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More on AT&T v. Hulteen

One of the cases under consideration at yesterday’s conference was No. 07-543, AT&T v. Hulteen. At issue in the case is a decision of the Ninth Circuit holding that AT&T’s employment benefits system violated Title VII of the Civil Rights Act, as amended by the Pregnancy Discrimination Act. The Solicitor General has recommended that cert. be granted in the case. To access previous filings in the case, click here and here. [Disclosure: Howe & Russell, P.C. and the Stanford Law School Supreme Court Litigation Clinic represent the respondents in the case; Akin Gump is not involved in the case.]

For nearly a hundred years, petitioner AT&T and its predecessors have offered employee benefits based on a “Net Credited Service” (“NCS”) date, which is calculated based on an employee’s hire date and adjusted forward to account for any time in which the employee is not working and therefore not earning service credits. Before 1977, employees who took pregnancy leave were granted a maximum of thirty personal days, with their NCS date adjusted forward for any additional time; by contrast, employees on regular temporary disability had no limit on the days they could continue to accrue service credit.

The individual respondents in the case before the Court are four current and former AT&T and Pacific Bell (AT&T’s predecessor) employees who took pregnancy leaves before the 1977 amendment and began to retire in the 1990s. After filing charges with the EEOC and receiving a right-to-sue letter, they – along with respondent Communications Workers of America, the union representing non-management AT&T employees – filed this suit in federal district court, arguing that the smaller pensions that resulted from AT&T’s failure to provide them with full credit for pregnancy leaves taken before the effective date of the PDA violated Title VII.

Based on an earlier Ninth Circuit decision, Pallas v. Pacific Bell, the district court granted summary judgment in favor of Hulteen and the other plaintiffs. In Pallas, the court of appeals held that Pacific Bell’s decision to give service credit for all pre-PDA temporary disability leave except by reason of pregnancy when calculating retirement benefits post-PDA violated Title VII. All parties agreed that Pallas was decided on “virtually identical facts” as those in Hulteen. In its judgment, though, the district court acknowledged the “great logical and legal force” of AT&T’s arguments.

On appeal, the Ninth Circuit panel reversed. It held that Hulteen failed to resolve two problems necessary to sustain her Title VII cause of action: those of retroactivity and the statute of limitations. Relying on the Supreme Court’s 1994 decision in Landgraf v. USI Film Products, in which the Court held, absent clear instruction from Congress, that “the default rule” for legislation is “no retroactive application,” the majority held that a ruling in Hulteen’s favor would require either an unlawful retroactive application of the PDA or situating the actionable offence much later, or outside the statute of limitations (when benefits based on an adjusted NCS date were actually awarded). The majority also rejected Hulteen’s argument that the NCS system was “facially discriminatory,” as such an argument again depended on a retroactive application of the PDA.

Judge Rymer dissented. She argued that the reasoning or theory of Pallas was not “so irreconcilable with the reasoning or theory of Landgraf as to give this panel license to overrule it.”

The Ninth Circuit granted rehearing en banc and affirmed the district court’s summary judgment in favor of the respondents, again relying on Pallas. The en banc majority held that no intervening Supreme Court decision overruled Pallas, nor did Pallas give impermissible retroactive effect to the PDA. It was AT&T’s post-PDA decision to award benefits according to an NCS date adjusted for pregnancy leave that was the “relevant, actionable” event. According to the en banc majority, Hulteen and the other respondents were affected by pregnancy anew when AT&T calculated their retirement benefits according to the adjusted NCS date and deprived them of benefits received by those not “affected by pregnancy.” In his dissent, Judge O’Scannlain (joined by three other judges, including Judge Rymer) rejected the majority’s holdings that Pallas remained good law and that the sex discrimination charges in Hulteen were timely: “because Pallas invented a timely Title VII violation where the determination of benefits simply gave present effect to past, unchallenged acts, contrary to Supreme Court authority, it must be overruled.”

AT&T’s petition first argues that certiorari is warranted because the decision of the en banc court “clearly departs” not only from the holdings of the Sixth and Seventh Circuits, but also from Supreme Court precedent such as United Airlines v. Evans, which was subsequently reaffirmed last term by Ledbetter v. Goodyear Tire. AT&T argues that there is no basis to distinguish its case from Evans, in which the Court held that companies could “treat [a] past act as lawful after respondent failed to file a [timely] charge of discrimination.” Further, AT&T alleges, the en banc majority “sought to escape Evans and Ledbetter by repeatedly labeling the NCS system ‘facially discriminatory.’” However, according to AT&T, its benefit distribution system can be labeled as such only if the PDA is applied retroactively, because prior to the law’s effective date, it “could lawfully deny employees full service credit for time spent on pregnancy leave.” Finally, AT&T argues that the question whether the PDA can be given retroeffective effect is itself an important one warranting the Court’s attention in light of both the frequency with which the question is likely to arise in the future and the disparate results that the Ninth Circuit’s holding will create.

Opposing certiorari, the respondents counter that certiorari is not warranted because the Supreme Court’s decision in Ledbetter “refines a major component of the controlling legal framework” by distinguishing between present compensation discrimination and neutral acts that only incidentally give present effect to past, and therefore unactionable, discrimination. According to respondents, the Ledbetter decision made clear that a “‘disparate-treatment claim [under Title VII] comprises two elements’” – “‘an employment practice[] and discriminatory intent’” – and reaffirmed the Court’s prior decisions holding that if a facially discriminatory pay scale is adopted by an employer, then “‘that employer engages in intentional discrimination whenever it issues a check to one of those disfavored employees.’” In respondents’ view, the setting of an employee’s benefits is precisely the same kind of discrete act as setting her pay; thus, the employment practice and the discriminatory intent were joined – long after the PDA – when AT&T used a facially discriminatory policy to calculate respondents’ pension benefits and, as a result, reduce them in comparison with other similarly situated employees.

Moreover, even if their claims rested upon AT&T’s pre-PDA decision to adjust their NCS date for pregnancy leave, respondents argue that the decision below should still stand based on Lorance v. AT&T Technologies, in which the Court held that if a seniority system is found to be facially discriminatory, it “‘can be challenged at any time,’” and the Civil Rights Act of 1991, which specifically provides for challenges to an intentionally discriminatory seniority system “when a person aggrieved is injured by the application of the seniority system.”

Finally, respondents argue that certiorari is not warranted because the effects of the Ledbetter decision have not been fully fleshed out by either the courts or Congress. The Sixth and Seventh Circuits issued their conflicting decisions before the Ledbetter decision and thus could not have relied on that decision’s “nuances.” It is possible, respondents maintain, that those circuits may reconsider their decisions in light of Ledbetter. And in any event, Congress is currently considering legislation that would cover all claims pending on or before May 28th, 2007.

In late May 2008, the United States – in response to the Court’s late January call for the views of the Solicitor General – filed a brief in which it urges the Court to grant certiorari. First, the government argues, the Ninth Circuit erred in holding that AT&T violated Title VII when, in calculating benefits, it failed to credit pre-PDA pregnancy leave; such a conclusion, the government emphasizes, gave an unintended retroactive effect to the PDA. Second, the government contends that efforts by the Ninth Circuit and respondents to characterize AT&T’s NCS system as facially discriminatory are “seriously flawed,” reasoning that when the petitioner adopted and applied its pre-PDA pregnancy leave policies, there was no law requiring pregnancy leave to be treated like other temporary disability leaves. Consequently, the policy could be discriminatory only if the PDA had retroactive effect, which it clearly did not. Indeed, the government continues, not only was it not retroactive, but the PDA “did not even apply prospectively to benefits programs” until 180 days after its enactment.

The United States next argues that, to circumvent the fact that the PDA did not at the time of its passage require employers to credit employees for pre-PDA pregnancy leave, the Ninth Circuit held that AT&T was nevertheless required to adjust the NCS date to account for pre-PDA pregnancy leave whenever it calculated benefits for any employee who had taken pre-PDA pregnancy leave. However, in the government’s view, “that kind of perpetuation-of-past discrimination claim is” – notwithstanding respondents’ arguments to the contrary – directly foreclosed” by a line of Supreme Court precedent starting with Evans and most recently revisited in Ledbetter.

Finally, the United States argues that cert. should be granted because the Ninth Circuit’s decision squarely conflicts with decisions out of the Sixth and the Seventh Circuits. Countering respondents’ arguments that those opinions might be revisited in the wake of Ledbetter, the government asserts that because those circuits relied upon the same Supreme Court precedent that Ledbetter “reaffirmed and reinforced,” there is no reason either for those courts to reconsider their decisions or to believe that the Ninth Circuit will correct its erroneous reading of Ledbetter.