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PIQUARD v. CITY OF EAST PEORIA

April 28, 1995

MARK PIQUARD AND JEROME DURAN, PLAINTIFFS,
v.
CITY OF EAST PEORIA, A CORPORATION, AND THE BOARD OF TRUSTEES OF THE CITY OF EAST PEORIA POLICE PENSION FUND, DEFENDANTS.



The opinion of the court was delivered by: Mihm, Chief Judge.

        ORDER

This matter is before the Court on the City of East Peoria's ("City") Motion to Dismiss (# 10), the Board of Trustees of the City of East Peoria Police Pension Fund's ("Board") Motion to Dismiss (# 11), Plaintiffs' Motion for Summary Judgment (# 18), the City's Motion to Strike Affidavit of Jerome Duran (# 25), the City's Motion to Strike Affidavit of Mark Piquard (# 26), Plaintiffs' Combined Motion and Memorandum in Support of Motion to Strike Portions of Affidavit of Donald Stoner (# 38), Plaintiffs' Motion to Strike City of East Peoria's Response to Plaintiffs' Combined Motion and Memorandum in Support of Motion to Strike Portions of Affidavit of Donald Stoner (# 41), the City's Motion to Dismiss Count IV of Complaint (# 45), and the Board's Motion to Dismiss Count IV of Complaint (# 47).

For the reasons stated below, the City's Motion to Dismiss (# 10) is DENIED, the Board's Motion to Dismiss (# 11) is DENIED, Plaintiffs' Motion for Summary Judgment is GRANTED IN PART and DENIED WITHOUT PREJUDICE IN PART, the City's Motions to Strike Affidavits of Jerome Duran and Mark Piquard (# 25 and # 26) are GRANTED IN PART and DENIED IN PART, Plaintiffs' Motion to Strike Portions of Affidavit of Donald Stoner (# 38) is DENIED, Plaintiffs' Motion to Strike the City's Response to Plaintiffs' Motion to Strike Portions of Affidavit of Donald Stoner (# 41) is GRANTED, the City's Motion to Dismiss Count IV (# 45) is DENIED, and the Board's Motion to Dismiss Count IV (# 47) is DENIED.

Motions to Dismiss (# 10, # 11, # 45, and # 47)

Counts I and II allege violations of Title II of the Americans with Disabilities Act ("ADA") against the Board and the City respectively, Count III asserts an identical claim under Section 504 of the Vocational Rehabilitation Act, 29 U.S.C. § 794, against the City, and Count IV alleges violations of Title I of the ADA against the City and the Board. The Board has moved to dismiss Count I of Plaintiffs' Complaint pursuant to Fed.R.Civ.P. 12(b)(6). The City has moved to dismiss Counts II and III of the Complaint pursuant to Fed.R.Civ.P. 12(b)(1) and/or (6). Both the City and the Board have moved to dismiss Count IV of the Complaint pursuant to Rules 12(b)(1), 12(b)(6), and 12(b)(7). When considering a motion to dismiss, the Court accepts the factual allegations of the complaint as true and draws all reasonable inferences from the allegations in the plaintiff's favor. Wiemerslage v. Maine Tp. High School Dist. 207, 29 F.3d 1149, 1151 (7th Cir. 1994). A motion to dismiss will only be granted if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957).

The following facts are taken as true. Mark Piquard ("Piquard") has been employed as a police officer by the City since 1990 and is being denied the opportunity to participate in the City's Police Pension Fund solely because of his spondylolisthesis. Jerome Duran ("Duran") has been employed as a police officer by the City since 1967 and is being denied the opportunity to participate in the City's Pension Fund solely because of an astigmatism. On April 29, 1990, the Board originally denied Piquard's application for membership in the City of East Peoria's Police Pension Fund ("Fund"). The Board denied Duran's application for admission to the Fund in 1967 or 1968. On August 16, 1993, Piquard reapplied for admission into the Fund, and his application was denied on August 20, 1993. Duran reapplied on January 28, 1994, and the Board has failed to respond to that application. Piquard filed a charge of discrimination alleging a violation of Title I of the ADA with the EEOC on December 23, 1993. Duran filed his Title I charge with the EEOC on February 22, 1994.

Plaintiffs do not and cannot dispute that the ADA may not be applied retroactively. Vande Zande v. State of Wis. Dept. of Admin., 44 F.3d 538, 545 (7th Cir. 1995). Instead, they contend that Defendants violate the ADA every day they are employed and not provided benefits because of their disabilities. Specifically, Plaintiffs allege that Defendants' conduct constitutes "systemic" and "serial" violations of the ADA. Plaintiffs also contend that the Board violated the ADA when it denied Plaintiffs' second applications to the Fund dated August, 1993 and January, 1994.

"The continuing violation doctrine allows a plaintiff to get relief for a time-barred act by linking it with an act that is within the limitations period." Selan v. Kiley, 969 F.2d 560, 564 (7th Cir. 1992). The Seventh Circuit has discussed three viable continuing violation theories, only two of which are alleged here. Jones v. Merchants Nat. Bank & Trust Co. of Indianapolis, 42 F.3d 1054, 1057-58 (7th Cir. 1994); Selan, 969 F.2d at 565. The "systemic" continuing violation theory involves an employer's express, openly espoused policy that is alleged to be discriminatory. Selan, 969 F.2d at 565 & n. 5; see also Mack v. Great Atlantic and Pacific Tea Co., Inc., 871 F.2d 179, 185 (1st Cir. 1989). A "serial" continuing violation occurs when an employer covertly follows a practice of discrimination over a period of time. In such a case, the plaintiff can only realize that he/she is a victim of discrimination after a series of discrete acts has occurred. The limitations period begins to run when the plaintiff gains such insight. Jones, 42 F.3d at 1058; Selan, 969 F.2d at 565.*fn2

Plaintiffs argue that Defendants' conduct constitutes a systemic continuing violation because Defendants are responsible for discriminatory practices and policies that treat similarly situated employees differently based on disabilities (e.g., allowing persons without disabilities to participate in the Fund but denying participation in the Fund to persons with disabilities). In Bazemore v. Friday, 478 U.S. 385, 395, 106 S.Ct. 3000, 3006, 92 L.Ed.2d 315 (1986), the Supreme Court considered discriminatory salary disparities created prior to

Title VII's effective date and perpetuated thereafter. The Court held that each week's paycheck that delivered less to a black employee than a similarly situated white employee was a wrong actionable under Title VII, regardless of the fact that the discriminatory pattern began prior to the effective date of Title VII. Id.

    A pattern or practice that would have constituted a
    violation of Title VII, but for the fact that the
    statute had not yet been 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. While
    recovery may not be permitted for pre-1972 acts of
    discrimination, to the extent that this
    discrimination was perpetuated after 1972,
    liability may be imposed.

Id.

The Seventh Circuit has held that active employees may challenge a discriminatory retirement plan. In Bartmess v. Drewrys U.S.A., Inc., 444 F.2d 1186 (7th Cir. 1971), a female employee challenged a retirement plan which treated men and women differently with respect to retirement ages. The defendant argued that the only potentially unlawful practice under a retirement plan is the actual discharge and not the overall maintenance of the plan and thus, plaintiff should have waited until the actual date of her retirement before filing a charge with the EEOC. The Seventh Circuit disagreed and allowed the plaintiff to proceed. The Bartmess court stated:

    We have no difficulty in concluding that the actual
    maintenance of a discriminatory retirement plan can
    be one of the acts which "adversely affect [an
    individual's] status as an employee, because of
    such individual's sex" and that retirement plan
    should be viewed as "conditions of employment"
    within the meaning of Section 703 of Title VII.
    (42 U.S.C. § 2000e-2(a)).
    The collective bargaining agreement in force at the
    time plaintiff filed her charge provided that
    female employees must retire three years prior to
    their male counterparts. If such a contract is
    found to be discriminatory, its mere presence in a
    collective bargaining agreement would render female
    workers "aggrieved persons" within the meaning of
    Title VII and would continue to do so for the
    entire time the individual was employed.

Id. at 1188. Finally, the Seventh Circuit has stated that, "[o]rdinarily in the case of a continuing unlawful practice, every day that the practice continues is a fresh wrong for purposes of the statute of limitations." Webb v. Indiana Nat. Bank, 931 F.2d 434, 438 (7th Cir. 1991).

Plaintiffs allege that the Board, in determining who may participate in the Fund, uses eligibility criteria and methods of administration which discriminate against qualified individuals with disabilities, such as Plaintiffs. Plaintiffs further allege that the Board has imposed eligibility criteria for participation in the Fund which screen out or tend to screen out individuals with disabilities, such as Plaintiffs, from fully enjoying the services and benefits of the Fund and that those criteria are not necessary to the administration of the Fund. Plaintiffs claim that the Board has failed to make reasonable modification of its policies, practices, and procedures which it uses to determine eligibility for admission into the Fund to avoid discriminating against individuals with disabilities, including Plaintiffs. Plaintiffs also allege that the City uses discriminatory eligibility criteria and methods of administering pension benefits which screen out individuals with disabilities from enjoying such benefits.

Having alleged that Defendants' illegal policies and practices of denying disabled individuals admission into the Fund continued from the initial denials of Plaintiffs' applications to their reapplications in August, 1993 and January, 1994, and into the present, Plaintiffs have filed timely EEOC charges under Title I and a timely Complaint under the ADA and Section 504 of the Rehabilitation Act. Mack, 871 F.2d at 183 (systemic violation requires discriminatory policy to be in effect during statute of limitations period); Stewart v. CPC Intern., Inc., 679 F.2d 117, 121 (7th Cir. 1982) (systemic violation exists when challenged policy in place and applicable to plaintiff at the time discrimination charge was filed).

Defendants rely heavily on the Sixth Circuit's decision in Dixon v. Anderson, 928 F.2d 212 (6th Cir. 1991), in which the plaintiffs asserted a new violation occurred daily under the Fourteenth Amendment's equal protection clause when similarly situated colleagues enjoyed membership in the retirement system and had contributions withheld from their checks, while plaintiffs were denied similar rights. The Dixon court rejected plaintiffs' argument and held that their employer's failure to withhold contributions was just a reminder of their nonmember status. The Dixon court cited to United Air Lines, Inc. v. Evans, 431 U.S. 553, 97 S.Ct. 1885, 52 L.Ed.2d 571 (1977), and found that plaintiffs only suffered from the continuing effects of past discrimination and were not the victims of a continuing violation. Id. at 216-17. According to the Dixon court, once the division into members and nonmembers was made according to statute, the retirement system operated neutrally in that all members were treated equally and all nonmembers were treated equally. Id. The Dixon court further held that although the defendants followed a policy of discrimination in membership selection, no allegedly discriminatory act occurred within the two-year limitations period prior to the filing of their complaint. Id. at 218.*fn3 The limitations period for plaintiffs' cause of action was held to have begun when they learned of their classification as nonmembers before the limitations period and there were no later triggering events. Id. at 217.

In Evans, a stewardess was fired as a result of a discriminatory "no-marriage" policy. Evans, 431 U.S. 553, 97 S.Ct. 1885 (1977). The airline later rehired the stewardess but refused to reinstate her seniority. The Supreme Court held that the limitations period ran from the time of the decision to fire her and that the implementation of that decision in another employment action was not a separate discriminatory act. Thus, the employer's refusal to grant retroactive seniority to the rehired stewardess was not a Title VII violation when she had failed to file a timely charge with the EEOC at the time of her discharge. The Court stated that "the critical question is whether any present violation exists" and that "[a] discriminatory act which is not made the basis for a timely charge is the legal equivalent of a discriminatory act which occurred before the statute was passed." Id. at 558, 97 S.Ct. at 1889. Evans held that the neutral seniority system which merely perpetuated the effects of previous discrimination was not a continuing violation. Id. at 560-61, 97 S.Ct. at 1890.

Evans is distinguishable because it dealt with a one-time violation, a discriminatory discharge, which had a lingering effect only because of a neutral seniority system. The case at bar, however, involves allegations by current employees of a long-standing policy of discrimination against disabled employees which continues after the ADA's effective date and into the limitations period. Plaintiffs attack what they argue are presently maintained discriminatory eligibility criteria and methods of administering the Fund applicable to Plaintiffs and other officers with disabilities.

In Stewart, the Seventh Circuit found that Evans, "with its emphasis upon proving a `present violation,' appear[ed] to reinforce rather than weaken the viability of the Bartmess continuing-violation theory, since the challenged [retirement] policy was in place and unquestionably was applicable to the plaintiff at the time the discrimination charge was filed." Stewart, 679 F.2d at 121. Dixon's holding that a denial of retirement benefits, allegedly because of a discriminatory policy still in effect and applicable to the plaintiffs, constitutes merely the lingering effects of a past discriminatory act, as in Evans, seems inconsistent with the law of the Seventh Circuit.

The parties disagree over whether Illinois law allows a reapplication for admission into the Fund and whether the Fund's failure to allow Plaintiffs admission into the Fund based on their subsequent applications or requests for rehearing after the ADA's effective date constitute discriminatory acts. Defendants argue that Plaintiffs' second applications for admission attempt to resurrect final decisions denying them participation in the Fund made before the limitations period and the ADA's effective date. Defendants contend that Plaintiffs should not be allowed to avoid the statute of limitations and the non-retroactivity of the ADA by reapplying for admission. According to Defendants, "Any other holding would mean that a plaintiff could always resuscitate a stale claim by asking for reconsideration." Dugan v. Ball State University, 815 F.2d 1132, 1135 (7th Cir. 1987).

In Dugan, the plaintiff was denied a promotion and failed to file a charge with the EEOC within 300 days of the Board of Trustees' affirmance of the denial. The defendant argued that her claim was barred by the applicable statute of limitations. The plaintiff responded that her later submission of a letter to the Dean should be considered a new application for promotion and that the time for filing a claim with the EEOC should be measured from the Dean's subsequent letter informing her that she could not be promoted to associate professor without a doctorate. The court rejected the plaintiffs claim that the Dean's letter constituted a separate denial because nothing in the record suggested that either the plaintiff or the Dean viewed her letter as beginning the application process again. For example, Dugan did not appeal the Dean's decision, and recommendations for promotion were normally initiated by the department, not by application directed to the Dean of the college. Id.

The Dugan plaintiff sought to avoid application of the Supreme Court's decision in Delaware State College v. Ricks, 449 U.S. 250, 101 S.Ct. 498, 66 L.Ed.2d 431 (1980). Dugan, 815 F.2d at 1135. In Ricks, a faculty member alleged that he was discriminatorily denied tenure, a decision which at Delaware State College inevitably led to his termination. Ricks challenged only the decision denying him tenure, but by arguing the date of termination as the time when the statute of limitations began to run, the Court found that "[i]n effect, he is claiming a `continuing violation.'" Ricks, 449 U.S. at 257, 101 S.Ct. at 503. The Supreme Court held that the limitations period ran not from when he was terminated, but from when he was notified of the decision to deny him tenure. Ricks, 449 U.S. at 259, 101 S.Ct. at 504-05.

Dugan and Ricks are inapplicable to this case. Plaintiffs' Complaint suggests that they viewed their second applications for admission into the Fund as beginning the application process again in view of the newly-enacted ADA. As in Bazemore, a pattern or practice of discriminating against disabled individuals in determining admission into the Fund became a violation of the ADA on its effective date.*fn4 Thus, it was not "obviously futile" for Plaintiffs to reapply for admission into the Fund after the ADA's effective date. Webb, 931 F.2d at 437 ("[I]f it obviously would be futile to make a future application for the job of which he has just been turned down, the plaintiff cannot delay suit and use those futile applications to delay the running of the statutory period indefinitely."). Moreover, unlike Ricks, where the plaintiff could have filed an action as of the date he was notified of the denial of tenure, the original acts of discrimination here could not have been challenged when committed because the ADA and, with regard to Duran the Rehabilitation Act, were not yet enacted. Defendants' failure to allow Plaintiffs admission into the Fund after their second applications, if based on their alleged disabilities and in violation of the ADA, would constitute an additional discriminatory act within the limitations period. Dixon, 928 F.2d at 221 (dissenting opinion).

Moreover, this case looks more like the Bazemore series of wrongful acts than the Evans and Ricks terminations in which the employers took one dispositive act. Like the employer that applies different salary schedules to black and white employees and commits a new wrong every pay period, Defendants commit a new wrong every pay period Fund contributions are not withheld from disabled employees' checks. "[E]ach day [Piquard and Duran] are treated differently than other similarly situated employees, with respect to their pension benefits, is another violation." Dixon, 928 F.2d at 220 (dissenting opinion). "Plaintiffs . . . are continually denied the right to participate in a pension plan pursuant to an ongoing policy which is still in effect." Id.

In a similar case, another Illinois district court has found that Section 5/3-106 of the Illinois Pension Code does not prevent the Board from rehearing second applications for admission in the Fund after the ADA's effective date, Holmes v. City of Aurora, 1995 WL 21606, *4 (N.D.Ill. Jan. 18, 1995), but whether state law allows reapplications for admission is not controlling here. If the original denials of Plaintiffs' applications occurred after the ADA's effective date and Illinois law clearly barred second applications for admission, that would be evidence that reapplications would be futile and that the parties did not view Plaintiffs' subsequent applications as beginning the process anew. That situation did not occur here. After its effective date, Defendants were under a duty to comply with the ADA. They are free to claim that state law prevents them from reviewing subsequent applications for admission to the Fund, but that is no defense to a failure to comply with the Act after its effective date. If Defendants are denying Plaintiffs admission into the Fund after the effective date of the ADA and in violation of the ADA, that conduct is illegal, regardless of whether state law allows reapplications.

Finally, Defendants rely on Florida v. Long, 487 U.S. 223, 108 S.Ct. 2354, 101 L.Ed.2d 206 (1988), to support their argument that Plaintiffs' action is retroactive and that Bazemore is inapplicable in the pension fund context. In Long, the Supreme Court stated:

    It is not correct to consider payment of benefits
    based on a retirement that has already occurred as
    a sort of continuing violation. Our decision in
    Bazemore v. Friday, 478 U.S. 385 [106 S.Ct. 3000,
    92 L.Ed.2d 315] (1986), is not to the contrary.
    Bazemore concerned the continuing payment of
    discriminatory wages. . . . In a salary case,
    however, each week's paycheck is compensation for
    work presently performed and completed by an
    employee. Further, the employer does not fund its
    payroll on an actuarial basis. By contrast, a
    pension plan, funded on an actuarial basis,
    provides benefits fixed under a contract between
    the employer and retiree based on a past assessment
    of an employee's expected years of service, date of
    retirement, average final salary, and years of
    projected benefits. In the pension fund context, a
    continuing violation principle in every case would
    render employers liable for all past conduct,
    regardless of whether the liability principle was
    first announced by [Los Angeles, Dept. of Water and
    Power v.] Manhart [435 U.S. 702, 98 S.Ct. 1370, 55
    L.Ed.2d 657] (1978), [Arizona Governing Committee
    for Tax Deferred Annuity & Deferred Compensation
    Plans v.] Norris [463 U.S. 1073, 103 S.Ct. 3492, 77
    L.Ed.2d 1236] (1983) or our decision here. We
    cannot recognize a principle of equitable relief
    that ignores the essential assumptions of an
    actuarially funded pension plan. . . . It is
    essentially retroactive to disrupt past pension
    funding assumptions by requiring further
    adjustments based on conduct that could not
    reasonably have been considered violative of Title
    VII at the time retirements occurred and funding
    provisions were made.

Florida v. Long, 487 U.S. 223, 239-40, 108 S.Ct. 2354, 2364, 101 L.Ed.2d 206 (1988). Long involved only persons who had already retired prior to a change in the law and whether they could sue to adjust their benefits. The Supreme Court held that due to the problem which would be caused by pensions that were already funded on an actuarial basis, retirees could not sue. Long did not address a discriminatory exclusion of current employees from accruing benefits and even explicitly left open the possibility that a retiree may sue where the retirement benefit amount is not fixed by contract. Id. at 240, 108 S.Ct. at 2364.

Although Plaintiffs' claims are not barred by the applicable statute of limitations, any pre-ADA discriminatory acts by Defendants were not forbidden by that law. Thus, Defendants may only be held liable for acts which occurred after January 26, 1992. Similarly, with regard to Duran, Defendants may not be held liable for any discriminatory act under Section 504 before its enactment in 1973.

Defendants next argue that Section 501(b) of the ADA bars Counts I, II, and IV. Section 501(b) provides in part:

    Nothing in this chapter shall be construed to
    invalidate or limit the remedies, rights, and
    procedures of any Federal law, or law of any State
    or political subdivision of any State or
    jurisdiction that provides greater or equal
    protection for the rights of individuals with
    disabilities than are afforded by this chapter.

42 U.S.C. § 12201(b). Defendants contend that the Illinois Pension Code and the Illinois Administrative Review Act provide an elaborate mechanism for establishing, evaluating, controlling, and reviewing issues related to a police officer's eligibility to participate in the Fund and supplied Plaintiffs with ample opportunity to present their concerns under Section 504 or the ADA.*fn5 (City's Memorandum, at 11). Neither Piquard nor Duran initiated administrative review proceedings to challenge the decisions of the Board. Therefore, Defendants argue, the Board's decisions are final and binding. Defendants further argue that unless Plaintiffs can affirmatively demonstrate that the state law procedures used to arrive at the decisions denying them participation are subject to a lower standard than the ADA, it would be improper to invalidate the Board's decisions.

Defendants have not cited any authority for their claim that Section 501(b) of the ADA requires Plaintiffs to affirmatively demonstrate that Illinois procedures subjected them to a lower standard than the ADA to maintain an ADA action. The legislative history indicates that with Section 501(b) Congress did not "intend to displace any of the rights or remedies available under other federal or state laws (including state common law) which provide greater or equal protection to individuals with disabilities." House Report ("H.Rep.") No. 101-485(II), 101st Cong., 2d Sess., at 135 (1990), U.S.Code Cong. & Admin.News 1990, at 267, 418. "Under Section 501(b) of the ADA, all of the rights, remedies and procedures that are available to people with disabilities under other federal laws, including Section 504 of the Rehabilitation Act, or other state laws (including state common law), are not preempted by this Act." H.Rep. No. 101-485(III), at 70, U.S.Code Cong. & Admin.News 1990, at 493. Section 501(b) means that:

    A plaintiff may choose to pursue claims under a
    state law that does not confer greater substantive
    rights, or even confers fewer substantive rights,
    if the plaintiffs situation is protected under the
    alternative law and the remedies are greater. For
    example, the California Fair Enforcement and
    Housing Act (FEHA) does not cover persons with
    mental disabilities. However, the FEHA has been
    construed to provide compensatory and punitive
    damages. Because the ADA covers mental
    disabilities, the FEHA could be construed as not
    conferring equal or greater rights than the ADA.
    However, a person with a physical disability may
    choose to sue under the FEHA, as well as under the
    ADA, because of the availability of damages under
    the FEHA. Section 501(b) ensures that the FEHA is
    not preempted by the ADA.

H.Rep. No. 101-485(III), at 70, U.S.Code Cong. & Admin.News 1990, at 493. Thus, if Illinois' procedures provide equal or greater protections for individuals with disabilities, as Defendants maintain, Section 501(b) only means that those state procedures are not preempted by the ADA and that Plaintiffs may choose to pursue their claims under Illinois law and the ADA. It does not mean that because Illinois has such procedures for reviewing denials of applications into the Fund, those procedures are the sole means for City police officers to bring disability discrimination claims.

Defendants also fail to cite any authority for their claim that since Plaintiffs failed to file an action in state court within 35 days of service of the final decisions of the Board under the Illinois Administrative Review Law, they are barred from seeking federal review of their ADA claims. Defendants believe that the decisions of the Board are final and not subject to any further review. State courts have concurrent jurisdiction over ADA cases, but plaintiffs may obviously decide their choice of forum. Krouse v. American Sterilizer Co., 872 F. Supp. 203, 205 (W.D.Pa. 1994). If Plaintiffs had filed an action in state court challenging the Board's decisions as disability discrimination (assuming the ADA had been enacted when the initial decisions were made), a state court judgment would be res judicata in federal court. Welch v. Johnson, 907 F.2d 714 (7th Cir. 1990); Pirela v. Village of North Aurora, 935 F.2d 909 (7th Cir. 1991). Thus, the Court rejects the idea that Plaintiffs should have filed a state court action challenging the Board's decisions on the basis of discrimination against their alleged disabilities before filing this action in federal court. To the extent that Defendants argue that Plaintiffs must have challenged the Board's decisions on some other grounds besides disability discrimination before being allowed to bring an ADA action in federal court, they cite no authority for that proposition, and it is also rejected.

Defendants also maintain that as a matter of judicial economy, the Court should abstain in this case because identical proceedings in separate forums are pending. This argument is now mooted by Judge McDade's Order of February 28, 1995 denying the City's Motion to Remand in Case No. 94-1131 and consolidating that case with this one.

As a further argument for dismissal of Plaintiffs' ADA claims, Defendants rely on Section 501(c) of the ADA. Section 501(c) provides that subchapters I through III of this chapter and Title IV of the ADA shall not be construed to prohibit or restrict:

    (1) An insurer, hospital or medical service
        company, health maintenance organization, or
        any agent, or entity that administers benefit
        plans, or similar organizations from
        underwriting risks, classifying risks, or
        administering such risks that are based on or
        not inconsistent with State law; or
    (2) A person or organization covered by this
        chapter from establishing, sponsoring,
        observing or administering the terms of a bona
        fide benefit plan that are based on
        underwriting risks, classifying risks, or
        administering such risks that are based on or
        not inconsistent with State law; or
    (3) A person or organization covered by this
        chapter from establishing, sponsoring,
        observing or administering the terms of a bona
        fide benefit plan that is not subject to State
        laws that regulate insurance.
    Paragraphs (1), (2), and (3) shall not be used as a
    subterfuge to evade the purposes of subchapters I
    and III of this chapter.

42 U.S.C. § 12201(c).

Defendants claim that 501(c) applies to this case because they have established and observed the terms of a bona fide benefit plan which is based on underwriting risks, classifying risks, or administering risks based on or not inconsistent with state law. The only exception to Section 501(c) is if the plan is a "subterfuge" to evade the purposes of the ADA. Section 501(c) provides, with regard to the "subterfuge" exception, that "Paragraphs (1), (2), and (3) shall not be used as a subterfuge to evade the purposes of subchapters I and III of this chapter." Counts I and II are brought pursuant to Title II of the ADA. Defendants argue that by specifically identifying Titles I and III, while excluding Title II, Congress has expressed a clear intent to exempt Title II from the "subterfuge" exception. Thus, Defendants argue, because the Complaint includes facts demonstrating that Defendants fall within 501(c)'s exceptions, no further analysis is required, and their conduct is neither prohibited nor restricted by the ADA, precluding Plaintiffs from stating a claim on which relief may be granted.

Despite Defendants' conclusory claims, the meaning and application of Section 501(c) is not so obvious. Defendants claim that they fall under 501(c)(2), but have not explained what it means to observe or administer the terms of a "bona fide benefit plan" that is based on "underwriting risks, classifying risks, or administering such risks that are based on or not inconsistent with State law" and how they meet this standard.

"Bona Fide Benefit Plan"

In United Air Lines, Inc. v. McMann, 434 U.S. 192, 194, 98 S.Ct. 444, 446, 54 L.Ed.2d 402 (1977), the Supreme Court held that a benefit plan was "bona fide" within the meaning of Section 4(f)(2) of the Age Discrimination in Employment Act ("ADEA") if it "`exists and pays benefits.'" In Public Employees Retirement System of Ohio v. Betts, 492 U.S. 158, 166, 109 S.Ct. 2854, 2861, 106 L.Ed.2d 134 (1989), the Supreme Court reaffirmed McMann's definition of "bona fide" as used in Section 4(f)(2) of the ADEA. Congress has not indicated, and the parties do not argue, that "bona fide" in Section 501(c) of the ADA means anything other than the Supreme Court found it did in the ADEA. Thus, a benefit plan is "bona fide" under Section 501(c) of the ADA if it "exists and pays benefits."

  "Underwriting Risks, Classifying Risks, or Administering Such
   Risks That Are Based On or Not Inconsistent with State Law"

The EEOC's Interim Policy Guidance on ADA and Health Insurance provides that risk classification:

    [R]efers to the identification of risk factors and
    the grouping of those factors that pose similar
    risks. Risk factors may include characteristics
    such as age, occupation, personal habits (e.g.,
    smoking), and medical history. Underwriting refers
    to the application of the various risk factors or
    risk classes to a particular individual or group
    (usually ...

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