Dragovich v. U.S. Dep't of the Treasury

848 F.Supp.2d 1091

109 A.F.T.R.2d 2012-689

Michael DRAGOVICH; Michael Gaitley; Elizabeth Litteral; Patricia Fitzsimmons; Carolyn Light; Cheryl Light; David Beers; Charles Cole; Rafael V. Dominguez; and Jose G. Hermosillo, on behalf of themselves and all others similarly situated, Plaintiffs,

v.UNITED STATES DEPARTMENT OF THE TREASURY, et al., Defendants.

No. C 10–01564 CW.

United States District Court, N.D. California.

Jan. 26, 2012.

Claudia Center, Elizabeth Kristen, Lori Rifkin, Shelley A. Gregory, San Francisco, CA, for Plaintiffs.

ORDER DENYING FEDERAL DEFENDANTS' MOTION TO DISMISS CERTAIN CLAIMS (Docket No. 97)

CLAUDIA WILKEN, District Judge.

Plaintiffs challenge the constitutionality of section three of the Defense of Marriage Act (DOMA), 1 U.S.C. § 7, and § 7702B(f) of the Internal Revenue Code, 26 U.S.C. § 7702B(f), which limit their participation in a Long–Term Care (LTC) insurance program maintained by the California Public Employees' Retirement System (CalPERS). Plaintiffs contend that these federal provisions violate the Constitution's guarantees of equal protection and substantive due process because they exclude legally married same-sex couples and registered domestic partners.

Federal Defendants earlier moved unsuccessfully to dismiss Plaintiffs' equal protection and substantive due process challenge to section three of the DOMA, which establishes a federal definition of marriage that excludes legally married same-sex spouses. At that time, Plaintiff couples were all legally married under California law, so the Court did not find it necessary to resolve whether a cognizable constitutional claim had been stated with respect to § 7702B(f)'s exclusion of registered domestic partners as family members eligible to enroll in federally qualified, state-maintained long-term care plans. Nor did the Court specifically address the constitutionality of section three of the DOMA with respect to registered domestic partners.

Subsequently, however, Plaintiffs filed a Second Amended Complaint adding as Plaintiffs Rafael V. Dominguez and Jose G. Hermosillo, who are not legally married, but are registered as domestic partners in California. In response, Federal Defendants moved to dismiss, pursuant to Federal Rule of Civil Procedure 12(b)(6), the claims that § 7702B(f)'s exclusion of California registered domestic partners violates equal protection and substantive due process. Federal Defendants state that nothing in their brief should be construed as support for the constitutionality of section three of the DOMA. Thus, Federal Defendants do not appear to move to dismiss the domestic partners' challenge to that law. Having considered all of the parties' submissions and oral argument, the Court denies Federal Defendants' motion to dismiss.

BACKGROUND

Plaintiffs are California public employees and their same-sex spouses and registered domestic partners, who are in long-term committed relationships recognized and protected under California law. As explained in this Court's previous order, CalPERS provides retirement and health benefits, including long-term care insurance, to many of the state's public employees and retirees and their families.

Long-term care insurance provides coverage when a person needs assistance with basic activities of living due to injury, old age, or severe impairments related to chronic illnesses, such as Alzheimer's disease. Internal Revenue Code § 7702B(f), which was enacted on August 21, 1996, as part of the Health Insurance Portability and Accountability Act (HIPAA), provides favorable federal tax treatment to participants in qualified state-maintained long-term care insurance plans for state employees, such as the CalPERS LTC insurance program. 26 U.S.C. § 7702B(f). Section 7702B(f)(2) disqualifies a state-maintained plan from this favorable tax treatment if it provides coverage to individuals other than those specified under its subparagraph (C). 26 U.S.C. § 7702B(f)(2)(C).

The list of eligible individuals in subparagraph (C) of § 7702B(f)(2) includes state employees and former employees, their spouses, and individuals bearing a relationship to the employees or spouses which is described in any of subparagraphs (A) through (G) of section 152(d)(2). 26 U.S.C. § 7702B(f)(2)(C).

Section 152(d)(2), the part of the tax code from which subparagraph (C)(iii) draws its list of eligible relatives, defines the relatives for whom a taxpayer may claim a dependent exemption. See26 U.S.C. §§ 151–52. Section 152(d)(2) sets forth subparagraphs (A) through (H) to identify the following individuals as “qualifying relatives” for the exemption:

(A) A child or a descendant of a child.

(B) A brother, sister, stepbrother, or stepsister.

(C) The father or mother, or an ancestor of either.

(D) A stepfather or stepmother.

(E) A son or daughter of a brother or sister of the taxpayer.

(F) A brother or sister of the father or mother of the taxpayer.

(G) A son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.

(H) An individual ... who, for the taxable year of the taxpayer, has the same principal place of abode as the taxpayer and is a member of the taxpayer's household.

26 U.S.C. § 152(d)(2).

When it chose to incorporate subparagraphs (A) through (G), Congress specifically chose not to carry over subparagraph (H) to subparagraph (C)(iii) of § 7702B(f)(2). Had Congress not chosen to exclude subparagraph (H) in subparagraph (C)(iii) of § 7702B(f)(2), registered domestic partners would have been eligible to enroll in the CalPERS LTC program.

Instead, CalPERS has refused to make its LTC insurance program available to the registered domestic partners, as well as the same-sex spouses, of the public employee Plaintiffs. Plaintiffs' complaint asserts that Congress violated the Constitution by excluding registered domestic partners as relatives eligible for enrollment in qualified state-maintained long-term care insurance plans.

In 1996, when Internal Revenue Code § 7702B(f) and the DOMA were passed, registered domestic partnership laws had not been widely adopted. Nonetheless, Congress had discussed registered domestic partnerships prior to and during 1996. In April 1992, the District of Columbia had passed the Health Care Benefits Expansion Act, establishing a domestic partnership registry in that jurisdiction. Congress reacted to the District of Columbia's new law by barring any local or federal funding to implement, enforce or administer the registry. District of Columbia Appropriations Act, 1993, Pub.L. No. 102–382, 106 Stat. 1422 (1992).¹ Representative Clyde Holloway argued, “If there ever was an attack on the family in this country, it is this Domestic Partnership Act ... To me, this bill totally destroys the families of this country.” 138 Cong. Rec. H2950–04, 1992 WL 96521, at *H2950. He stated, “I do not think anyone that is homosexual can stand here on this floor and openly tell me that homosexuality is good for the future of America.” 138 Cong. Rec. H6120–02, 1992 WL 156371, at *H6129.

In arguing against the appropriations ban before the Senate, Senator Brock Adams entered into the Congressional record information detailing domestic partnership recognition in numerous jurisdictions, apart from the District of Columbia.² 138 Cong. Rec. S10876–01, 1992 WL 180795, at *S10904.

On July 30, 1992, the appropriations bill was amended to include the funding ban, and on October 5, 1992, the District of Columbia Appropriations Act, 1993, became law. Pub L. No. 102–382.

The ban on funds for the District of Columbia's domestic partnership registry was renewed in subsequent years. In 1993, as part of a successful drive to renew the ban, Representative Ernst Istook argued, “Now, obviously this was passed by the District of Columbia to enable people, more than anything else, who are in a homosexual relationship to register an equivalent of a gay marriage. That is one of the reasons that this particular proposal is abhorrent, in my view.” 139 Cong. Rec. H4353–01, 1993 WL 236117, at * H4355, *H4358. The District of Columbia Appropriations Act, 1994, included the ban. Pub.L. No. 103–127, 107 Stat. 1336 (1993).

In 1994, Representative Robert Dornan proclaimed, “From my historical knowledge, this business of domestic partner benefits started in Seattle where they were trying to give privileged treatment to lesbian and homosexual partners ... Let us get rid of this domestic partnership nonsense.” 140 Cong. Rec. H5589–02, 1994 WL 363727, at *H5601. Again, the funding ban was approved. District of Columbia Appropriations Act, 1995, Pub.L. No. 103–334, 108 Stat. 2576 (1994).

In 1995, opponents of registered domestic partnerships again sought to include the ban in the District of Columbia Appropriations Act, 1996. Representative Cliff Stearns asserted that domestic partnership registration laws “undermine the traditional moral values that are the bedrock of this Nation.” 141 Cong. Rec. H11627–02, 1995 WL 639923, at *H11657.

Although the District of Columbia Appropriations Act was never passed during the budget impasse of 1995, in 1996, during the same legislative session in which § 7702B(f) and the DOMA were passed, Congress passed continuing appropriations, which included the ban on funding of the registry. Continuing Appropriations, 1996, Pub.L. No. 104–90, 110 Stat. 3 (1996).See also,Pub.L. No. 104–92, 110 Stat. 16 (1996). Later that year, Congress passed two appropriations bills that also contained the ban on funding for the registry. Omnibus Consolidated Rescissions and Appropriations Act of 1996, Pub.L. No. 104–134, 110 Stat. 1321 (1996); District of Columbia Appropriations Act, 1997, Pub.L. No. 104–194, 110 Stat. 2356 (1996) (captioned “Prohibition on Domestic Partners Act”).

The record of Congress' consideration of the DOMA, which also occurred in 1996, likewise evidences animosity and moral condemnation of same-sex relationships.³Gill v. Office of Personnel Mgmt., 699...