Seyfarth Synopsis: On December 23, 2019, District Judge Rosemary Marquez ruled, in connection with a motion to dismiss, that Title VII does protect discrimination based on a person’s transgender status, and that a health insurance plan’s exclusion for gender reassignment surgery may not be “rationally related to a legitimate government interest.”

As we previously blogged, Plaintiff Russell Toomey, a transgendered male, filed suit in early 2019 against his employer, the State of Arizona, after the self-funded health plan provided by the State of Arizona denied Toomey’s request for medical preauthorization for a total hysterectomy. The Plan generally provides coverage for “medically necessary care”, and Toomey’s doctors contended that the hysterectomy was medically necessary, but the Plan denied authorization under an exclusion for “gender reassignment surgery.”

Toomey’s complaint contends that the Plan’s denial of authorization for a hysterectomy was sex discrimination under Title VII and a violation of the Equal Protection Clause. In March 2019, the State of Arizona and two individually named defendants employed by the State of Arizona filed a motion to dismiss Toomey’s complaint.

Magistrate Judge Bowman issued her Report and Recommendation on the motion to dismiss on June 24, 2019. Judge Bowman determined that Title VII does not prohibit discrimination based on a person’s transgender status. However, she decided that Toomey had adequately alleged that the health plan exclusion for gender reassignment surgery disadvantaged a “suspect class”, justifying a heightened level of scrutiny, and that defendants had failed to argue that the exclusion would survive this level of scrutiny.

The parties filed Objections to the Report and Recommendation and District Judge Rosemary Vasquez held oral argument on October 2, 2019. After consideration of the Report and Recommendation, and the parties’ objections and oral argument, Judge Vazquez issued an order denying the motion to dismiss on December 23, 2019.

Judge Vazquez disagreed with Judge Bowman’s recommendation concerning Toomey’s Title VII claim, reasoning that “[d]iscrimination based on transgender status or identity is discrimination based on sex because, but for the individual’s sex, the employer’s treatment of the individual would be different.” Judge Vazquez further highlighted the fact that the health plan’s exclusion of “gender reassignment surgery” “is directly connected to the incongruence between [Toomey’s] natal sex and his gender identity”, thereby “implicat[ing] the gender stereotyping prohibited by Title VII.” Judge Vazquez thus denied the motion to dismiss Toomey’s Title VII claim.

Judge Vazquez agreed with Judge Bowman’s recommendation regarding the non-dismissal of Toomey’s Equal Protection Clause claim. She reasoned that Toomey had alleged facts which could justify a heightened level of scrutiny. Judge Vazquez also noted that even if the Court were to apply rational basis review to Toomey’s Equal Protection claim, Toomey had “alleged facts plausibly showing that the Plan’s exclusion of gender reassignment surgery is not rationally related to a legitimate government interest.”

The question of whether the protections of Title VII apply to transgender individuals is currently before the Supreme Court for consideration, after oral argument on October 8, 2019. However, Judge Bowman denied the Defendants’ Motion to Stay Proceedings Pending the Supreme Court’s decision – thus, it is unclear whether the Supreme Court’s decision on this issue will have any impact in this particular case.

We will continue to watch this case, and will keep you posted of any developments.