Court's pronouncement in Robinson v. Shell Oil Co., 519 U.S. 337 (1997). Robinson overruled in part the Court's decision in Gonzales v. Garner Food Services, Inc., 89 F.3d 1523, 1530-31 (11th Cir. 1996), which had held that a former employee is not a "qualified individual with a disability." This holding is based in part on a misreading of the definition of the term "employee" as only encompassing current employees. Robinson makes clear, however, that the term "employee" as used in Title VII specifically includes former employees. Since the term "employee" is defined the same in both Title VII and the ADA, this portion of Gonzales is no longer valid. In revisiting the issue, the Court should acknowledge the ambiguity inherent in the ADA's definition of the term "qualified individual with a disability" and should, therefore, look to the broader context of the statutory language. Because the ADA specifically prohibits discrimination in the provision of fringe benefits, it is unthinkable that Congress would exclude former employees from ADA coverage when challenging a discriminatory denial of those benefits. In other words, Congress would not have created the right without providing a remedy. Both circuits to address the issue in the wake of Robinson have decided that a former employee challenging a discriminatory limitation on post-employment fringe benefits is a "qualified individual with a disability" within the meaning of the ADA. See Castellano v. City of New York, 142 F.3d 58, 69 (2nd Cir. 1998); Ford v. Schering-Plough Corp., 145 F.3d 601, 608 (3rd Cir. 1998). The ADA prohibits discrimination because of an individual's disability. 42 U.S.C. 12112(a). Kmart's plan is discriminatory because it singles out persons with mental disabilities for less favorable treatment. That is, individuals with mental disabilities are eligible for only 24 months of long-term disability benefits, whereas individuals with all other disabilities are eligible for benefits until retirement age. The district court's conclusion that the ADA is not violated when persons with one kind of disability are treated less favorably than persons with another kind of disability is simply incorrect. The Supreme Court has recently made clear that illegal discrimination can occur when one member of a protected group has been favored over another member of that same group. Because Mr. Johnson's benefits were cut off after 24 months because of his particular kind of disability, he has stated a claim under Title I of the ADA. Simply because Kmart's LTD plan draws a distinction that disfavors individuals with mental disabilities does not, however, mean that Kmart has violated the ADA. Under the ADA's safe harbor provision, a disability-based distinction in a bona fide employee benefit or other insurance plan is shielded as long as the distinction is not used as a subterfuge to evade the purposes of the statute. See 42 U.S.C. 12201(c). The Commission defines the term "subterfuge" as used in the safe harbor as disability-based disparate treatment that is not actuarially justified. The Commission's definition is consistent with Congressional intent as demonstrated by the legislative history of the safe harbor provision. Because the district court resolved this case on a motion to dismiss, it remains to be seen whether Kmart can establish a legitimate actuarial justification for its LTD plan's disability-based distinction. The Court should, therefore, reverse and remand for further proceedings. ARGUMENT 1. Title I of the Americans with Disabilities Act covers the plaintiff Title I of the ADA prohibits discrimination against a qualified individual with a disability because of the disability of such individual in regard to job application procedures, the hiring, advancement, or discharge of employees, employee compensation, job training, and other terms, conditions, and privileges of employment. 42 U.S.C. 12112(a). The ADA defines "qualified individual with a disability" as "an individual with a disability who, with or without reasonable accommodation, can perform the essential functions of the employment position that such individual holds or desires." 42 U.S.C. 12111(8). Mr. Johnson performed the essential functions of his job for thirty years, while at the same time contributing to his employer's long-term disability plan. The question here is whether Mr. Johnson, now a former employee, may challenge under Title I of the ADA a discriminatory limitation on his long-term disability benefits. We believe he may. The Eleventh Circuit has held that a former employee is not a qualified individual with a disability within the meaning of the ADA. Gonzales v. Garner Food Services, Inc., 89 F.3d 1523, 1530-31 (11th Cir. 1996). The holding in Gonzales is based in part on the fact that the ADA defines "employee" as "an individual employed by an employer." Id. at 1526 (emphasis in original) (quoting 42 U.S.C. 12111(4)). In the Court's view, this definition demonstrates that the plain meaning of the statute is limited in scope to current employees as opposed to former employees. Id. at 1526 n.10. In a post-Gonzales case, however, the Supreme Court has overruled this portion of Gonzales, laying to rest any doubts about whether the definition of the term "employee" includes within its scope a former employee. See Robinson v. Shell Oil Co., 519 U.S. 337, 346 (1997) (holding that the term "employee" as used in Title VII includes within its definition former employees). Because the continuing vitality of Gonzales has been called into question by Robinson, we urge the Court to revisit the issue in the instant case. In Robinson, the plaintiff had alleged that his former employer had given him a negative reference in retaliation for having filed an EEOC charge. Robinson, 519 U.S. at 339. The Supreme Court was asked to decide whether the term "employees" as used in Title VII [42 U.S.C. 2000e et seq.] includes former employees, such that the plaintiff could sue his former employer. Id. The Court's first task was to determine whether the statutory language at issue is ambiguous. Id. at 340. Ambiguity, the Court noted, "is determined by reference to the language itself, the specific context in which that language is used, and the broader context of the statute as a whole." Id. at 341. The Court observed that Title VII's definition of the term "employee" ("an individual employed by an employer") lacks a temporal qualifier, and, therefore, could be taken to mean a current employee or a former employee. Id. at 342. Furthermore, the Court noted, other portions of the statute use the term "employee" in ways that are inconsistent with a definition encompassing only current employees. Id. Having found an ambiguity in the statutory language, the Court set about resolving it. For assistance, the Court looked to the "broader context provided by other sections of the statute." Id. at 345. The Court reasoned that since Title VII expressly protects employees from retaliation for filing a charge, and since a charge of unlawful termination would have to be filed by a former employee, the definition necessarily contemplates inclusion of former employees. Id. "[T]o hold otherwise," the Court agreed, "would effectively vitiate much of the protection afforded by [the statute]." Id. The term "employee" is defined the same in both Title VII and the ADA. See Gonzales, 89 F.3d at 1527 ("With respect to employment-related terms, legislative history of the ADA states that the provisions in Title I use or incorporate by reference several of the definitions in Title VII, including the term 'employee.'") (citing H.R. Rep. No. 485(II), 101st Cong., 2d Sess. 54, reprinted in 1990 U.S.C.C.A.N. 303, 336). Thus, it is clear in light of Robinson that the term "employee" as used in the ADA includes former employees. Without having the benefit of the holding in Robinson, the Gonzales Court, however, was convinced that the ADA covers only "job applicants and current employees capable of performing essential functions of available jobs." Gonzales, 89 F.3d at 1528 (emphasis added). This ruling is no longer valid. Post-Robinson, the two circuits that have grappled with the question whether the ADA covers former employees who are challenging limitations on post- employment benefits have decided that it does. See Castellano v. City of New York, 142 F.3d 58, 69 (2nd Cir.), cert. denied, 119 S. Ct. 60 and 119 S. Ct. 276 (1998); Ford v. Schering-Plough Corp., 145 F.3d 601, 608 (3rd Cir. 1998); cert. denied, 119 S. Ct. 850 (1999). Both Castellano and Ford specifically relied on Robinson and its rationale, namely that the definition of the term "employee" in Title VII does not contain a temporal qualifier, and, therefore, the statute is ambiguous, necessitating an examination of the broader context of the statutory language. See Robinson, 519 U.S. at 341. Analogizing to Robinson, the Castellano and Ford courts observed that the ADA's definition of "qualified individual with a disability" does not contain a temporal qualifier. See Castellano, 142 F.3d at 67 (the ADA "fails to specify when a potential plaintiff must have been a 'qualified individual with a disability' in the context of a claim that the provision of retirement or fringe benefits is discriminatory"); Ford, 145 F.3d at 606 ("the ADA contains an ambiguity concerning the definition of 'qualified individual with a disability' because there is no temporal qualifier for that definition"). Having found an ambiguity, both courts, accordingly, examined the broader context of the statutory language. After doing so, both courts held that former employees may sue their employers under the ADA for a discriminatory denial of post-employment benefits. Castellano, 142 F.3d at 69; Ford, 145 F.3d at 608. The Third Circuit noted that this Court in Gonzales "failed to address the possibility that the disparity between the rights created by the ADA and the apparent legal remedy fashioned by the ADA creates an ambiguity in the eligibility requirements for obtaining a remedy." Ford, 145 F.3d at 608. In other words, the phrase "qualified individual with a disability" cannot refer only to currently qualified individuals with disabilities, or otherwise there would be no way for a former qualified individual with a disability to challenge a discriminatory limitation on post-employment fringe benefits. The Gonzales Court's unswerving adherence to what it considered "plain meaning" is in error, and the Court should seize this opportunity to set right its oversight in light of the Supreme Court's pronouncement in Robinson. There is an ambiguity in the statute that this Court should acknowledge and should resolve by looking to the ADA's broader context. In enacting the ADA, Congress found that "individuals with disabilities continually encounter various forms of discrimination, including . . . relegation to lesser . . . benefits." 42 U.S.C. 12101(5). Furthermore, Congress found that "individuals who have experienced discrimination on the basis of disability have often had no legal recourse to redress such discrimination." 42 U.S.C. 12101(4). Consistent with these findings and purposes, Congress expressly prohibited discrimination in the provision of fringe benefits. 42 U.S.C. 12112(b)(2). As Castellano and Ford recognized, it is entirely implausible that Congress would have created a right to the non-discriminatory provision of fringe benefits without providing a remedy to persons denied equal benefits merely because those benefits are handed out after employment has ended. Castellano, 142 F.3d at 69; Ford, 145 F.3d at 605-06. After all, many valuable fringe benefits, such as pensions or, as here, long-term disability benefits, are "earned during years of service" when the employee was in fact performing the essential functions of his or her job "but are provided in years after the employment relationship has ended." Castellano, 142 F.3d at 67; see also Gonzales, 89 F.3d at 1532 (Anderson, J., dissenting) (it would be "surprising to suppose . . . that Congress intended to protect current employees' fringe benefits, but intended to then abruptly terminate that protection upon retirement or termination, at precisely the time that those benefits are designed to materialize"). Indeed, as in the instant case, "some fringe benefits are paid out to individuals precisely because they can no longer work." Castellano, 142 F.3d at 68 (emphasis added). To ensure that discrimination in the provision of such benefits can be remedied, the statutory language "qualified individual with a disability" must be construed to include former employees who are suing for the discriminatory denial of a post-employment fringe benefit for which they are eligible by virtue of their prior employment relationship. See Bailey v. USX Corp., 850 F.2d 1506, 1509 (11th Cir. 1988) (holding that former employees may sue for retaliation under Title VII in light of observation that a statute should not be interpreted "to produce a result which is actually inconsistent with the policies underlying the statute"). Such a construction would not only avoid absurd consequences that would otherwise result, but it would effectuate the ADA's broad remedial purpose "to prohibit disability discrimination in all aspects of the employment relationship." Castellano, 142 F.3d at 68; see also 42 U.S.C. 12101(b)(1) (one of Congress's purposes in enacting the ADA was to "provide a clear and comprehensive national mandate for the elimination of discrimination against individuals with disabilities"). Thus, Mr. Johnson is covered under Title I of the ADA and entitled to its protection against discrimination in the provision of post-employment fringe benefits. See 29 C.F.R. 1630.4(f). 2. Kmart's long-term disability benefits plan discriminates on the basis of disability An employer may not "discriminate against a qualified individual with a disability because of the disability of such individual in regard to . . . terms, conditions, and privileges of employment." 42 U.S.C. 12112(a) (emphasis added). Kmart's LTD plan is discriminatory because it precludes disabled individuals with mental illnesses from obtaining benefits that are available to all other disabled individuals. Because the district court erred in finding that Kmart's LTD plan comports with the ADA's requirements, we urge the Court to reverse. The ADA specifically prohibits "limiting, segregating, or classifying a job applicant or employee in a way that adversely affects the opportunities or status of such applicant or employee because of the disability of such applicant or employee." 42 U.S.C. 12112(b)(1). Mr. Johnson is an employee who has been limited in a way that adversely affects his status because of his disability. That is, his benefits were cut off after 24 months simply because his disability is caused by mental illness, whereas his fellow employees with disabilities caused by all other illnesses are able to continue collecting benefits until retirement age. Such differential treatment could have vast consequences: it could mean losing decades of benefit payments. In addition, the ADA prohibits "participating in a contractual or other arrangement or relationship [including a relationship between an employer and an organization that provides fringe benefits] that has the effect of subjecting a covered entity's qualified applicant or employee with a disability to the discrimination prohibited by this subchapter." 42 U.S.C. 12112(b)(2). In other words, an employer may not discriminate on the basis of disability in the provision of "[f]ringe benefits available by virtue of employment." 29 C.F.R. 1630.4(f). In the case at bar, Kmart has participated in a contractual relationship with an organization that provides fringe benefits to its employees. This relationship has the effect of subjecting Mr. Johnson, a qualified employee, to disability-based discrimination. Mr. Johnson has been singled out for receipt of lesser benefits because of his disability. He has, therefore, stated a claim under the ADA. In dismissing Mr. Johnson's complaint, the district court improperly relied on Alexander v. Choate, 469 U.S. 287 (1985), and Traynor v. Turnage, 485 U.S. 535 (1988). In Alexander, the Supreme Court held that a state's durational limitation on Medicaid coverage that disproportionately affected individuals with disabilities did not violate the Rehabilitation Act. Alexander, 469 U.S. at 289. Alexander thus concerned a facially neutral limitation that disproportionately affected persons with disabilities. The case at bar, on the other hand, presents a facially discriminatory disability-based limitation. Alexander, therefore, is inapposite because it provides no insight as to how the Court would view a disability-based distinction in this context. As for Traynor, in the district court's view, it stands for the proposition that conferring benefits on one class of disabled individuals but not on others comports with the requirements of the Rehabilitation Act. R1-25-3. The district court misread Traynor, which, in any event, is distinguishable. Traynor concerned a time limitation on the use of educational benefits imposed on veterans unless they were prevented from timely use of their benefits by a "disability which was not the result of [their] own willful misconduct." Traynor, 485 U.S. at 538 (citation omitted). The Veterans Administration had denied the petitioners' requests for extensions of time in which to use their benefits, finding that their disability, primary alcoholism, was the result of willful misconduct. Id. The Court held that the denial of an extension of time for those with primary alcoholism did not violate the Rehabilitation Act. Id. at 551. In obiter dictum, the Court stated, "[t]here is nothing in the Rehabilitation Act that requires that any benefits extended to one category of handicapped persons also be extended to all other categories of handicapped persons." Traynor, 485 U.S. at 549. Notably, however, the Court also suggested that "distinguish[ing] between categories of disabled veterans according to generalized determinations that lack any substantial basis" would violate the Rehabilitation Act. Id. at 550. The Court, though, was unwilling to hold that the exclusion of persons with primary alcoholism from eligibility for the extension violated the Rehabilitation Act because, in this instance, the exclusion was based on "a substantial body of medical literature." Id. In the Court's estimation, the grant of an extension of time to some veterans with disabilities but not to others was simply "a special benefit to disabled veterans who bear no responsibility for their disabilities." Id. at 549. Traynor is distinguishable from the case at bar. Unlike the Veterans Administration, Kmart has offered no explanation for its LTD plan's disability- based distinction, much less one that is grounded in a "substantial body of medical literature." Furthermore, regardless of the wisdom of the Traynor Court's assumption that persons with primary alcoholism are in some measure "responsible" for their disabilities, it is undisputed that Mr. Johnson, and other Kmart employees who become disabled due to a mental illness, are not the least bit "responsible" for their disabilities such that disparate treatment would be justified, as the Court concluded in Traynor. Not only is Traynor distinguishable, but the district court misread it. Taking the dictum in Traynor out of context, the district court relied upon it to hold that intra-group discrimination is permissible under the ADA. As the Supreme Court has recently made clear, however, the term "discrimination" may encompass "disparate treatment among members of the same protected class." Olmstead v. L.C. ex rel. Zimring, 119 S. Ct. 2176, 2186 n.10 (1999) (emphasis in original) (citation omitted). Thus, a plaintiff may prove illegal discrimination by demonstrating that "one member of a particular protected group has been favored over another member of that same group." Id. (citation omitted). Traynor, therefore, cannot be read to condone intra-group discrimination as the district court suggests. Indeed, in O'Connor v. Consolidated Coin Caterers Corp., the Supreme Court expressly rejected the notion that intra-group discrimination is permissible under a federal anti-discrimination statute. 517 U.S. 308 (1996). There, the Court addressed the question "whether a plaintiff alleging that he was discharged in violation of the [ADEA] must show that he was replaced by someone outside the age group protected by the ADEA to make out a prima facie case." Id. at 309 (citation omitted). The court of appeals had held that the plaintiff, who was 56 years old at the time of his termination, had failed to establish a prima facie case of age discrimination because his replacement was 40 years old, and, therefore, also in the protected age group. Id. at 309-10. In reversing, the Court reasoned that one person in the protected age group could lose out to another person in the protected age group and still state a claim of discrimination, as long as the plaintiff lost out because of his protected status, in this case age. Id. at 312. Consistent with Olmstead and O'Connor, the ADA plainly prohibits disparate treatment among individuals in the same protected class, i.e. the class of all individuals with disabilities. It is, therefore, incorrect to assert that the ADA protects only against discrimination between disabled and non-disabled individuals. To illustrate the point, imagine that an employer is willing to hire individuals in wheelchairs but unwilling to hire hearing-impaired individuals. Though this does not constitute discrimination between disabled and non-disabled individuals, an employer may not draw such a distinction without running afoul of the ADA. Nor may an employer classify employees on the basis of a particular disability, e.g. epilepsy, in such a way that adversely affects persons with that disability. Such a classification constitutes unlawful discrimination because it treats persons with epilepsy less favorably than everyone else, disabled and non- disabled alike. So too, the ADA cannot be read to countenance arbitrary disability- based distinctions in the provision of fringe benefits that single out for unfavorable treatment all individuals with a particular kind of disability. Because disparate treatment among individuals in the same protected class is prohibited under the ADA, the district court's reliance on various other precedents misses the mark. For example, the court found persuasive the following cases: Lewis v. Kmart Corp., 180 F.3d 166 (4th Cir. 1999), petition for cert. filed, 68 U.S.L.W. 3311 (Oct. 29, 1999); Rogers v. Department of Health and Environmental Control, 174 F.3d 431 (4th Cir. 1999); Ford, 145 F.3d at 608; Parker v. Metropolitan Life Insurance Co., 121 F.3d 1006 (6th Cir. 1997); and EEOC v. CNA Insurance Co., 96 F.3d 1039 (7th Cir. 1996). Each of those cases (with the exception of CNA), however, rests on the same misreading of Traynor discussed above. Moreover, each of those cases was decided before the Supreme Court handed down Olmstead. Thus, these precedents are no longer persuasive, if they ever were. One final point merits discussion. In the court below, Kmart asserted that the Commission's policy guidance condones conferring different benefits on those with mental disabilities than on those with physical disabilities. This assertion is incorrect. The Commission has never taken the position that such a distinction would pass muster under the ADA. The Commission's position is that, as a general matter, a health insurance plan may provide a lesser amount of coverage for the treatment of mental conditions than for physical conditions without violating the ADA. See EEOC: Interim Guidance on Application of ADA to Health Insurance, 8 Fair Empl. Prac. Man. (BNA) 405:7115, 7117 (June 8, 1993) ("Interim Guidance"). In this context, there are crucial differences between a health insurance plan and a long-term disability benefits plan. Health insurance plans that draw this distinction "apply to the treatment of a multitude of . . . conditions," many of which are not disabling. Id. In addition, such distinctions in health insurance plans "constrain individuals both with and without disabilities," and, therefore, are not distinctions based on disability. Id. Kmart's LTD plan does not fit this bill. Unlike a health insurance plan, which pays for the treatment of both disabled and non-disabled individuals, Kmart's LTD plan provides benefits only to disabled individuals. Among those, it arbitrarily cuts off benefits after 24 months if the individual's disability is caused by a mental illness. In other words, the LTD plan discriminates "because of the disability of such individual" in violation of the ADA. 42 U.S.C. 12112(a). Mr. Johnson, then, has stated a claim under the ADA and should be permitted to proceed in the district court, unless Kmart can establish that its LTD plan is shielded by the ADA's safe harbor provision, discussed below. 3. The plaintiff's claim of disability-based discrimination is not precluded as a matter of law by the ADA's safe harbor provision That Kmart's LTD plan draws a distinction based on disability does not mean Kmart is liable for a violation of the ADA. In 501(c), the ADA provides safe harbor protection for disability-based distinctions in bona fide employee benefit or other insurance plans if the distinctions are not "used as a subterfuge to evade the purposes" of the employment provisions contained in Title I of the ADA. See 42 U.S.C. 12201(c). Thus, Kmart can avoid liability if it can demonstrate that its LTD plan's distinction between mental and physical disabilities is not a subterfuge. The term "subterfuge" as used in the safe harbor provision means "disability-based disparate treatment that is not justified by the risks or costs associated with the disability." Interim Guidance, 8 Fair Empl. Prac. Man. at 405:7120. One way that an employer may prove that a particular disability-based distinction is not a subterfuge is by demonstrating that "the disparate treatment is justified by legitimate actuarial data." Id. Another way is by demonstrating that the disparate treatment is necessary to ensure the "fiscal soundness" of the plan. Id. at 7121. Whether a disability-based distinction is being used as a subterfuge must be decided on a case-by-case basis, taking into consideration the totality of the circumstances. Id. at 7120. The Commission's definition of the term "subterfuge" is consistent with Congressional intent, as evidenced by the ADA's legislative history. The House Report specifies that an individual with a disability cannot be "subject to different terms or conditions of insurance based on disability alone, if the disability does not pose increased risks." H.R. Rep. No. 485(II), 101st Cong., 2d Sess. 136, reprinted in 1990 U.S.C.C.A.N. 303, 419. Thus, a plan may not "limit the amount . . . of coverage available to an individual . . . solely because of a physical or mental impairment," unless the limitation "is based on sound actuarial principles or is related to actual or reasonably anticipated experience." Id. at 137, reprinted in 1990 U.S.C.C.A.N. at 420; see also Parker, 121 F.3d at 1021 (Merritt, J., dissenting) (discussing legislative history). The Senate Report echoes these views, stressing that a benefit plan provision is protected by the safe harbor only if it is designed "in a manner that is consistent with basic principles of insurance risk classification." S. Rep. No. 116, 101st Cong., 1st Sess., at 85-86. Despite this clearly expressed legislative intent, some courts disagree with the Commission's definition of the term "subterfuge" as used in the ADA. See, e.g., Leonard F. v. Israel Discount Bank of New York, No. 98-7320, 1999 WL 1114700, at *4 (2d Cir. Dec. 8, 1999); Ford, 145 F.3d at 611; Modderno v. King, 82 F.3d 1059, 1064-65 (D.C. Cir. 1996). These courts instead have looked to the Supreme Court's interpretation of the term "subterfuge" as used in an early version of the Age Discrimination in Employment Act, 29 U.S.C. 626(f)(2) ("ADEA"). See Public Employees Retirement Sys. v. Betts, 492 U.S. 158 (1989). In Betts, the Supreme Court stated that "the term 'subterfuge' must be given its ordinary meaning as 'a scheme, plan, stratagem, or artifice of evasion." Betts, 492 U.S. at 167 (quoting United Air Lines, Inc. v. McMann, 434 U.S. 192, 203 (1977)). The Court reasoned, in part, that a retirement plan that was established long before the ADEA was even enacted cannot be characterized as a subterfuge to evade the purpose of the Act. Id. at 168. Some courts have seized on this reasoning to furnish safe harbor protection to plans that were adopted before the ADA's enactment. See, e.g., Leonard F., 1999 WL 1114700, at *4; Modderno, 82 F.3d at 1064-65. What these courts fail to appreciate, however, is that the ADA's subterfuge provision differs from the ADEA's former subterfuge provision, which the Court interpreted in Betts. The subterfuge provision construed in Betts provided that a plan provision could not be a subterfuge, whereas under the ADA it may not be used as a subterfuge. Compare Betts, 492 U.S. at 161 with 42 U.S.C. 12201(c). Congress chose this different language on purpose to ensure that the ADA's safe harbor provision would not be open to a Betts-like attack. See H.R. Rep. No. 485 (II), 101st Cong., 2d Sess. 136, reprinted in 1990 U.S.C.C.A.N. 303, 419 (the ADA's safe harbor provision "may not be used to evade the protections of title I . . . regardless of the date an insurance plan or employer benefit plan was adopted"); see also S. Rep. No. 116, 101st Cong., 1st Sess. 85 (same). Thus, regardless of when Kmart's plan was adopted, which apparently has not yet been established in this litigation, it might still be used as a subterfuge. Because the district court resolved this case on a motion to dismiss, there has been no discovery. Thus, it remains to be seen whether Kmart's plan is based on sound actuarial principles. Kmart is not entitled to the protection of the safe harbor unless it comes forward with a legitimate actuarial justification for its LTD plan's disability-based distinction. CONCLUSION For the foregoing reasons, the Commission asks the Court to reverse the district court's grant of the motion to dismiss and remand this case for further proceedings. Respectfully submitted, C. GREGORY STEWART General Counsel Designate PHILIP B. SKLOVER Associate General Counsel LORRAINE C. DAVIS Assistant General Counsel CAREN I. FRIEDMAN Attorney EQUAL EMPLOYMENT OPPORTUNITY COMMISSION 1801 L Street, NW, 7th Floor Washington, D.C. 20507 (202) 663-4720 CERTIFICATE OF COMPLIANCE I hereby certify that this brief complies with the Court's type-volume limitations. The brief is printed in 14-point Times New Roman and contains 5,767 words. Caren I. Friedman CERTIFICATE OF SERVICE I hereby certify that on this 27th day of December 1999, the original and six true and correct copies of the attached brief were mailed first class, postage prepaid to the Clerk of Court, and two true and correct copies were mailed first class, postage prepaid to counsel of record at the following addresses: Bradley M. Bole, Esq. 100 South Ashley Drive, Suite 1180 Tampa, Florida 33602 Mark J. Neuberger, Esq. BUCHANAN INGERSOLL, P.C. Suite 606 One Turnberry Place 19495 Biscayne Boulevard Aventura, Florida 33180 Caren I. Friedman ____________________________________ 1. The Commission appears as an amicus to address only the issues stated above. The Commission does not express any views on other issues that this appeal may raise. 2. Pursuant to 11th Cir. Rule 28-1(i), citations to the record reference the volume, document, and page numbers. 3. Although the district court did not explicitly rule on the coverage issue, we address it since Kmart argued for dismissal on this ground in the court below. 4. The Court is required to follow the holding of a prior panel, “except where that holding has been . . . undermined to the point of abrogation by a subsequent . . . Supreme Court decision.” Chambers v. Thompson, 150 F.3d 1324, 1326 (11th Cir. 1998). “To the extent of any inconsistency between our [prior opinions’] pronouncements and the Supreme Court’s supervening ones, of course, we are required to heed those of the Supreme Court.” Id. (citation omitted). 5. There is a minor exception not relevant here. Namely, Title VII contains an exception for public officials, whereas the ADA does not. Compare 42 U.S.C. § 2000e(f) with 42 U.S.C. § 12111(4). 6. A district court within this Circuit has noted other courts’ disagreement with Gonzales, but has rejected their logic. See Bass v. City of Orlando, 57 F. Supp.2d 1318, 1323-24 (M.D. Fla. 1999), aff’d, No. 99-10867 (11th Cir. Nov. 22, 1999). 7. There is an exemption from liability if the employer can establish that the disability-based distinction falls within the ADA’s safe harbor. See infra pp. 22-26. 8. Although the district court did not address this issue, we address it to demonstrate that the Court should not affirm on the alternative ground that the disability-based distinction in Kmart’s LTD plan is protected by the ADA’s safe harbor provision. 9. In the Lewis litigation, Kmart conceded that a similar LTD plan’s disability-based distinction is not actuarially justified. See Lewis v. Aetna Life Ins. Co., 7 F. Supp.2d 743, 747 (E.D. Va. 1998), vacated Lewis v. Kmart Corp., 180 F.3d 166 (4th Cir. 1999), petition for cert. filed, 68 U.S.L.W. 3311 (Oct. 29, 1999).