Arizona Governing Committee v. Norris Reply Brief of Petitioners

    No. 82-52

In T he

Supreme Court of the United States

October Term, 1982

Arizona G overning Committee for T ax D eferred 
Annuity and D eferred Compensation Plans, 
State of Arizona, et al.,

Petitioners,
v.

N athalie N orris, on behalf of herself and all 
others similarly situated,

Respondents.

ON WRIT OF CERTIORARI TO THE 
UNITED STATES COURT OF APPEALS 

FOR THE NINTH CIRCUIT

REPLY BRIEF OF PETITIONERS

Robert K. Corbin
Attorney General of the 
State of Arizona

John L. Jones
Assistant Attorney General 
1275 West Washington 
Phoenix, Arizona 85007

John L. Endicott 
( Counsel of Record)
Special Assistant Attorney General 
333 South Grand Avenue 
Los Angeles, California 90071 
(213) 229-7000

Attorneys for Petitioners

PANDICK PRESS, LOS ANGELES, 1945 S. FIGUEROA, LOS ANGELES, CALIFORNIA (213) 747-4321



1

TABLE OF CONTENTS

Page

INTRODUCTION..... ............................. ................................... 1

I. PETITIONERS DID NOT DISCRIMINATE BE­
CAUSE THEY HAD NO CHOICE BUT TO CON­
TRACT WITH INSURANCE CARRIERS USING 
SEX-BASED ACTUARIAL TABLES................ ............. 2

II. PETITIONERS CANNOT BE HELD LIABLE FOR 
DISCRIMINATORY TREATMENT UNDER TITLE 
VII WHERE THERE IS A FINDING THAT PETI­
TIONERS DID NOT INTEND TO DISCRIMINATE... 7

III. UNDER THE REASONING OF THIS COURT’S DE­
CISION IN MANHART, PETITIONERS ARE NOT 
LIABLE UNDER TITLE V II............... .......................... 12

A. Title VII Relates To The Conduct Of An
Employer, Not Third parties................. ................ 12

B. The Instant Plan Falls Squarely Within The Open
Market Exception Stated In Manhart And Is 
Therefore Lawful..... ..................     15

C. Unlike Manhart, In The Instant Case
Contributions Are Equal..... ......................     17

CONCLUSION.....................................   20



TABLE OF AUTHORITIES

Cases Page

Arlington Heights v. Metropolitan Housing Corp., 429 U.S. 252
( 1977).........................................................................................7, 8

Barone v. Hackett, 28 FEP Cases 1765 (D.R.I. 1982).................  15
Briggs v. City of Madison, 536 F. Supp. 435 ( W.D. Wise. 1982).. 15 
EEOCv, Colby College, 589 F.2d 1139 ( 1st Cir. 1978) ..6, 14, 15, 19 
Furnco Construction Corp. v. Waters, 438 U.S. 567 ( 1978) ....3, 8, 9
General Electric Co. v. Gilbert, 429 U.S. 125 ( 1976).....9, 11, 15, 18
Harris v. McRae, 448 U.S. 297 ( 1980)..................................6, 15, 16
Los Angeles Dept, of Water & Power v. Manhart, 435 U.S. 702

( 1978).................................................................................... Passim
McDonnell Douglas Corp. v. Green, 411 U.S. 792 ( 1973)..... 3, 4, 11
Personnel Administrator of Mass. v. Feeney, 442 U.S. 256

( 1979)............................................................................... .........8, 9
Peters v. Wayne State University, 691 F.2d 235 (6th Cir. 1982),

cert. pet. filed, Docket No. 82-794 (Nov. 10, 1982)............ 14, 19
Retired Public Employees Association of California v. California,

677 F.2d 733 (9th Cir. 1982)......................................................  19
Sobel v. Yeshiva University, 477 F. Supp. 1161 (S.D.N.Y. 1979). 14 
Spirt v. Teachers Insurance and Annuity Association, 691 F.2d 

1054 (2nd Cir. 1982), cert. pet. filed, Docket No. 82-791
(Nov. 8, 1982).................................................................. 14, 15, 19

Teamsters v. United States, 431 U.S. 324 (1977)....................... 7, 8
Texas Department of Community Affairs v. Burdine, 450 U.S.

248 (1981)........................................................... .............4, 6, 8, 16
Washington v. Davis, 426 U.S. 229 ( 1976).......................... ......... 7

U.S. Constitution

Fourteenth Amendment, Equal Protection Clause................. 7, 8, 9

Statutes

26 U.S.C. § 457(b)(6 ).......
42 U.S.C. § 2000 e-2(a)( 1)

13
12



INTRODUCTION

Throughout their briefs, respondents and their amici con­
tend that the instant case is controlled by the holding in 
Los Angeles Dept, o f Water & Power v. Manhart, 435 U.S. 702 
(1978). They claim that because petitioners “control” and 
“created” the deferred compensation plan, they should not be 
able to avoid liability simply because the life annuity benefits 
are provided by independent insurance companies. (R.B.1 
25-27)

Respondents confuse the issue: Petitioners created the 
deferred compensation plan; they did not create or develop the 
challenged life annuities offered by the private insurance com­
panies.

Although respondents complain that the actuarial tables 
upon which the life annuities are calculated are “based ex­
clusively on the sex of the employee” and do not incorporate 
“bona fide mortality variables” (R.B. 3), petitioners were not 
responsible for those tables nor do they represent themselves as 
having any special expertise in the use of actuarial data. The 
only act for which petitioners can be held responsible is their act 
of offering their employees those life annuities made available 
by private insurance carriers in the open market. Since all 
insurance companies available to them used sex-based actuarial 
tables—and respondents, who carry the burden of proof, do not 
cite any evidence to the contrary—petitioners had no choice but 
to offer sex-based annuities if they were to offer annuities at all. 
Intentional discrimination cannot be premised upon a lack of 
choice.

Respondents’ (and their amici’s) argument should be seen 
for what it really is: An attempt at social engineering through 
the courts to change the presently legitimate use of sex by

1 Respondents’ brief will be abbreviated as and Petitioners’ brief
will be abbreviated as “P.B.”



2

private insurance companies as a basis for risk classification.2 
The fact that respondents disapprove of present insurance 
practices does not justify the invocation of Title VII to condemn 
an employer which only made available that which the private 
insurance market offered.3

I

PETITIONERS DID NOT DISCRIMINATE BECAUSE
THEY HAD NO CHOICE BUT TO CONTRACT WITH
INSURANCE CARRIERS USING SEX-BASED ACTU­
ARIAL TABLES

Respondents have attempted to create the appearance of 
an issue of fact by contending that petitioners have mis­
represented the meaning of the stipulation that “all [actuarial] 
tables presently in use provide a larger sum to a male than to a 
female of equal age. . . . ” (J.A. 10.) Petitioners contend that the 
stipulation—which is unlimited in scope—meant, as it says, that 
“all tables presently in use” by insurance companies then 
available to Arizona made such a distinction; respondents 
contend that this stipulation meant only that the companies 
participating in the Arizona Deferred Compensation Plan used 
such tables.4 However, this alleged issue of fact is really a red

2 This is made even more apparent by the fact that several amici briefs 
are dedicated to the issue of the propriety of the use of sex-based actuarial 
tables by the insurance industry. This is not a relevant issue under Title VII or 
in this case, and will not be addressed here.

3 Title VII is not a proper means by which to challenge practices of the 
insurance industry since it does not govern relations between an insured and 
an insurer. See Manhart, 435 U.S. at 718 n.33. Instead, respondents’ proper 
recourse was to file a complaint with the appropriate Insurance Commission­
ers, challenging those practices which they deemed illegal or inequitable.

4 However, it was specifically stipulated two pages later in the Joint 
Stipulated Statement of Facts that “all of the companies participating in the 
State Deferred Compensation Plan used sex-segregated actuarial tables.” 
(J.A. 12) There would have been no need to make the second stipulation if 
the first already covered that fact.



3

herring. Whether the stipulation is interpreted as contended by 
petitioners or as construed by respondents makes no real 
difference to the ultimate outcome of this case.

First, if petitioners’ interpretation is correct and the parties 
did agree that all insurance companies offering life annuities 
used sex-segregated tables, then petitioners cannot have been 
guilty of discrimination. In that event, petitioners had no 
opportunity to act otherwise than they did, i.e., to offer the sex- 
based annuities made available by the open market. It would 
obviously be illogical and unfair to conclude that petitioners’ 
act of offering such annuities was “more likely than not based 
on the consideration of impermissible factors.” Furnco Con­
struction Corp. v. Waters, 438 U.S. 567, 577 (1978).

Moreover, the absence of unisex annuities constitutes a 
“legitimate, nondiscriminatory reason” for petitioners’ failure to 
include such an annuity in the options offered. This being so, 
respondents had the burden of proving “by a preponderance of 
the evidence that the legitimate reasons offered by the defend­
ant were not its true reasons, but were a pretext for dis­
crimination. ” McDonnell Douglas Corp. v. Green, 411 U.S. 792, 
804 (1973). Respondents did not make, and could not make, 
any such showing.

On the other hand, if the stipulation is interpreted as 
argued by respondents, i.e., “ [t]he record is silent as to the 
availability of nondiscriminatory plans” (R.B. 24), respondents 
failed to make out a prima facie case. This Court has made it 
very clear that the plaintiff in a Title VII case alleging dis­
criminatory treatment has the burden of proving a prima facie



4

case of discrimination, as well as “ [t]he ultimate burden of 
persuading the trier of fact that the defendants intentionally 
discriminated against the plaintiff.” Texas Department o f Com­
munity Affairs v. Burdine, 450 U.S. 248, 253 (1981). In order 
to make out a prima facie case, it was respondents’ burden to 
prove that an insurance company which provided life annuities 
based on unisex mortality tables was available to the State of 
Arizona and this respondents utterly failed to do. In a typical 
case of disparate treatment, where the plaintiff contends that 
she has not been hired or promoted because of sex, the burden 
which plaintiff must meet has been stated by this Court as 
follows: “ [t]he plaintiff must prove by a preponderance of the 
evidence that she applied for an available position for which 
she was qualified, but was rejected under circumstances which 
give rise to an inference of unlawful discrimination.” Texas 
Department o f Community Affairs v. Burdine, supra, 450 U.S. 
248, 253; accord, McDonnell Douglas Corp. v. Green, 411 U.S. 
792 (1973).

Just as such a plaintiff must prove that the job was 
“available” before she can make out a prima facie case of 
discrimination in a typical case, so, too, respondent in this case 
had the burden of proving that a unisex annuity was “avail­
able” to Arizona which was not offered to her. If no job is 
available in a traditional case of discrimination, it cannot be 
inferred that plaintiff was discriminated against because she 
was not given a job. Similarly, if no unisex annuities were 
available to Arizona, it cannot be inferred that women were 
discriminated against by Arizona because it failed to offer such 
annuities. The record is completely devoid of any evidence that



5

such a unisex annuity was available.5 Thus, respondent failed 
to satisfy her burden of proving a prima facie case.6

In any event, this alleged dispute as to the meaning of the 
stipulation is a diversion from the underlying fact that all 
insurers available to Arizona did in fact use sex-based tables. 
At the hearing on respondents’ motion for summary judgment 
in the district court, respondents’ counsel (then Mr. Meyerson)

5 The only purported evidence of unisex tables that respondents adduce 
—which is outside the record—is a recent adoption by the University of 
Minnesota of a unisex plan; however, this cannot disturb in any way the 
undisputed state of the record that there were no private insurance companies 
available to Arizona which offered unisex annuities in 1975 when respondent 
selected a life annuity option under the deferred compensation plan and her 
claim arose.

Likewise, the alleged evidence adduced by the amicus Lawyers’ Com­
mittee for Civil Rights Under Law -is irrelevant and misleading. They state 
that in a telephone call, Lincoln National Life Insurance Company stated that 
“in some cases” if the business was “large enough,” it would be willing to 
provide group life annuities based on unisex tables. First, what Lincoln might 
do today is irrelevant to what was available to Arizona in 1975 when 
respondent’s claim arose and she filed her charges with the EEOC. Second, 
the evidence is misleading since it presumably refers to a mandatory plan 
where members cannot withdraw because of dissatisfaction with unisex rates, 
unlike the instant plan. This affects the availability of unisex rates. Finally, 
this “evidence”—which is also outside the record—lacks foundation. The 
conditions and rates at which the insurance product would be offered are not 
mentioned. The fact that an insurer would offer a life insurance policy to an 
80-year-old woman dying of cancer is meaningless without the price and 
conditions of the offer.

6 Nor can respondents and their amici avoid their burden of proof by 
characterizing proof of the absence of unisex tables as an affirmative defense 
for which petitioners bear the burden of proof. ( See Amicus Brief for the 
Lawyers’ Committee for Civil Rights Under Law, p. 19.) Burdine establishes 
that the ultimate burden of proof remains with the plaintiff at all times. 450 
U.S. at 253. After a plaintiff establishes a prima facie case, an employer only 
has a burden of production.



6

admitted that he was not aware of any carriers which would be 
prepared to offer a unisex table in Arizona:

MR. MEYERSON: I do not know whether in the 
State of Arizona there is a carrier who is prepared to offer a 
plan that would be required if the Court would rule in 
favor of the plaintiffs motion.

October 22, 1979 Hearing, R. 11.
Moreover, the amicus brief of the American Council of Life 
Insurance (ACLI) states that it is “not aware of any private 
insurance company which offers an annuity plan which does not 
calculate benefits according to sex-specific mortality tables.” 
(ACLI brief, p. 10, 24; accord, Amicus Brief of the Equal 
Employment Advisory Council, p. 2.) Further, in Manhart 
itself, an affidavit from an actuary was submitted which stated 
that “no tables have yet been developed which measure life 
expectancy for annuity purposes on a unisex basis.” EEOC v. 
Colby College, 589 F.2d 1139 (1st Cir. 1978), quoting affidavit 
submitted in Manhart.7

Finally, respondents and their amici argue that there is no 
evidence “that this large employer, with 35,000 employees, 
could not have negotiated a contract with a company to use sex- 
neutral tables.” (R.B. 8, 24; ACLU Brief, p. 13) The argument 
is misleading. First, respondents had no duty to attempt to 
change that which the marketplace offered. See Elarris v. 
McRae, 448 U.S. 297, 316 (1980). Second, in 1978 (three 
years after respondent filed her claim) only 1,675 employees of 
the 35,000 state employees had elected to participate in the 
deferred compensation plan, and only a portion of the 1675 
chose the life annuity option (J.A. 6). Thus, the bargaining 
leverage is missing which respondents would seek to imply. 
Moreover, it was respondents’ burden to prove that petitioners 
could have negotiated such a contract. See Texas Dept, o f 
Community Affairs v. Burdine, supra, 450 U.S. at 253. They did 
not meet that burden.

7 Even the Equal Employment Opportunity Commission, which sub­
mitted a brief to the Ninth Circuit, appeared to concede the absence of any 
private insurance companies which used unisex mortality tables in Arizona. 
(EEOC Brief, p. 14.)



7

II

PETITIONERS CANNOT BE HELD LIABLE FOR 
DISCRIMINATORY TREATMENT UNDER TITLE 
VII WHERE THERE IS A FINDING THAT PETI­
TIONERS DID NOT INTEND TO DISCRIMINATE

In their opening brief, petitioners established that where an 
employee alleges less favorable treatment on the basis of sex 
under Title VII, proof of discriminatory motive is critical. 
Accordingly, the court of appeals was incorrect in concluding 
that proof of intent was unnecessary. (P.B. 23-28) Petitioners 
are not liable under Title VII in this case because the district 
court made an express finding that petitioners did not engage in 
purposeful discrimination.

Respondents claim that petitioners’ argument is premised 
upon “a fundamental misunderstanding.” (R.B. p. 18) Re­
spondents state that the district court’s determination that 
petitioners did not engage in purposeful discrimination cannot 
be elevated to a finding of fact because it was made “in the 
context of its understanding of the equal protection clause of 
the fourteenth amendment and not with regard to Title VII 
legal standards.” (R.B. 19 n.13; see also ACLU Brief, p. 25.) 
However, the standard of proof under the Equal Protection 
Clause of the Fourteenth Amendment and for disparate treat­
ment under Title VII is the same. See Teamsters v. United 
States, 431 U.S. 324, 335-336 n.15 ( 1977). It is where the 
disparate impact test under Title VII is at issue that the 
standard of proof under the Fourteenth Amendment differs 
from Title VII. Arlington Heights v. Metropolitan Housing 
Corp., 429 U.S. 252, 265 ( 1977); see Washington v. Davis, 426 
U.S. 229 (1976).8

8 Respondents also claim that the district court’s finding that petitioners 
did not engage in purposeful discrimination should be considered a con­
clusion of law and not one of fact on the ground that the stipulated facts are

(Footnote continued on next page)



8

Respondents further claim that the only discriminatory 
intent needed under Title VII is “knowingly treating all women 
differently.” (R.B. 19, 20) However, Arizona did not treat 
women differently. Nor is its awareness or knowledge of the 
consequences of the insurers’ practices tantamount to its intent 
to treat them differently. See Personnel Administrator o f Mass. 
v. Feeney, 442 U.S. 256, 279 (1979). This Court has con­
sistently held that in disparate treatment cases9, the employer 
must be found to have intentionally discriminated, Texas 
Department of Community Affairs v. Burdine, 450 U.S. 248 
(1981), and that the “central focus of inquiry” must be whether 
the employer is treating some people less favorably than others 
“ because of” their sex. Furnco Construction Corp. v. Waters, 
438 U.S. 567, 577, quoting Teamsters v. United States, 431 U.S. 
324, 335 n.15 (1977).

As this Court stated in Personnel Administrator o f Mass. v. 
Feeney, 422 U.S. 256 (1979):

“Discriminatory purpose,” however, implies more 
than intent as volition or intent as awareness of the 
consequences. [Citation omitted.] It implies that the 
decisionmaker, in this case a state legislature, selected or 
reaffirmed a particular course of action at least in part 
“because of,” not merely “in spite of,” its adverse effects 
upon an identifiable group.

(Footnote continued from previous page)
silent as to the state of mind of the employer. To the contrary, the district 
court was entitled to infer the lack of intent from the record, see Arlington 
Heights v. Metropolitan Housing Corp., supra, 429 U.S. at 265-266, and 
indeed so stated: “From the facts agreed upon, it is clear that this classifica­
tion was not made by the defendants but rather are the results of the insurers’ 
judgment. This is somewhat less than the purposeful and invidious gender- 
based discrimination necessary for a finding that the compensation plan 
violates . . . the Fourteenth Amendment.” 486 F. Supp. 645. 651. (See April 
14, 1980 Hearing. R. 8) Respondents have not challenged this finding on 
appeal.

9 Respondents in their brief have agreed this is a disparate treatment 
case. (R.B. p. 18-24).



9

Personnel Administrator o f Mass. v. Feeney, id., 442 U.S. 
at 279.10

Hence, the critical issue is whether Arizona selected life 
annuities “because o f ’ an illegitimate consideration, such as 
sex, Furnco Construction Corp. v. Waters, supra, 438 U.S. at 
577, and not simply whether it was aware of the consequences 
of the insurers’ practices. Here, Arizona offered life annuities 
which used sex-based tables because they were the only 
annuities available to it at the time, not because the annuities 
were based on sex-distinct actuarial tables. Indeed, even if a 
unisex annuity had been available to Arizona at the time 
respondent brought her claim, Arizona would still have had an 
opportunity under Title VII to “articulate” a nondiscriminatory 
reason why it did not select that annuity before a court could 
conclude that Arizona offered only sex-based annuities “be­
cause o f ’ the effect on females.

Respondents also claim that petitioners’ position on intent 
is incorrect because “ [t]his Court has never imposed a require­
ment that an employee or applicant show why the employer 
engaged in a practice of using racial or sexual criteria.” (R.B. 
21) Petitioners agree that the issue is not “why”, but “whether” 
the employer used racial or sexual criteria in the challenged 
practice. However, knowledge that a third party engages in a 
practice based on an employee’s race or sex does not mean that

10 Respondents claim that Feeney is not relevant to the issue of intent 
because it involved a facially neutral policy which was challenged under the 
Fourteenth Amendment, not Title VII. (R.B. 22 n. 15) However, petitioners 
have only cited Feeney as authority for the meaning of discriminatory intent 
which, as demonstrated earlier, is the same element of proof necessary to 
prove disparate treatment under Title VII. Compare Teamsters v. United 
States, supra, 431 U.S. 324, 335-336 n.15, with Arlington Fleights v. Metropoli­
tan Housing Corp., supra, 429 U.S. 252, 265-266. Furthermore, this Court has 
ruled that the concept of discrimination which has evolved from court 
decisions involving the Equal Protection Clause of the Fourteenth Amend­
ment is a “useful starting point” for purposes of interpreting the term 
“discrimination” under Title VII. General Electric Co. v. Gilbert, supra, 429 
U.S. 125, 133.



10

the employer is treating that employee differently because of her 
race or sex.11

Respondents also claim that they have carried their burden 
of proof of discriminatory intent because the employer has the 
burden of articulating a legitimate, non-discriminatory reason 
for its action and “ [t]he record in this case contains no 
evidence of any lawful reason for using sex-segregated tables, 
nor could any legitimate reason be articulated under this 
Court’s decision in Manhart and this plan.” (R.B. 22) How­
ever, respondents confuse the issue: Arizona does not “use” sex- 
based tables. The insurers do that; Arizona only offers life 
annuities which the insurers base upon such tables. Since the 
insurance carriers have not been sued, the record obviously 
would not “contain evidence of any lawful reason” for the use 
of sex-based tables by the carriers. If respondents meant to 
contend that no lawful reason exists for Arizona’s offering 
annuities which are based on sex-based actuarial tables, they 
are quite mistaken. To the contrary, the record expressly 
provides that all actuarial tables in use are sex-based and 
therefore Arizona had no choice but to offer sex-based life 
annuities if it was to offer them at all. The lack of choice in the 
marketplace is certainly a lawful reason for not offering that 
which does not exist.

Respondents claim that the effect of petitioners’ position on 
Title VII could be “profound” because it would allow employ­
ers to “contract out for various services relating to terms and 
conditions of employment and then claim that they did not 
‘intend’ the discriminatory programs which they knowingly and

11 The ACLU misstates petitioners’ position on intent and claims that 
petitioners’ position is that they should not be held to have intended to 
discriminate if their motives were benign. (ACLU’s Brief, p. 24) That is not 
petitioners’ position. Petitioners’ position is that intent to discriminate 
requires that an employer take an action, whether that act is done for malign 
or benign reasons, “ because o f ’ an employee’s gender. Here, Arizona 
contracted with private insurance companies “because” it wanted to offer life 
annuities, not “because” the life annuities were based on sex-distinct actuarial 
tables.



11

expressly adopted.” (R.B. 23) This contention is specious. If 
non-discriminatory services are available, it can be inferred that 
the employer intended to treat its female employees differently 
by its failure to offer them—unless the employer can articulate a 
non-discriminatory reason for its choice and the plaintiff cannot 
prove that the reason is a pretext. See McDonnell Douglas 
Corp. v. Green, supra, 411 U.S. 792, 804. However, where an 
employer contracts for a service and can receive no better 
benefits for females because the open market does not furnish 
them, it clearly does not intend to treat them differently. See 
General Electric Co. v. Gilbert, supra, 429 U.S. at 139 n. 17. For 
this reason, all of the analogies cited by the ACLU at pages 
14-15 of its amicus brief are flawed, if not sophistic.12

Respondents also argue that where “an employer explicitly 
and knowingly approves sex-based differentiation developed by 
a third-party contractor, petitioners’ theory would permit an 
employer to escape liability.” (R.B. 23) Again, the petitioners 
did not approve, either knowingly or explicitly, of the use of 
sex-based tables by the insurance companies and indeed do not

12 The ACLU claims that this action is analogous to a case where an 
employer offers a form of guaranteed mortgage financing to senior employees 
through a specified local bank and then seeks to avoid responsibility under 
Title VII for the bank’s discriminatory refusal to lend money to black or 
women employees on the grounds that it was a third-party decision. How­
ever, there, the employer’s purposeful choice of a bank with discriminatory 
policies would constitute treating black or women employees differently 
because banks with nondiscriminatory lending policies were available to it on 
the open market. Likewise, the ACLU’s argument that an employer offering 
membership in an employer-selected eating club could not defend itself 
against a charge of violating Title VII by arguing that the refusal of the club 
to admit black or women employees was a third-party decision is not 
apposite. There, again, if the employer did not offer membership in other 
clubs available on the open market which treated employees equally, its 
intentional choice of a club which it knew treated women or blacks 
differently, would amount to a purposeful act to treat employees differently on 
the basis of race or sex. However, where an employer provides what is 
available to it on the open market (or at least what it knows to be available), 
it cannot be properly accused of intending to treat them differently on the 
basis of race or sex since it had no other choice.



12

consider themselves qualified to render an opinion as to the 
advantages and disadvantages of sex as a classification in 
actuarial tables. Petitioners’ position is simply that where they 
had no choice but to offer annuities based on sex-based tables, 
they cannot be held to have intended to treat women differ­
ently. Intentional discrimination cannot be premised upon a 
lack of choice.

Ill

UNDER THE REASONING OF THIS COURT’S DECI­
SION IN MANHART, PETITIONERS ARE NOT
LIABLE UNDER TITLE VII

A. Title VII Relates To The Conduct Of An Employer, Not Third
Parties.
Respondents argue that “here, as in Manhart, there is 

gender-based discrimination in the use of sex-segregated actua­
rial tables.” (R.B. 27) Such an argument glides over the issue 
of who is responsible for the use of the sex-based actuarial 
tables. This Court noted in Manhart that Title VII governs the 
conduct between an employer and its employees, not between 
third parties and the employees, unless the third parties can be 
considered the employer’s agents or corporate shells. 435 U.S. 
at 718 n.3313 Arizona, unlike the employer in Manhart, can 
only be held responsible for making available life annuities, but 
not for using sex-based tables.14

13 The insurers cannot be considered Arizona’s agents or corporate shells. 
(SeeP.B. 12.)

14 Accordingly, respondents are incorrect when they contend that in 
Manhart, “this Court held that retirement or pension plans which classify 
women on the basis of sex rather than individual characteristics are illegal 
under Title V II. . . ” (R.B. 8) This overlooks the fact that in Manhart this 
Court did not broadly condemn all such retirement and pension plans but 
expressly limited its holding to employer-operated plans: “ [ a ] 11 that is at 
issue today is a requirement that men and women make unequal contributions 
to an employer-operated pension fund.” [Emphasis added] 435 U.S. 702, 717. 
This is a sensible limitation since Title VII prohibits only employers, not third 
parties from discrimination. 42 U.S.C. §2000e-2(a)( 1).



13

Implicitly recognizing that they cannot hold Arizona liable 
for the conduct of the insurance carriers, respondents argue that 
“the employer created a discriminatory program,” and that 
“ the employer concedes that the plan classifies on the basis of 
sex.” (R.B. 9, 21) However, the plan itself is sex-neutral and 
non-discriminatory. It is the actuarial tables, which petitioners 
did not control or develop, of which respondents complain.

Nonetheless, respondents argue that because the em­
ployer’s control over the plan is “extensive,” it is also respon­
sible for the insurance carriers’ use and development of the 
actuarial tables. Respondents cite as evidence of the employer’s 
control that the “deferred employee funds remain assets of the 
employer until payment,” that they are “subject to the claims of 
the employer’s general creditors,” that “ [t]he employer retains 
complete legal title” to the funds, and that the “employees 
have only a future, contingent legal claim for payment.” (R.B. 
5, 25)

However, this control is unrelated to the development of 
the life annuities or the use of the sex-based actuarial tables, of 
which respondents complain. Indeed, it is only when the 
employee acquires an absolute right to payment that the use of 
sex-based tables comes into being. Further, Arizona’s limited 
control over the funds ( which are placed into the investment of 
the employee’s choice) is necessary in order for the plan to 
obtain the desired tax deferral. See 26 U.S.C. § 457(b)(6). 
To qualify, a deferred compensation plan must provide that all 
amounts of compensation deferred under it and all income 
attributable to it will remain solely the property and right of the 
State, subject only to the claims of the State’s general creditors. 
26 U.S.C. § 457(b)(6). However, this control does not relate 
or reach to the insurance companies’ use of sex-based actuarial 
tables for life annuities.

Respondents next argue that petitioners are responsible for 
the insurance carriers’ use of the actuarial tables because “the 
state procurement documents requesting contract bids expressly



14

solicit a breakdown of annuity payments by sex,” and in a non 
sequitur contend that “ the employer here has foreclosed the 
development of a non-discriminatory annuity plan for its 
employees through the use of the contract procurement docu­
ments that solicit contract bids from private insurance com­
panies solely on the basis of the sex of the employee.” (R.B. 
24, 26)

Respondents’ evidence of “solicitation” (R.B. 3) consists 
of an innocuous inquiry to insurance companies as to what type 
of monthly annuity the bidding insurance companies would 
provide for both a male and a female, age 65, under various 
circumstances. This inquiry cannot in any way be construed as 
“encouragement” of any form of actuarial table or “fore­
closure” of the development of unisex tables. A bidding 
company could have fully complied with the request by pro­
viding a unisex rate. Arizona simply sought information 
concerning benefits for both males and females to determine 
which insurers provided the most lucrative benefits for all 
concerned, and would have been derelict in its duty to do 
otherwise.

Accordingly, Arizona is not responsible for the use of sex- 
based actuarial tables by the independent insurance carriers. 
Since the independent insurance carriers’ use of such tables for 
life annuities is not prohibited by Title VII or elsewhere, the 
fact that an employer has made them available to its employees 
cannot transform a legitimate practice into a prohibited one. 
Neither Manhart nor common sense holds that offering an 
employee the opportunity to deal with a third party is “dis­
criminating against” an employee.15

15 The ACLU argues that Arizona’s “affirmative active participation” in 
adopting the plan “constitutes involvement sufficient to hold it responsible 
under Title VII,” citing Spirt v. TIAA-CREF, 691 F.2d 1054 (2nd Cir. 1982), 
cert. pet. filed, Docket No. 82-791 (Nov. 9, 1982); EEOC v. Colby College, 589 
F.2d 1139, 1141 (1st Cir. 1978); Sobel v. Yeshiva University, A ll F.Supp. 
1161, 1166 n. 4 (S.D.N.Y. 1979); and Peters v. Wayne State University, 
691 F.2d 235, 238 (6th Cir. 1982) cert. pet. filed. Docket No. 82-794 
(Nov. 10, 1982). None of these cases held employers responsible simply 
because they contracted with private, independent insurance companies. In

(Footnote continued on next page)



15

B. The Instant Plan Falls Squarely Within The Open 
Market Exception Stated in Manhart And Is Therefore 
Lawful.
Respondents argue that petitioners’ reliance on the Man- 

hart open market exception is flawed for several reasons. First, 
respondents claim that Manhart did not create an open market 
exception. (R.B. 29) Respondents state that the open market 
exception only means that “Title VII does not regulate transac­
tions in the open market outside of the employer-employee 
context.” (R.B. 29)

Respondents’ construction of the open market exception is 
so narrow as to be tautological: Of course, Title VII does not 
regulate transactions “outside of the employer—employee con­
text.” Petitioners submit that the open market exception is 
premised on the fact that Title VII applies only to the actions of 
an employer, not to third parties in the marketplace. A long 
line of authority indicates that an employer’s liability does not 
extend to conditions of the marketplace which it did not create. 
See Harris v. McRae, 448 U.S. 297 (1980); General Electric Co. 
v. Gilbert, 429 U.S. 125, 139 ( 1976); Briggs v. City o f Madison, 
536 F. Supp. 435, 447 (W.D. Wise. 1982); Barone v. Hackett, 
28 FEP Cases 1765 (D.R.I. 1982). (See P.B. 17-23.)16

(Footnote continued from previous page)
Sobel, the district court simply concluded that the action could not be decided 
on summary judgment and in dictum indicated that Manhart’s prohibition 
against unequal contributions to an employer-operated plan did not control 
the case because of the “difficulty in applying the legalistic rationale of 
Manhart to a pension plan which is funded through a private insurance 
company.” 477 F. Supp. at 1166. The other cases involve TIAA and CREF 
which were found to “exist solely for the purpose of enabling universities to 
delegate their responsibility to provide retirement benefits for their em­
ployees.” Spirt v. Teachers Insurance and Annuity Association, supra, 691 
F.2d at 1063. In EEOC v. Colby College, the court of appeals simply vacated 
the district court’s dismissal of the complaint and stated that “we do not rule 
that Manhart requires a ruling on liability . . . .” 589 F.2d at 1146. The court 
in Peters found the employer not liable under Title VII.

16 Respondents claim that “the employer asks this Court to exempt 
discriminatory employment practices because such discrimination derives 
from practices in the marketplace that are not initially related to the

(Footnote continued on next page)



16

Respondents’ second argument against the open market 
exception is that nothing in the record shows that sex-neutral 
tables were unavailable. (R.B. 29) That has already been 
addressed in section I. In any event, respondents had the 
burden to prove the availability of unisex annuities, and cannot 
shift the burden to petitioners. See Texas Dept, of Community 
Affairs v. Burdine, supra, 450 U.S. at 253.

Moreover, it appears that even if unisex life annuities had 
been available in the marketplace in 1975 and petitioners had 
offered them, along with all of the other offerings of the open 
market, respondents would still complain of a violation of Title 
VII. Respondents argue that “Title VII prohibits an employer 
from offering a discriminatory fringe benefit regardless of 
whether the employer also offers nondiscriminatory alterna­
tives.” (R.B. 9) Hence, respondents’ real complaint is not that 
petitioners failed to offer unisex annuities but that they did offer 
sex-based annuities, i.e., they offered what was available on the 
open market and that paid more per month to males than to 
females. Accordingly, respondents are really attacking the 
open market. Under respondents’ theory ( as well as that of the 
Ninth Circuit, see 671 F.2d at 335), the availability of unisex 
annuities is simply irrelevant.

Respondents’ third argument is that “Title VII does not 
allow an employer to avoid statutory responsibility by con­
tracting out.” (R.B. 29) Respondents do not cite any authority 
for this proposition and also misstate the issue. This case is not 
one of an employer who intends to discriminate and decides to 
contract out the responsibility, but a case in which an employer 
did not intend to discriminate but intended to make available to 
all employees a benefit (life annuities) and offered the only

(Footnote continued from previous page)
employment context.” Respondents misstate petitioners’ position. It is not 
that discrimination “derives” from the marketplace, but that an employer is 
not responsible for conditions in the marketplace which it did not create and 
over which it had no control. Respondents’ attempt to distinguish Harris v. 
McRae (R.B. 26-27) was anticipated by petitioners and fully rebutted in the 
opening brief at page 19 n. 11.



17

type available on the open market. Despite respondents’ 
protests, they never indicate (nor could they) that an insurer 
was available to Arizona in 1975 which used sex-neutral tables.

Finally, respondents complain that the insurance com­
panies with which petitioners contracted do not mirror the open 
market because Arizona did not contract with all of the 
companies on the open market or provide all of the possibilities 
available to it. It is not so important to mirror the open market 
as to represent it. The material fact is that respondents did not 
prove that they could have done better on the open market than 
with the companies which petitioners offered.

Petitioners have done no less than required by this Court in 
Manhart to qualify for the open market exception: Petitioners 
set aside equal contributions for similarly situated employees, 
and each retiree was able to purchase the largest benefit which 
the open market offered—whether the employee chose to do 
that through the lump sum offered by Arizona or through the 
available insurance companies which provided the largest 
benefits available in the open market.

C. Unlike Manhart, In The Instant Case Contributions Are
Equal.

Respondents incorrectly state that “petitioners in this case 
implicitly recognize” that the fact that Manhart involved un­
equal contributions while the instant case involves unequal 
benefits “is of no decisional consequence.” (R.B. 13-14) Peti­
tioners submit that there is a material distinction between 
unequal monthly contributions, as in Manhart, and unequal 
monthly benefits, as here.

Where a woman is required to make a higher monthly 
contribution than a man, both her monthly contributions and 
her total contributions over the term of her employment will be 
higher; hence, her aggregate and monthly salaries are always 
less than those of a comparable male. In contrast, where a 
woman receives lower monthly benefits ( but contributions are



18

equal as here), whether her total retirement benefits will be 
more or less than those of a comparable man depends upon her 
longevity; only her monthly payments will always be less than 
that of a man because in the experience and judgment of the 
annuity insurer she is expected to receive such benefits for a 
longer period of time.17 Since the purpose of a deferred 
compensation plan is to defer current income and to recoup it at 
a later date when the tax consequences will presumably be 
lighter, whether a female or male will recoup all of their 
deferred compensation will depend solely on their longevity, 
not their sex.

In General Electric Co. v. Gilbert, 429 U.S. 125 (1976), this 
Court held that General Electric’s disability benefit plan ( which 
excluded pregnancy) did not involve discrimination based upon 
gender because the plan instead divided potential recipients 
into two other groups: pregnant women and non-pregnant 
persons. 429 U.S. at 135. Similarly, in this case, the plan 
divides potential recipients into three different groups, not on 
the basis of sex, but: (1) persons who will recoup less income 
than they deferred into the plan, (2) persons who will recoup 
the amount of income which they deferred, and (3) persons 
who will recoup more income than they deferred. Each of these 
groups will be composed of both men and women, and whether 
any given person will fall into any particular group will be 
determined on the basis of his or her longevity. Therefore, the 
amount of retirement income received by each employee is not 
based on gender as such.

In Manhart, this Court rejected the argument that the 
different contributions exacted from men and women were 
based on the factor of longevity, rather than sex, because all

17 For this reason, it is misleading to compare the monthly benefits of 
males and females rather than total retirement income. An employee who 
selects a life annuity has chosen a product which pays a certain monthly 
amount, not for a fixed period but for life (an indefinite period of time). A 
male will receive x  amount for his expected life (y), while a woman will 
receive u amount for her expected life (v). Although x  X y has the same 
value as u X v, comparison between x and u is meaningless where y differs 
from v.



19

women took home less pay and the determination of who 
would make a higher contribution was ultimately based on sex. 
All women were treated differently, i.e., were required to make 
greater contributions than men, regardless of longevity. How­
ever, in the instant case, women do not contribute more than 
similarly situated men, and whether any given employee will 
receive more or less total retirement income than he or she 
contributes cannot be determined on the basis of sex. Unlike 
Manhart, where all women were required to contribute more, in 
this case whether a woman will recover more income than a 
similarly situated male depends solely on her longevity.18

Accordingly, the ultimate receipt of retirement benefits 
over an employee’s lifetime will depend upon his or her 
longevity, unlike Manhart where the receipt of less take-home 
salary always depended solely on one’s sex. Petitioners submit 
that there is thus a material distinction between unequal 
contributions and unequal benefits, at least where a deferred 
compensation plan is involved.19

18 Indeed, the appendix to the amicus brief of the American Council of 
Life Insurance evinces that females, on the average, will recoup approxi­
mately ten percent more in aggregate annuity benefits than similarly situated 
males.

19 In Peters v. Wayne State University, 691 F.2d 235 (6th Cir. 1982), the 
Sixth Circuit held that the payment of unequal monthly pension benefits did 
not violate Title VII because, inter alia, the actuarial value of the fund for 
similarly situated male and female employees was equal. Accordingly, the 
court held that the plan differentiated between men and women on the basis 
of longevity. The other lower courts which have rejected the distinction 
between plans providing for unequal contributions and unequal monthly 
benefits have done so without much discussion. E.g., Spirt v. Teachers 
Insurance and Annuity Association, supra; Retired Public Employees Associ­
ation of California v. California, 677 F.2d 733, 735 (9th Cir. 1982); EEOC v. 
Colby College, 589 F.2d 1139, 1144 ( 1st Cir. 1978).



20

CONCLUSION

For all the foregoing reasons, petitioners request that this 
Court reverse the judgment of the Court of Appeals and order 
that judgment be entered in their favor.

Respectfully submitted,

ROBERT K. CORBIN 
Attorney General of the 
State of Arizona

JOHN L. JONES
Assistant Attorney General 
1275 West Washington 
Phoenix, Arizona 85007

JOHN L. ENDICOTT 
(Counsel of Record)
Special Assistant Attorney General 
333 South Grand Avenue 
Los Angeles, California 90071 
(213) 229-7000

Attorneys for Petitioners