Court Opinion

ID: 200893
Source: CourtListenerOpinion
Date Created: 2011-02-07 05:03:16+00
Date Added: 2024-06-11T17:27:12.590768
License: Public Domain

United States Court of Appeals
                     For the First Circuit

No. 03-1774

                YOLANDA CANDELARIO-RAMOS, ET AL.,

                     Plaintiffs, Appellants,

                                v.

   BAXTER HEALTHCARE CORPORATION OF PUERTO RICO, INC., ET AL.,

                     Defendants, Appellees.

          APPEAL FROM THE UNITED STATES DISTRICT COURT

                 FOR THE DISTRICT OF PUERTO RICO

      [Hon. Raymond L. Acosta, Senior U.S. District Judge]

                             Before

                       Boudin, Chief Judge,

              Torruella and Howard, Circuit Judges.

     Charles S. Hey-Maestre with whom Luis Amauri Suárez-Zayas was
on brief for appellants.
     Sari M. Alamuddin with whom Jeffrey K. Ross, Christopher A.
Weals and Seyfarth Shaw LLP were on brief for appellees.

                          March 8, 2004
           BOUDIN, Chief Judge.           Plaintiffs, employees of Baxter

Healthcare Corporation of Puerto Rico ("Baxter-PR"), appeal from

the   district    court's   decision      granting   summary     judgment   to

defendants   on   plaintiffs'     Title    VII   claim.     Ramos v.   Baxter

Healthcare Corp. of Puerto Rico, Inc., 256 F. Supp. 2d 127, 150

(D.P.R. 2003). That claim charged Baxter-PR, and its U.S. parent--

Baxter, International, Inc. ("Baxter")--with discriminating based

on race and national origin in setting the terms of plaintiffs'

pension plan.     The background facts are undisputed.

           Baxter is a major manufacturer of health care products.

Together with its numerous subsidiaries, it employs about 45,000

people worldwide. It maintains a pension plan, called the Domestic

Plan, covering employees of Baxter and many but not all of its U.S.

mainland subsidiaries.      The Domestic Plan permits early retirement

(i.e., before a worker reaches 65), but does not provide full

retirement benefits to employees who retire early; until 1990, the

Domestic   Plan    mechanically    reduced       benefits   in   set   amounts

depending on how early an employee retired.

           In 1990, Baxter revised the Domestic Plan to employ a

point system for early retirement that, in addition to age, took

account of how many years the worker had been at Baxter or a

covered subsidiary. The net effect was to make the reduction less,

and benefits greater, for early retiring workers who had served

longer.    This in turn made early retirement more attractive for

                                    -2-
long-serving workers covered by the Domestic Plan.           Baxter says

some workers are better off with the change and others worse off.

          About 6,000 Baxter employees work in Puerto Rico, mostly

for Baxter-PR. Employees of Baxter-PR are covered by the so-called

Puerto Rico Plan, but this plan, like the Domestic Plan, is

controlled     by   Baxter   through     its   so-called   Administrative

Committee, the members of which are appointed by the Compensation

Committee of Baxter's Board of Directors.         Although the plans had

differed in the past, just prior to 1990 the retirement terms of

the Domestic and Puerto Rico plans were similar.1          However, when

Baxter converted its Domestic Plan to the point system, it did not

make a comparable adjustment in the Puerto Rico Plan.

             In 1995 Baxter began the closing of a major plant in

Carolina, Puerto Rico.       A number of Baxter-PR employees, most of

whom worked at the plant, responded in 1998 by filing the present

law suit in the federal district court in Puerto Rico.                The

defendants were their employer, Baxter itself, two other Baxter

subsidiaries doing business in Puerto Rico, and the members of the

Baxter committee that managed both plans.         A principal claim, and

the only one pursued on appeal, is that the different treatment of

     1
      The Puerto Rico plan derives from the consolidation with
Baxter's enterprises in 1985 of another major company having Puerto
Rico facilities; the benefits in Puerto Rico at the outset were
well below mainland standards but were raised after the initial
consolidation.

                                   -3-
early retirees under the respective plans violates Title VII.           42

U.S.C. § 2000e-2(a) (2000).

          On motion for summary judgment, the district court ruled

in favor of the defendants.        Ramos, 256 F. Supp. 2d at 150.

Although class certification had been sought, that issue was not

discussed and neither side complains.     In a nutshell, the district

court analyzed the evidence adduced on the Title VII claim and

concluded that there was no evidence of intentional discrimination

sufficient to warrant a trial.     After a brief analysis, the court

also rejected a claim of disparate impact discrimination.              This

appeal followed.2

          Our review of the granting of a motion for summary

judgment is de novo, drawing reasonable inferences in favor of the

non-moving party, here the plaintiffs.         Zapata-Matos v. Reckitt &

Colman, Inc., 277 F.3d 40, 42 (1st Cir. 2002).         Title VII, so far

as   pertinent,   says   an   employer   may    not   "discriminate"    in

compensation or terms of employment based, inter alia, on "race" or

"national origin."       § 2000e-2(a)(1).       Baxter assumes without

argument that intentional discrimination in pension plan terms

against Puerto Ricans would violate Title VII.

     2
      The plaintiffs also challenged Baxter's decision not to
extend subsidized retiree medical and life insurance benefits, both
of which are offered under the Domestic Plan, to the Puerto Rico
Plan.    However, both parties seem to agree on appeal that
resolution of the issues surrounding the point system necessarily
disposes of the same issues with regard to the medical and life
insurance benefits. See Ramos, 256 F. Supp. 2d at 133.

                                  -4-
          Baxter is less ready to concede that the Domestic Plan is

more favorable to employees than is the Puerto Rico Plan.                  It

suggests that some employees are better off under the latter than

the former.    But its documents also show that it would have cost

Baxter-PR a substantial sum to switch over to the new point system.

So we will also assume arguendo (it does not alter the outcome)

that it would be "discrimination" under Title VII to withhold the

point system if the motive in whole or in part was hostility to

Puerto Ricans. See Rodriguez-Cuervos v. Wal-Mart Stores, Inc., 181

F.3d 15, 18-20 (1st Cir. 1999).

          This brings us to the evidence of motive.           Typically at

this stage     Title   VII   cases   undertake   a   relentless   survey   of

McDonell Douglas Corp. v. Green, 411 U.S. 792 (1973), and its main

sequels,3 but we can be spared this exercise.                Assuming the

plaintiffs     made    out   the     so-called   prima    facie    case    of

discrimination, see id. at 802--a point which Baxter disputes on

the ground that not all of its mainland subsidiaries enjoy access

to the point system--the defendants provided a facially plausible

reason for not adopting the point system in Puerto Rico.                   The

reasons were the added cost, the financial climate, and the view

that the benefits offered by Baxter-PR were already competitive in

Puerto Rico.    See Feliciano de la Cruz v. El Conquistador Resort &

     3
      E.g., Texas Dep't of Cmty. Affairs v. Burdine, 450 U.S. 248
(1981); St. Mary's Honor Ctr. v. Hicks, 509 U.S. 502 (1993); Reeves
v. Sanderson Plumbing Prods., 530 U.S. 133 (2000).

                                     -5-
Country Club, 218 F.3d 1, 6 (1st Cir. 2000); Zapata-Matos, 277 F.3d

at 45.

            Whether the evidence in this case created a jury issue on

improper motive depends simply on analyzing the sworn testimony and

documents    presented     on    summary       judgment   and    deciding     what

commonsense inferences they permit.            If the plaintiffs lack direct

evidence    of   animus,    it    may    yet     be   possible   to   infer     it

circumstantially, depending on the facts; and if the defendants

gave explanations that a jury could find to be false, this will

count against them in the mix of inferences.              Reeves v. Sanderson

Plumbing Prods., Inc., 530 U.S. 133, 148-49 (2000); Thomas v.

Eastman Kodak Co., 183 F.3d 38, 57 (1st Cir. 1999), cert. denied,

528 U.S. 1161 (2000).

                 Here no direct evidence exists of discriminatory

intent–-for example, there are no statements by Baxter management

disparaging Puerto Ricans.        Instead, plaintiffs concentrate their

attack on the alleged inadequacy of Baxter's reasons for its

differential      treatment,     on     supposed      discrepancies    in     its

explanations, on its failure to produce documents, and on the

inference that weak explanations are given to cover wicked motives.

We set forth the sequence of events within Baxter in more detail

and then consider the plaintiffs' arguments.

            In 1988 and 1989 a Baxter task force reporting to the

Board's Compensation Committee undertook a review of Baxter's

                                        -6-
retirement program.       According to the affidavit of a consultant,

Gregory Hansen, who participated in the exercise, the decision to

adopt the point system was made because the prior system created a

strong disincentive for long serving employees to retire early.

The politely unspoken inference is that Baxter wanted to encourage

retirements      of   employees    whose      long   service      also    meant    high

salaries.

            In    all    events,      plaintiffs       do   not     challenge       the

explanation but only the failure to extend the same courtesy to

employees of Baxter-PR.        According to Hansen, by the time of a June

6, 1989, meeting of the task force, Baxter had decided to adopt the

point system for the Domestic Plan as of January 1, 1990.                          When

Hansen asked in the meeting whether the system would also be

adopted in Puerto Rico, he was told that there might be a delay

because of translation and related problems but that his firm

should develop an estimate of the increased costs if the Puerto

Rico Plan were to be similarly amended.

            Other Baxter documents created at the same time suggest

that Baxter was inclined to delay any such change in Puerto Rico

until, among other things, it could complete a survey of overall

benefits and compensation for its Puerto Rico operations.                            An

affidavit from Mary Barker, a former Vice President of Benefits

Management at Baxter, says that Baxter's compensation at different

locations   around      the   world    differs       depending     upon    "cost    and

                                        -7-
competitive market conditions" and that the benefits package in

Puerto Rico   differs   in   various    respects   from   those   in   other

locations-–some favoring Puerto Rico and some not.

          In all events, later documents and testimony covering the

1990-1993 period show that Baxter created a new task force on

compensation early in 1993 to review benefits for Puerto Rico

employees, and it conducted a study during the year.              The study

concluded that Baxter's "base salaries in Puerto Rico [were] 93% of

the comparator group" and that overall Baxter's "benefits [were]

generally competitive."      In addition to the study, the task force

also priced various enhancements for the Puerto Rico Plan–-the

point system was estimated to cost $900,000 per year–-but there was

"no consensus" among task force members on the question whether to

adopt the point system.

          In her deposition, Mary Barker said that various task

force proposals, including the possibility of switching to the

point system, were considered by senior Baxter management in

October 1993.   She said that there were cost concerns about new

benefits in Puerto Rico and that at the time business conditions

were unfavorable: Baxter's stock price was not doing well and tax-

law changes then under review were thought to have potentially

adverse effects on Puerto Rico operations. Among the objectives of

senior management was to be sure that Puerto Rico costs remained

competitive with Baxter's other worldwide operations.         Ultimately,

                                  -8-
the decision was made not to adopt the point system for the Puerto

Rico Plan, although other benefits changes were adopted.

           The following year Baxter created an advisory counsel

made up of representatives of its business units operating in

Puerto Rico. This council eventually recommended that Baxter adopt

for Puerto Rico units the point system, or a new 401(k) type

contribution plan, or both; but Baxter decided not to do either,

partly because of cost and partly because a separate 1995 study of

its   competitors   in   Puerto   Rico   showed   that   Baxter's   pension

benefits were well above the median.        The same study showed that

Baxter's overall compensation package in Puerto Rico was below the

median but this was, importantly, because Baxter did not offer the

401(k) type plan.    Baxter did adopt such a plan for Puerto Rico in

1998.

           Thus far there is nothing ominous in the story.           About

the most one could say–-if this were all--is that Baxter, although

sometimes following a uniform approach, appears for the most part

to have varied its compensation regimes based on location and that

Baxter considered adopting the point system in Puerto Rico, but

concluded that it would be costly and was not needed to retain its

employees.    This shows that Baxter's management were profit-

oriented capitalists, but not that they intentionally discriminated

against Puerto Ricans within the meaning of Title VII.

                                   -9-
            In attacking this scenario and the district court's grant

of summary judgment, plaintiffs' very able brief presents four main

themes: that the failure to extend the point system to Puerto Rico

contradicted a settled Baxter policy of uniformity as to benefits;

that allegedly inconsistent statements were provided as to certain

events; that there are suspicious failures by Baxter to produce

documents or remember events; and that the district court relied on

factual    propositions    that       were    fairly    controverted       and   drew

inferences against plaintiffs.

            Plaintiffs' broadest position, and the foundation for

most of their other arguments, is that Baxter had adopted prior to

1990 a general policy of uniformity of treatment in compensation

for all employees of Baxter enterprises whether located on the

mainland or in Puerto Rico.       From this it follows, according to the

plaintiffs, that purported cost concerns about extending the point

system to    Puerto     Rico   were    pretextual       and   that   a    reasonable

inference from this deceit is an illicit motive.

            Whatever the logic, the premise is wrong.                    It is based

mainly on statements in a Corporate Human Resource Policy and

Procedure Manual adopted in 1988 described as having "corporate-

wide application."        The manual says that "[u]nless otherwise

approved," each Baxter unit is to "participate" in employee benefit

programs    including    retirement      programs       designed     by    Corporate

Benefits.     Plaintiffs       take    this    as   a   commitment        to   uniform

                                       -10-
compensation at all locations, making the discrepant treatment of

Puerto Rico a suspicious deviation.

              But the manual, apart from other routine disclaimers,

says   that     uniform     treatment       is   provided     "unless    otherwise

approved."       The evidence is clear that Baxter did in certain

respects vary benefits by location both before and after 1990; and

the history of the Puerto Rico operations vis à vis mainland

operations is a tangled one.                The claim that uniformity was a

strict policy        from   which    this    case   was   a   unique,   suspicious

deviation is wrong on the facts and not one that a reasonable jury

could accept.

              Plaintiffs' second argument is narrower and comes closest

to   making    out   a   conventional       case    against   summary    judgment.

Focusing primarily on the 1990 decision itself, plaintiffs point to

one statement, already mentioned, that the extension of the point

system to Puerto Rico was being delayed for six months or a year

because   of     translation        and   related    problems;    and,    charging

"pretext," plaintiffs contrast this with the indefinite delays that

followed and the concern with cost that was given as the reason for

inaction.

              This is a fair argument–-a false reason coupled with

other facts can suggest an illicit real reason, Zapata-Matos, 277

F.3d at 45-–but context here greatly blunts its force.                   The focus

of the 1988-89 task force was on the Domestic Plan, and Hansen in

                                          -11-
a memorandum discussing the June 6, 1989, implementation meeting

says that he "brought up the subject of the Puerto Rico plan and

whether comparable changes will be made." He then says that Baxter

said it "might want to at least delay 6 months and maybe a year"

because of translation and related issues.4

          Then, the formal minutes of the June 28, 1989, task force

meeting record that Hansen again raised the issue and got the

following reply:

          Judy Coffey-Hedquist explained that, from a
          time perspective, it would not be possible to
          implement and communicate changes to the
          Puerto Rico Plan by January 1, 1990.

          Herb Walker pointed out that it would also be
          prudent to defer implementation so that the
          results of several employee surveys on
          compensation    and     benefits    currently
          distributed to Puerto Rico employees become
          available.

A memorandum by Hansen the next day says: "A survey is being

conducted on compensation and benefits in Puerto Rico.       It was

decided not to extend the new early retirement or death benefit

provisions to the Puerto Rico plan currently."

          In other words, from the outset, cost and competitiveness

were at issue.     No juror could reasonably draw from this supposed

     4
      There was also an oblique reference in this report to
concerns about discrimination, but comparable references in other
documents indicate that this concern involved the risk that
adoption of the points system in Puerto Rico could have the effect
of impermissibly favoring highly compensated employees.     See 26
U.S.C. § 401(a)(4) (2000); Ramos, 256 F. Supp. 2d at 138.

                                 -12-
"discrepancy" an inference that Baxter lied about its reasons for

not extending the point system to Puerto Rico and must have

harbored    animus   toward   Puerto    Ricans.   Even   plaintiffs'

foundational premise–-Baxter's supposed policy of uniformity–-is

undercut by the documents.

            Next, the plaintiffs say that Baxter failed to produce

documents to back up its story and that the failures undercut or

cast doubt on the reasons given by Baxter for its actions.        In

particular, plaintiffs complain about the absence of the formal

minutes of the June 6, 1989, meeting of the task force; any formal

study underpinning the decision to adopt the points system for the

Domestic Plan; any cost or competitive study leading to the refusal

to do so for Puerto Rico; and the results of any Puerto Rico

surveys on compensation and benefits.

            Starting with the most specific complaint–-the absence of

June 6, 1989, task force minutes--there is simply no indication

that such minutes ever existed, or if they did, were deliberately

withheld.   The task force appears to have been a working group, not

a formal administrative unit like the Administrative Committee that

ran the pension plans (all of whose minutes were produced). Baxter

did produce an agenda for the June 6, 1989, task force meeting and

Hansen's summary, and, although Baxter did produce minutes for at

least one other task force meeting, nothing suggests that any

further documentary record of the June 6, 1989, meeting exists.

                                 -13-
            The lack of any formal study of adopting the point system

as part of the Domestic Plan may or may not be surprising, but,

again, there is no indication that Baxter deliberately withheld any

documents in its possession from the plaintiffs.      The point system

was one of a number of issues considered by the task force; and

anyone familiar with corporate decision-making culture would not be

surprised that the remnants would be nothing more than agendas,

scattered references in summaries and minutes, and a few memories

secured by depositions.

            Plaintiffs also point out that a stated reason for

deferring the point system for Puerto Rico was to await alleged

surveys of compensation and benefits being conducted in Puerto

Rico.    Yet the March 8, 1991, minutes of the Administrative

Committee suggest that surveys and other studies were underway, and

there is no dispute that by 1993 Baxter had surveyed employees in

Puerto Rico and also obtained a study of benefits from comparable

companies   in   Puerto   Rico–-information   made   available   to   the

plaintiffs.5

     5
      To bolster their argument, plaintiffs produced the affidavits
of three long-term Baxter-PR employees, all plaintiffs in this
case, who say that they were unaware of any employment surveys
conducted between 1989 and 1993. However, as the district court
pointed out, "the fact that plaintiffs in this particular action
did not personally know of any such surveys nor [were] advised of
the results is not indicative that none were carried out." Ramos,
256 F. Supp. 2d at 140.

                                 -14-
            The   last   "missing"    item   is   any   document   formally

explaining the decision not to extend the point system to Puerto

Rico.   But, as with many cases of inaction, there is no reason to

think that any such formal document existed.            What the documents

taken together show is an initial decision to defer the issue for

study, a later determination that the cost of extension would be

considerable, and at least two benefits studies indicating that

Baxter-PR's retirement benefits matched those of other companies in

Puerto Rico.

            This brings us to plaintiffs' final claim, a general-–but

then elaborately documented-–claim that the district court relied

on facts not proved, ignored evidence favorable to plaintiffs, and

drew inferences in favor of defendants.            An introductory table

provides one to two dozen examples (depending on how one counts)

together with record cites and then refines or restates a number of

them in text.      This is certainly a helpful way to present the

material.

            The difficulty is that on close examination the examples

given tend to dissolve.        The first, and most important, group

reflect plaintiffs' main premise that from the outset Baxter

intended a single retirement regime embracing the mainland and

Puerto Rico, deviating at the last minute for pretextual reasons.

But we have already explained why the plaintiffs' premise is

faulty, resting as it does on a misreading of the manual and an

                                     -15-
oversimplification   of   Baxter's   history   and   practice   as    to

uniformity.   Several other criticisms rest on the absence of

documents (e.g., surveys) and the alleged contradictions in reasons

given by Baxter in June 1989–-both points already discussed.         And

some of the examples are just argument: e.g., that Christmas

bonuses were admittedly paid in Puerto Rico and not in the United

States but were required in Puerto Rico by statute.

          In the end plaintiffs' collection of examples fails

because whatever the quibbles, there is simply no evidence that

Baxter management acted out of animus to Puerto Ricans. Plaintiffs

say in their table that this ignores evidence that a Baxter-PR

official was concerned about the fairness of the decision and that

Mary Barker was concerned about employee reaction.        But neither

comment provides a basis for an inference that Baxter management

itself was concerned about anything beyond saving money.6

          Even with reasonable inferences drawn in plaintiffs'

favor, the district court correctly held that there was no evidence

     6
      Plaintiffs also argue that the district court erred in
refusing to consider the affidavit of one Gilda Nevin, a retired
Baxter employee who transferred from Puerto Rico to Illinois in the
early 1980s.    Nevin said that her new colleagues in Illinois
treated her poorly because she was Puerto Rican and that Baxter
unfairly refused to credit her years of service in Puerto Rico
toward her pension benefits. Nevin stopped working for Baxter in
1987, before implementation of the points system was even
contemplated, and the district court did not abuse its discretion
in ruling that her affidavit had little bearing on the issues in
this case. See Bradley v. Work, 154 F.3d 704, 708-09 (7th Cir.
1998).

                                -16-
of animus--and that means that the discriminatory treatment claim

fails.   What is left is that part of the evidence that shows that

employees of Baxter-PR–-most and perhaps almost all of whom are

Puerto Rican-–were      treated    differently      than   Baxter's   mainland

employees, who we will assume are mostly not Puerto Rican.                  This

brings us to plaintiffs' alternative disparate impact theory of

violation.

             Plaintiffs claim that regardless of intent or lack of

racial   discrimination,      Baxter's     dual    plan    approach   has    the

impermissible effect of disfavoring Puerto Ricans.             See Int'l Bhd.

of Teamsters v. United States, 431 U.S. 324, 335 n.15 (1977)

(disparate impact prohibits "employment practices that are facially

neutral in their treatment of different groups but that in fact

fall more harshly on one group than another and cannot be justified

by business necessity"); see generally Griggs v. Duke Power Co.,

401 U.S. 424 (1971).

           It is true that disparate impact liability can be imposed

regardless     of   whether   an   employer       possesses   an   intent    to

discriminate, Watson v. Fort Worth Bank & Trust, 487 U.S. 977, 987

(1988), but Title VII also says:

          Notwithstanding any other provision of this
          subchapter, it shall not be an unlawful
          employment practice for an employer to apply
          different   standards  of   compensation,   or
          different terms, conditions, or privileges of
          employment pursuant to a bona fide seniority
          system . . . or to employees who work in
          different   locations,  provided   that   such

                                    -17-
              differences are not the result of an intention
              to discriminate because of race, color,
              religion, sex, or national origin.

42 U.S.C. § 2000e-2(h) (2000) (emphasis added).              In other words,

different treatment in different locations is permissible absent an

intent to discriminate.

              What legislative history there is tends to confirm this

view,   see    110    Cong.   Rec.   12,723   (1964)   (statement    of   Sen.

Humphrey); and the few appellate cases interpreting the "different

locations" language of § 2000e-2(h) also appear to support this

reading. See Russell v. Am. Tobacco Co., 528 F.2d 357, 362-63 (4th

Cir. 1975), cert. denied, 425 U.S. 935 (1976) ("If . . . Leaf and

Branch are different locations, and if the differences in treatment

of workers at the different locations are not due to an intention

to discriminate, the company's refusal to allow Leaf employees to

transfer on the basis of company-wide seniority would not violate

the Act.").

              In addition, there are numerous cases, including Supreme

Court decisions, construing the companion "bona fide seniority

system" language of § 2000e-2(h)--those cases hold that an employer

who   provides    different     levels   of   compensation    for   employees

pursuant to a bona fide seniority system cannot be held liable

under a disparate impact theory--plaintiffs must prove an intent to

discriminate.        E.g., Pullman-Standard v. Swint, 456 U.S. 273, 289

(1982); Trans World Airlines, Inc. v. Hardison, 432 U.S. 63, 82

                                      -18-
(1977); Int'l Bhd. of Teamsters, 431 U.S. at 348-56.                   The two

provisions of subsection 2(h) can fairly be read together.

          The subsection itself is not surprising.              Location is

often a   proxy   for   differences   in   cost   and   other   competitive

circumstances;    and    while   Congress    could      have    made     those

circumstances a separate defense, the difficulties of showing that

a difference in pay precisely correlated with a difference in cost

would be formidable.     Cf. Texaco Inc. v. Hasbrouck, 496 U.S. 543,

561 n.18 (1990) (discussing the difficulties of establishing the

cost justification defense under the Robinson-Patman Act).                  In

effect, different locations are simply a safe harbor where there is

no intentional discrimination.

          Affirmed.

                                  -19-