Candelario Ramos v. Baxter Healthcare Corp. of Puerto Rico, Inc.

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
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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.
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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.
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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).
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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
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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
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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,
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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.
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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
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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
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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.
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"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.
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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.
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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
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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).
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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
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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
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(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.
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