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August 9, 1979

Diana L. SPIRT, Plaintiff,
TEACHERS INSURANCE AND ANNUITY ASSOCIATION, College Retirement Equities Fund, and Long Island University, Defendants

The opinion of the court was delivered by: WARD

This is an action alleging sex discrimination in the operation of certain retirement annuity programs administered by defendants Teachers Insurance and Annuity Association ("TIAA") and College Retirement Equities Fund ("CREF"). Plaintiff Diana L. Spirt ("Spirt"), a college professor who is required by her employer, defendant Long Island University ("LIU"), to participate in the TIAA and CREF plans, has moved for summary judgment, pursuant to Rule 56, Fed.R.Civ.P., alleging that the retirement annuity plans in question violate both the Civil Rights Act of 1964, 42 U.S.C. § 2000e Et seq., ("Title VII" or "the Act") and the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution. Defendants TIAA and CREF have cross-moved for summary judgment. *fn1" For the reasons hereinafter stated, Spirt's motion is granted in part and denied in part; TIAA and CREF's cross-motion is granted as to TIAA and denied as to CREF.

The parties have submitted a detailed Stipulation of Facts which indicates the following: TIAA is a non-profit, legal reserve life insurance company, organized in 1918 by the Carnegie Foundation for the Advancement of Teaching. It functions as a service organization, providing retirement and insurance plans for educational institutions and their staff members. Eligibility is limited to colleges, universities, independent schools, and certain other non-profit institutions that are engaged primarily in education or research. CREF is a companion non-profit corporation to TIAA with the same limited eligibility. The purpose of both TIAA and CREF is to offer educational institutions retirement and other benefit plans suited to the needs of their teaching staffs and other employees. The essential difference between the two corporations is that TIAA provides fixed dollar annuities, while CREF provides variable annuities. *fn2" Over 85 percent of all private four-year colleges and universities and over 40 percent of all public colleges and universities have adopted retirement plans managed by TIAA and CREF. In all, more than 450,000 employees of approximately 2,800 participating institutions are insured by the TIAA and CREF system.

 LIU is one of the institutions which has adopted a retirement program for its employees managed by TIAA and CREF. Pursuant to a resolution of LIU's Board of Trustees, both the employee and the university contribute 5 percent of the first $ 4,800 of earnings; thereafter, the employee's contribution remains at 5 percent, and the institution contributes 11 percent. Participation in the plans by tenured professors at LIU, such as Spirt, is mandatory.

 Plaintiff's claim of sex discrimination does not rest upon the contribution formula under the TIAA and CREF plans, which is identical for men and women. Rather, the asserted discrimination derives from TIAA and CREF's use of sex-segregated mortality tables in determining the benefits purchased with the contributions. These tables reflect the fact, that, taken as a group or class, women have a greater life expectancy than men. Based upon the uncontested rationale that women as a class will receive annuity payments for a longer period of time than men as a class, female participants in the plans receive smaller monthly payments than male participants of the same age, years in in the plans, salary, and rate of contribution. Spirt contends that this discrimination violates Title VII and/or the Equal Protection Clause.

 I. Title VII

 A. The McCarran-Ferguson Act

 TIAA and CREF first assert that application of Title VII to them in this case is barred by the McCarran-Ferguson Act ("the McCarran Act"), 15 U.S.C. § 1011 Et seq., which provides in pertinent part:


No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such Act specifically relates to the business of insurance . . . .

 Id. § 1012(b).

 The McCarran Act was passed in response to the Supreme Court's decision in United States v. South-Eastern Underwriters Ass'n, 322 U.S. 533, 64 S. Ct. 1162, 88 L. Ed. 1440 (1944), which, overruling Paul v. Virginia, 8 Wall. 168, 75 U.S. 168, 183, 19 L. Ed. 357 (1869), held that insurance transactions were subject to federal regulation under the Commerce Clause. The purpose of the statute was "broadly to give support to the existing and future state systems for regulating and taxing the business of insurance . . . by removing obstructions which might be thought to flow from (congressional) power" and by declaring continued state regulation of the business of insurance to be in the public interest. *fn3" Prudential Ins. Co. v. Benjamin, 328 U.S. 408, 429-30, 66 S. Ct. 1142, 1155, 90 L. Ed. 1342 (1946); Accord, SEC v. National Securities, Inc., 393 U.S. 453, 458, 89 S. Ct. 564, 21 L. Ed. 2d 668 (1969). The effect of the legislation was to make federal statutes inapplicable to the business of insurance, returning to the states the plenary regulatory power they had enjoyed prior to the South-Eastern Underwriters decision, unless (1) federal legislation specifically related to the business of insurance; or (2) the challenged activity by the defendant did not constitute the business of insurance; or (3) the state had not enacted any law for the purpose of regulating the business of insurance which would be invalidated, impaired, or superseded by application of the federal law. Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S. 205, 218, 99 S. Ct. 1067, 1076 & nn. 16, 18, 59 L. Ed. 2d 261 (1979); SEC v. National Securities, Inc., supra, 393 U.S. at 458-61, 89 S. Ct. 564; Prudential Ins. Co. v. Benjamin, supra, 328 U.S. at 429-30, 66 S. Ct. 1142; Cochran v. Paco, 606 F.2d 460, 464 (5th Cir. 1979); Hamilton Life Ins. Co. v. Republic Nat'l Life Ins. Co., 408 F.2d 606, 611 (2d Cir. 1969); Monarch Life Ins. Co. v. Loyal Protective Life Ins. Co., 326 F.2d 841, 844 (2d Cir. 1963), Cert. denied, 376 U.S. 952, 84 S. Ct. 968, 11 L. Ed. 2d 971 (1964).

 Federal legislation is deemed to "specifically relate to the business of insurance" within the meaning of the McCarran Act only if it contains an express indication to that effect. Prudential Ins. Co. v. Benjamin, supra, 328 U.S. at 429-30, 66 S. Ct. at 1155; Cochran v. Paco, supra, 606 F.2d at 464-465; Hamilton Life Ins. Co. v. Republic Nat'l Life Ins. Co., 291 F. Supp. 225, 230 (S.D.N.Y.1968), aff'd, 408 F.2d 606, 611 (2d Cir. 1969); Ben v. General Motors Acceptance Corp., 374 F. Supp. 1199, 1201 (D.Colo.1974); Gerlach v. Allstate Ins. Co., 338 F. Supp. 642, 649 (S.D.Fla.1972). The federal statute relied on here, Title VII, is a law of general applicability to employers in commerce with no explicit reference to insurance. Compare § 514(a) of ERISA, 29 U.S.C. § 1144(a), Discussed in Hewlett-Packard Co. v. Barnes, 571 F.2d 502 (9th Cir.), Cert. denied, 439 U.S. 831, 99 S. Ct. 108, 58 L. Ed. 2d 125 (1978). Thus, the supremacy of state regulation of the TIAA and CREF plans cannot be overridden on this basis.

 The next consideration under McCarran Act analysis is whether the activities of defendants challenged by plaintiff constitute the "business of insurance." Although neither Congress nor the courts has defined the exact contours of the term, the general parameters were set by the Supreme Court in SEC v. National Securities, Inc., 393 U.S. 453, 459-60, 89 S. Ct. 564, 569, 21 L. Ed. 2d 668 (1969):


Insurance companies may do many things which are subject to paramount federal regulation; only when they are engaged in the "business of insurance" does the statute apply. Certainly the fixing of rates is part of this business; that is what South-Eastern Underwriters was all about. The selling and advertising of policies, FTC v. National Casualty Co., 357 U.S. 560, 78 S. Ct. 1260, 2 L. Ed. 2d 1540 (1958), and the licensing of companies and their agents, cf. Robertson v. California, 328 U.S. 440, 66 S. Ct. 1160, 90 L. Ed. 1366 (1946), are also within the scope of the statute. Congress was concerned with the type of state regulation that centers around the contract of insurance, the transaction which Paul v. Virginia held was not "commerce." The relationship between insurer and insured, the type of policy which could be issued, its reliability, interpretation, and enforcement these were the core of the "business of insurance." Undoubtedly, other activities of insurance companies relate so closely to their status as reliable insurers that they too must be placed in the same class. But whatever the exact scope of the statutory term, it is clear where the focus was it was on the relationship between the insurance company and the policyholder. Statutes aimed at protecting or regulating this relationship, directly or indirectly, are laws regulating the "business of insurance."

 The activity challenged in the instant case the use of sex-segregated mortality tables in the computation of annuity benefits is an integral part of the relationship between the insurance company and the policyholder and specifically centers on the type of policy which can be issued. As such, it would appear to fall squarely within the "business of insurance" as defined by National Securities.

 However, the Supreme Court has also interpreted the word "insurance" under the McCarran Act to require some Investment risk-taking on the part of the insurance company. SEC v. Variable Annuity Co., 359 U.S. 65, 79 S. Ct. 618, 3 L. Ed. 2d 640 (1959); Accord, Group Life & Health Ins. Co. v. Royal Drug Co., supra, 99 S. Ct. at 1073-74. Thus, the Court has held that variable annuity companies, which assume only the risk of mortality but no investment risk *fn4" do not issue insurance within the meaning of the Act. SEC v. Variable Annuity Co., supra, 359 U.S. at 69-73, 79 S. Ct. 618. While TIAA offers fixed annuities which subject it to investment risk, CREF is a variable annuity company. *fn5" Under the rationale of SEC v. Variable Annuity Co., therefore, it cannot be exempted from the dictates of Title VII as a result of state regulation of its policies. Consequently, the Court rejects this ground of CREF's motion for summary judgment.

 Having met the first two conditions for supremacy of state regulation of the business of insurance, TIAA must still demonstrate that New York State has enacted a law for the purpose of regulating the business of insurance which would be invalidated, impaired, or superseded by the application of Title VII in the instant case. Plaintiff argues that New York State has not regulated the question before the Court. The McCarran Act does not specify the extent to which a state must have regulated the business of insurance before application of a federal statute will be deemed to "invalidate, impair, or supersede" state law. However, this language has been judicially construed as satisfied whenever the state has either occupied the field of regulating the business of insurance or else has regulated the same general subject within the business of insurance as that potentially affected by the federal statute. See Lowe v. Aarco-American, Inc., 536 F.2d 1160, 1162 (7th Cir. 1976); Cochran v. Paco, Inc., 409 F. Supp. 219, 222 (N.D.Ga.1975), rev'd on other grounds, 606 F.2d 460 Ca. (78) (5th Cir. 1979); Ben v. General Motors Acceptance Corp., supra, 374 F. Supp. at 1201; Gerlach v. Allstate Ins. Co., supra, 338 F. Supp. at 649-50. *fn6" This interpretation is supported by the legislative intent that, except as otherwise expressly provided, plenary power to regulate the business of insurance rests in the states. SEC v. National Securities, Inc., supra, 393 U.S. at 459-60, 89 S. Ct. 564; Prudential Ins. Co. v. Benjamin, supra, 328 U.S. at 429-30, 66 S. Ct. 1142; Cochran v. Paco, Inc., supra, 606 F.2d at 462 - 464.

 In the instant case, New York has occupied the field of regulating the business of insurance through one of the most comprehensive insurance codes in the country. It has also pervasively regulated the subject of discrimination between policyholders. For example, § 209 of the Insurance Law provides Inter alia that no life insurance company doing business in the state shall make or permit any unfair discrimination between individuals of the same class and of equal expectation of life in premiums, rates, dividends or benefits of policies for life insurance or annuities. The restriction of § 209's proscription to discrimination between individuals of the same class evidences a legislative acceptance of discrimination between individuals based on their membership in classes or groups which, from an actuarial point of view, are known to present different insurance risks. Indeed, such risk classification is a concept fundamental to the operation of insurance systems. The Supreme Court, 1977 Term, 92 Harv.L.Rev. 57, 302 (1978); Note, Sex Discrimination and Sex-Based Mortality Tables, 53 B.U.L.Rev. 624, 625-26 & nn. 9-10, 627 n.18, 653-54 (1973). Since defendants' use of sex-segregated mortality tables is based on the demonstrated difference in longevity between men as a class and women as a class, it is the type of discrimination contemplated by New York's regulatory scheme. Consequently, application of Title VII to enjoin the use of such tables by TIAA would invalidate, impair, or supersede New York law.

 Other provisions of the New York Insurance Law not only regulate the subject of discrimination between policyholders, but also evidence a legislative belief that discrimination on the basis of sex in the rates and benefits of annuity contracts is not unlawful. For example, implicit in §§ 159(1)(d) and 160(c), which refer to remedies for misstatements of age and sex in annuity contracts, is the notion that New York views sex as a permissible factor in setting annuity rates and benefits. The same conclusion is suggested by a comparison of § 40(10) with § 40-e. The former section contains a sweeping prohibition of discrimination in "any . . . manner whatsoever" on account of race, color, creed, or national origin. By contrast, sex discrimination is subject to a separate, limited prohibition in § 40-e, which makes it unlawful for an insurer to refuse to issue or to cancel or decline to renew a policy on account of the sex of the applicant. See January 28, 1975 Opinion and Report Pursuant to Section 278 of the Insurance Law; News Memorandum re Chapter 564, issued by the Executive Chamber of the State of New York, August 4, 1975.

 The Court is persuaded on the basis of this evidence that New York State has regulated the business of insurance, including the subject of discrimination between policyholders, in a pervasive manner and that, within that comprehensive system of regulation, discrimination on the basis of sex in computing rates and benefits is considered to be permissible. Consequently, application of Title VII to TIAA in the instant case would invalidate, impair, or supersede New York law regulating the business of insurance. Accordingly, the Court holds that application of Title VII to TIAA in this case is precluded by the McCarran Act. *fn7"

 B. Title VII Procedural Prerequisites

 TIAA *fn8" and CREF make the additional preliminary argument that plaintiff's Title VII claim must be dismissed because she has failed to comply with the statute's elaborate procedural requirements. Among the jurisdictional prerequisites to the maintenance of a civil action under Title VII is that the grievant have filed timely charges of employment discrimination with the Equal Employment Opportunity Commission ("EEOC") and received from that agency a statutory notice of the right to sue. 42 U.S.C. § 2000e-5(a), (e), (f); McDonnell Douglas Corp. v. Green, 411 U.S. 792, 798, 93 S. Ct. 1817, 36 L. Ed. 2d 668 (1973); Silver v. Mohasco Corp., 602 F.2d 1083, 1085-1086 (2d Cir. 1979); Weise v. Syracuse University, 522 F.2d 397, 412 (2d Cir. 1975). When the alleged unlawful employment practice occurs within a state having a law prohibiting such a practice, an aggrieved person must also preliminarily seek relief from the relevant state authority. The EEOC may not act upon the charge until 60 days after state proceedings have been commenced, unless state proceedings have been terminated earlier. 42 U.S.C. § 2000e-5(c); Love v. Pullman Co., 404 U.S. 522, 524-25, 92 S. Ct. 616, 30 L. Ed. 2d 679 (1972); Silver v. Mohasco Corp., supra, 602 F.2d at 1085-1086; Weise v. Syracuse University, supra, 522 F.2d at 411.

 In the instant case, Spirt filed her complaint commencing this action on April 14, 1974, prior to filing charges with either the EEOC or the New York State Division of Human Rights ("NYSDHR"), the state agency responsible for complaints alleging discrimination in employment on the basis of sex. *fn9" On October 25, 1974, she submitted a charge to the EEOC. By letter dated November 6, 1974, the EEOC informed plaintiff that her complaint had been forwarded to the NYSDHR and asked plaintiff to "contact (the state agency) immediately to be certain that all requirements for commencing proceeding in your case have been met." A week later, by letter dated November 13, 1974, a Supervisor at the NYSDHR wrote to Spirt, confirming that her charge had been referred to that agency by the EEOC. In the letter, the Supervisor indicated that he had tried unsuccessfully to call Spirt and her attorney and asked that Spirt call him since, before he could proceed, he needed answers to several questions posed by her charge to the EEOC. Nevertheless, allegedly due at first to substantial delays in receipt of the letter and then to the Supervisor's failure to return Spirt's attorney's calls, the sixty day deferral period expired without either Spirt or her attorney's ever establishing communication with the Supervisor at the NYSDHR. Once the deferral period had elapsed, Spirt's attorney, believing that the procedural requirements of the statute had been satisfied, made no further efforts to contact the state agency. The EEOC also believed the deferral requirement satisfied after 60 days and as of that time considered Spirt's charge to have been formally filed with it. When 180 days passed after the date of formal filing without a disposition of Spirt's charge by the EEOC, her attorney requested and received from that agency a Right to Sue letter, closing the EEOC file and entitling Spirt to maintain a lawsuit on the charge. Upon receipt of the Right to Sue letter, plaintiff proceeded with the instant action.

 TIAA and CREF argue that the jurisdictional prerequisites to the maintenance of this action have not been satisfied because Spirt commenced this lawsuit without recourse to either the EEOC or the NYSDHR. Defendants assert that this action is also jurisdictionally defective because plaintiff's attorney's delayed response to the November 13, 1974 letter deprived the NYSDHR of a bona fide opportunity to consider and act upon her complaint.

 The first of these arguments has already been rejected by this Court in a prior opinion. Spirt v. TIAA, 416 F. Supp. 1019, 1020 (S.D.N.Y.1976). *fn10" The recent decision by the United States Supreme Court in Oscar Mayer & Co. v. Evans, 441 U.S. 750, 99 S. Ct. 2066, 60 L. Ed. 2d 609 (1979), has made it clear beyond peradventure that defendants' second argument as to jurisdiction is also without merit. Indicating that the virtually identical language of § 14(b) of the Age Discrimination in Employment Act, 29 U.S.C. § 633(b) and § 706(b) of Title VII, 42 U.S.C. § 2000e-5(c), requiring a sixty-day period of deferral to state authorities were to be construed In pari materia, 99 S. Ct. at 2071, the Court interpreted the burden on the grievant under those sections as limited to the commencement of state proceedings by the filing of a written and signed statement of the facts upon which the proceeding is based. Id. at 2073-76. The Court recognized that such a statutory construction could conceivably permit grievants to avoid state intervention by failing to comply with state-imposed requirements, thereby frustrating the congressional intent that federal litigation be used as a last resort. Id. at 2075. Nevertheless, it interpreted the statutory language, which relates the proscription of further action only to the Commencement of state proceedings *fn11" and which specifically excludes state-imposed requirements other than the filing of a written and signed statement of the facts from the definition of "commencement," *fn12" as indicative of a congressional intent that the failure to meet additional state procedural requirements not foreclose federal relief. Id. at 2073. The Court also found this statutory construction supported by the legislative purpose of merely giving state agencies a limited opportunity to settle grievances in a voluntary manner on the local level. Id. at 2074. See also Silver v. Mohasco Corp., supra, 602 F.2d at 1083; Voutsis v. Union Carbide Corp., 452 F.2d 889 (2d Cir. 1971), Cert. denied, 406 U.S. 918, 92 S. Ct. 1768, 32 L. Ed. 2d 117 (1972).

 In the instant case, defendants do not dispute that plaintiff's charge with the EEOC, which included a copy of the complaint in this action, was referred to the NYSDHR by the EEOC, that the charge was received by that agency and that the EEOC deferred to the NYSDHR for 60 days. Regardless then of whether the NYSDHR had a sufficient opportunity to consider Spirt's grievance, it is clear under Oscar Mayer that the jurisdictional requirement of § 706(b) has been fulfilled.

 C. The Merits

 Turning to the substance of the Title VII claim, Spirt relies primarily *fn13" on § 703(a)(1) of the Act, 42 U.S.C. § 2000e-2(a)(1), which provides:


(a) It shall be an unlawful employment practice for an employer


(1) to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's race, color, religion, sex, or national origin . . . .

 This section was construed by the Supreme Court in the context of an employee pension plan providing different terms for men and women in City of Los Angeles v. Manhart, 435 U.S. 702, 98 S. Ct. 1370, 55 L. Ed. 2d 657 (1978). Manhart struck down as violative of § 703(a)(1) an employer-operated pension fund which required women employees to contribute more than their male counterparts in order to receive equal periodic benefits upon retirement.

 The Court found the plan unlawfully discriminatory although its differentiation in treatment was based upon the unquestionably accurate generalization that women as a class live longer than men as a class. Emphasizing that § 703(a)(1)"s proscription of discrimination with respect to compensation referred specifically to the "individual," the Court held that the section "precludes treatment of Individuals as simply components of racial, religious, sexual or national class." 435 U.S. at 708, 98 S. Ct. at 1375. The Court recognized that unless women as a class made greater contributions to the plan, they would be subsidized by the class of male employees. However, it believed that the language of § 703(a)(1) evidenced Congress' judgment that fairness to individuals in matters of discrimination in employment covered by the statute were to take precedence over fairness to various classes affected thereby. Id. at 708-09, 98 S. Ct. 1370. It also found this construction consistent with the statutory goal of replacing "traditional assumptions about groups" with "thoughtful scrutiny of individuals," since a significant part of the longevity differential between men and women might well result from social factors rather than from innate biological characteristics. Id. at 709-10, 98 S. Ct. 1370. Finally, while recognizing that insurance is concerned with events that are individually unpredictable, the Court rejected the possibility that Congress intended a special definition of discrimination for employee group insurance plans. Id. at 710. The City of Los Angeles' plan was thus unlawful despite the validity of its general premise for the simple reason that many individual women would receive smaller paychecks than their corresponding male colleagues while working, but would live no longer than the men, thus receiving no compensating advantage during retirement.

 The pension plans under attack in the instant case, like that involved in Manhart, differentiate in their treatment of women and men based on the fact that women participants as a class enjoy greater longevity than their male counterparts. However, because Individual women will not live any longer than men who made the same contributions to the plans during their working years, but who receive larger monthly pension checks upon retirement, the program suffers from the same deficiency as the plan in Manhart.

 TIAA and CREF maintain that Manhart does not control this case because here the differentiation in treatment of the sexes is in benefits, not in contributions. The Court, however, finds this distinction without significance. Section 703(a)(1) outlaws sex discrimination by employers with respect to "compensation." Justice Stevens' opinion for the majority in Manhart makes clear that both contributions and benefits constitute "compensation" within the meaning of the statute. 435 U.S. 702 at 712 n. 23, 98 S. Ct. 1370, 55 L. Ed. 2d 657. Thus, absent some affirmative justification, the discrimination against individual women in pension benefits involved in the instant case is as unlawful under § 703(a)(1) as the discrimination in contributions challenged in Manhart. Bernstein and Williams, Sex Discrimination in Pensions: Manhart's Holding v. Manhart's Dictum, 78 Colum.L.Rev. 1241, 1242 (1978); 1977 Supreme Court, supra, 92 Harv.L.Rev. at 309.

 D. Definition of "Employer" Under Title VII

 The present case is also distinguishable from Manhart, TIAA and CREF assert, because it involves a retirement system administered by private insurance companies, not by the employer alone. It is their position that they cannot be held to have violated Title VII because § 703(a) covers only employer-operated pension plans.

 The Court agrees that in most instances pension plans of private insurers will not be subject to the dictates of Title VII, since § 703(a) makes unlawful only discriminatory employment practices of an "employer." However, the term "employer" under Title VII has been construed in a functional sense to encompass persons who are not employers in conventional terms, but who nevertheless control some aspect of an individual's compensation, terms, conditions, or privileges of employment. See, e.g., Sibley Memorial Hospital v. Wilson, 160 U.S.App.D.C. 14, 488 F.2d 1338 (1973); Puntolillo v. New Hampshire Racing Comm'n, 375 F. Supp. 1089 (D.N.H.1974); Hairston v. McLean Trucking Co., 62 F.R.D. 642 (M.D.N.C.1974), Vacated on other grounds, 520 F.2d 226 (4th Cir. 1975). See also Manley v. Mobile County, 441 F. Supp. 1351, 1355-56 (S.D.Ala.1977); Curran v. Portland Superintending School Committee, 435 F. Supp. 1063, 1072-73 (D.Me.1977).

 Holding responsible those who control the aspects of employment accorded protection under Title VII is consistent with the congressional intent both that the Act's effectiveness not be frustrated by an employer's delegating authority for its employees' compensation, terms, conditions, or privileges of employment to third parties, *fn14" See Manhart, supra, 435 U.S. at 718 n. 33, 98 S. Ct. 1370, and that the Act be interpreted liberally in order to achieve its remedial purpose of eradicating discrimination in employment. *fn15" See, e.g., Silver v. Mohasco Corp., supra, 602 F.2d at 1087; Craig v. Department of Health, Education & Welfare, 581 F.2d 189, 193 (8th Cir. 1978); Bell v. Brown, 181 U.S.App.D.C. 226, 230, 557 F.2d 849, 853 (1977); Puntolillo, supra, 375 F. Supp. at 1091-92.

 Although in the present case LIU is plaintiff's employer in the usual sense, Spirt contends that TIAA and CREF have been delegated authority with respect to her pension plan sufficient to require them to share LIU's responsibility as "employer" for purposes of § 703(a)(1). The Court agrees. Educational institutions such as LIU have delegated their responsibility for and control over employee annuity plans to TIAA and CREF. To hold that discrimination in that aspect of employee compensation cannot be fully remedied under Title VII because of such delegation would impair the effectiveness of the Act. It is significant in the Court's view that TIAA and CREF are non-profit corporations whose sole reason for existence is to serve Spirt's direct employer, LIU, and other similar institutions by relieving them of the burden of establishing and administering their own insurance programs for their employees and that participation in TIAA and CREF is compulsory for plaintiff as a tenured professor at LIU. Thus, the instant case is a far cry from the situation implicitly sanctioned by Manhart, 435 U.S. 702 at 717-18, 98 S. Ct. 1370, 55 L. Ed. 2d 657, in which an employer has set aside equal retirement contributions for each employee and let each retiree purchase the largest benefit which his or her accumulated contributions could command from any private insurer on the open market. EEOC v. Colby College, 589 F.2d 1139, 1146 (1st Cir. 1978) (Coffin, C. J., concurring); 1977 Supreme Court, supra, 92 Harv.L.Rev. at 309 n. 57. Under the circumstances of this case, the Court concludes that TIAA and CREF, as well as LIU, are employers within the meaning of Title VII and thus that CREF is liable along with the university *fn16" for any violation of § 703(a)(1).

 E. Bennett Amendment

 TIAA and CREF also claim that their annuity plans are not proscribed by Title VII by virtue of the Bennett Amendment, § 703(h) of the Act, 42 U.S.C. § 2000e-2(h). The Bennett Amendment provides that an employer's differentiation on the basis of sex in determining the wages or compensation paid to its employees will not violate Title VII if such differentiation is authorized by the Equal Pay Act, 29 U.S.C. § 206(d). The Equal Pay Act requires employers to pay men and women equal wages for equivalent work unless one of four specified exceptions is met. Defendants contend that the fourth exception, which authorizes a "differential based on any other factor other than sex," 29 U.S.C. § 206(d)(1)(iv), applies here because the difference in benefits provided to men and women is based on the factor of longevity rather than sex.

 Although this argument was expressly rejected by the Supreme Court in Manhart, 435 U.S. 702 at 711-14, 98 S. Ct. 1370, 55 L. Ed. 2d 657 defendants assert that Manhart does not control the present case because the plan there involved unequal employee contributions and equal benefits while the opposite is involved here. They appear to base this argument on the fact that the Wage and Hour Administrator's regulation, 29 C.F.R. § 800.116, while silent on the permissibility of different employee contribution rates accompanied by equal benefits, such as the plan in Manhart involved, expressly provides that either equal employer contributions or equal benefits will satisfy the dictates of the Equal Pay Act. 29 C.F.R. § 800.116(d) (1978). However, Justice Stevens' opinion makes clear that even assuming that 29 C.F.R. § 800.116 could be interpreted as sanctioning unequal employee contributions when accompanied by equal benefits, the Court found a conflicting regulation of the Administrator, 29 C.F.R. § 800.151 *fn17" more persuasive. 435 U.S. 702 at 714 n. 26, 98 S. Ct. 1370, 55 L. Ed. 2d 657; See EEOC v. Colby College, supra, 589 F.2d at 1144 n. 9.

 Moreover, in light of Manhart, the Administrator has proposed that 29 C.F.R. § 800.116(d) be amended so as to require that both employee contributions and benefits be equal under the Equal Pay Act. 43 Fed.Reg. 38,029 (1978). The Court thus finds the asserted distinction between Manhart and the present case without significance. As in Manhart, the record contains no evidence that any factor other than the employee's sex was taken into account in calculating the differentials in benefits received by men and women. Therefore, as in Manhart, "one cannot "say that an actuarial distinction based entirely on sex is "based on any other factor other than sex." Sex is exactly what it is based on.' " 435 U.S. at 712-13, 98 S. Ct. at 1377, 1378, Quoting Manhart v. City of Los Angeles, 553 F.2d 581, 588 (1976). Accordingly, defendants have not established a defense based upon the Bennett Amendment.

 F. Business Necessity

 The Court is also unpersuaded by TIAA and CREF's argument that "business necessity" insulates them from what would otherwise be a Title VII violation. Assuming Arguendo that the business necessity defense is applicable to practices which are facially discriminatory, *fn18" But see 1977 Supreme Court, 92 Harv.L.Rev. at 305 n. 37, the Court does not agree with TIAA and CREF that the sex distinctions drawn by them are "reasonably necessary to the normal operation" of their plans. See Manhart, supra, 435 U.S. at 716 n. 30, 98 S. Ct. 1370. Defendants emphasize that insurance deals with risks that cannot be evaluated for an individual, but which must be accurately predicted on a group basis to ensure financial reliability. The short answer to this argument is that the Court in Manhart made it clear that the impossibility of individual prediction could not justify resort to classifications proscribed by Title VII. Id. at 710, 98 S. Ct. 1370.

 The insurance industry's reliance on the concept of equity also fails to legitimize the instant discrimination. In essence, TIAA and CREF contend that unless they are allowed to continue to use sex-segregated mortality tables, men will withdraw from defendants' programs and enroll in other plans which do not require them to assume more than their "actuarial share" of the annuity burden, resulting in TIAA and CREF's eventual insolvency. The Court finds no support for this dire prediction. Since, as in Manhart, participation in the plans is generally mandatory, "an employee who wants to leave the plans must also leave his job, and few workers will quit because one of their fringe benefits could theoretically be obtained at a marginally lower price on the open market." *fn19" 435 U.S. at 716 n.30, 98 S. Ct. at 1379 n.30. That male participants would even consider an adjustment in benefits sufficient to warrant a change in plans seems particularly unlikely in the case of TIAA and CREF because their plans offer attractive features not generally available on the open market such as portability between employers and immediate vesting. Bernstein & Williams, Title VII and the Problem of Sex Classifications in Pension Programs, 74 Colum.L.Rev. 1203, 1228 n. 94 (1974). The Court is also unconvinced that men would be likely to consider the equalization in treatment unfair: "The fundamental perception of equality with respect to compensation turns on the relative daily purchasing power of individual employees rather than the comparative actuarial estimates of a pension's total value. . . . After retirement, since the primary purpose of pensions is to ensure adequate cash flow to meet daily short term needs, the size of the monthly benefits would be the crucial element." 1977 Supreme Court, supra, 92 Harv.L.Rev. at 305.

 Moreover, contrary to TIAA and CREF's prediction, the result in this case will not "revolutionize the insurance and pension industries." Manhart, supra, 435 U.S. at 717, 98 S. Ct. at 1380. It is important to note that although CREF's activities fall within Title VII's jurisdiction in this case, private insurance companies are exempt from the dictates of the Act unless they are both functioning as employers within the meaning of the statute and are engaged in conduct which does not constitute the business of insurance under the McCarran Act. Moreover, the Court believes that the formulation of appropriate relief can avoid drastic changes in the legal rules governing the plans, which TIAA and CREF contend would jeopardize their solvency and the insureds' benefits. Furthermore, nothing in this decision precludes consideration of the composition of the work force as a whole in determining the cost of defendants' annuity plans, See Manhart, supra, 435 U.S. at 718, 98 S. Ct. 1370, or the use of other risk classifications not proscribed by Title VII to ensure reliability and equity.

 For the foregoing reasons, the Court concludes that CREF and LIU have violated § 703(a)(1) of Title VII. Accordingly, Spirt's motion for summary judgment is granted as to these defendants, and TIAA and CREF's cross-motion for summary judgment is denied with respect to CREF.

 II. Equal Protection

 Since the Court has concluded that TIAA is exempt from the dictates of Title VII by virtue of the McCarran Act, it must consider Spirt's alternative argument that defendants' use of sex-segregated mortality tables in the computation of annuity benefits denies her her Fourteenth Amendment right to equal protection of the laws in violation of 42 U.S.C. § 1983 and § 1985(3). While TIAA and CREF assert that there can be no equal protection violation here because defendants are private parties, and there is no state action, plaintiff takes the position that there is sufficient state involvement to bring this case within § 1983. Plaintiff further contends that even if there is no state action, defendants' conduct is proscribed by § 1985(3), which outlaws purely private conspiracies to violate constitutional rights.

 § 1983

 To state a claim for relief under § 1983, plaintiff must establish that defendants have deprived her of a right secured by the Constitution or laws of the United States and that, in so doing, defendants acted under color of state law. *fn20" Flagg Brothers, Inc. v. Brooks, 436 U.S. 149, 155, 98 S. Ct. 1729, 56 L. Ed. 2d 185 (1978). The right relied on by Spirt is the Fourteenth Amendment guarantee of freedom from the denial by the state of the equal protection of the laws. Thus, Spirt must demonstrate both that defendants have acted under color of law and that their actions are properly attributable to the State of New York. Id. at 156, 98 S. Ct. 1729.

 Although TIAA and CREF are private entities, Spirt alleges that their actions may be considered those of the state because, as insurance companies, their business involves substantial public interest and is the subject of substantial regulation by the State of New York. Plaintiff notes specifically that the New York Superintendent of Insurance is required to and does approve all TIAA contracts, CREF certificates and various other materials. The TIAA contracts as well as some of the other materials set forth the sex-segregated rate and mortality tables used by defendants to compute annuity benefits.

 That a business is "affected with a public interest" does not suffice to convert its actions into those of the state for purposes of the Fourteenth Amendment. Jackson v. Metropolitan Edison Co., 419 U.S. 345, 353-54 & n. 9, 95 S. Ct. 449, 42 L. Ed. 2d 477 (1974); See, e.g., Evans v. Newton, 382 U.S. 296, 300, 86 S. Ct. 486, 15 L. Ed. 2d 373 (1966); Civil Rights Cases, 109 U.S. 3, 8, 3 S. Ct. 18, 27 L. Ed. 835 (1883). Nor does the fact that the business is subject to extensive and detailed state regulation serve to transform its activities into governmental ones. Jackson, supra, 419 U.S. at 350, 95 S. Ct. 449; Moose Lodge No. 107 v. Irvis, 407 U.S. 163, 176-77, 92 S. Ct. 1965, 32 L. Ed. 2d 627 (1972). Rather, "the inquiry must be whether there is a sufficiently close nexus between the State and the challenged action of the regulated entity so that the action of the latter may be fairly treated as that of the State itself." Jackson, supra, 419 U.S. at 351, 95 S. Ct. at 453; Accord, Moose Lodge, supra, 407 U.S. at 176-77, 92 S. Ct. 1965.

 In Jackson, the Supreme Court held that a state utility commission's approval of the defendant utility company's tariff which set forth the company's right to terminate service for nonpayment without a hearing did not transmute the utility's termination practice into state action "where the commission has not put its own weight on the side of the . . . practice by Ordering it." 419 U.S. at 357, 95 S. Ct. at 456-457 (emphasis added). Subsequent to Jackson, in Flagg Brothers, Inc. v. Brooks, 436 U.S. 149, 98 S. Ct. 1729, 56 L. Ed. 2d 185 (1978), the Supreme Court unequivocally pronounced that the acts of a private entity will not be attributed to the state unless the state actually Compels the action. There, the plaintiffs challenged the defendant storage company's sale of their property without a prior hearing. Although a state statute specifically authorized the sale by the defendant, the Court held there was no state action because the state was in no way responsible for the private defendant's action, action which the state statute permitted, but did not compel. 436 U.S. 149 at 165, 98 S. Ct. 1729, 56 L. Ed. 2d 185. In the present case, there can be no claim that the State of New York has compelled TIAA and CREF to use sex- segregated mortality tables. Therefore, under the rationale of Jackson and Flagg Brothers, there is no state action.

 It is arguable, however, that Flagg Brothers and Jackson do not control the instant case. This Circuit has held that state action analysis requires consideration of the nature of the right allegedly infringed as well as the extent of the state's involvement, E. g., Taylor v. Consolidated Edison Co., 552 F.2d 39, 42 (2d Cir.), Cert. denied, 434 U.S. 845, 98 S. Ct. 147, 54 L. Ed. 2d 111 (1977); Weise v. Syracuse University, supra, 522 F.2d at 405-06; Jackson v. Statler Foundation, 496 F.2d 623, 629 (2d Cir. 1973), Cert. denied, 420 U.S. 927, 95 S. Ct. 1124, 43 L. Ed. 2d 397 (1975), and that when the conduct complained of is race or sex discrimination, less state involvement may be required to find state action than when other interests are at stake. Weise v. Syracuse University, supra, 522 F.2d at 405-06; Jackson v. Statler Foundation, supra, 496 F.2d at 629, 635. Because Jackson and Flagg Brothers involved deprivations of the right to procedural due process, not class-based discrimination, it is thus arguable *fn21" that in the present case conduct short of state compulsion could be deemed to constitute state action.

 Even in the context of race discrimination *fn22" by a heavily regulated business, however, the Supreme Court in Moose Lodge No. 107 v. Irvis, 407 U.S. 163, 92 S. Ct. 1965, 32 L. Ed. 2d 627 (1972), made it clear that no state action will be found unless, at a minimum, it can be said that the state has fostered or encouraged the alleged discrimination. 407 U.S. 163 at 175-77 & n. 3, 92 S. Ct. 1965, 32 L. Ed. 2d 627. In the present case, the New York Insurance Department plays absolutely no part in establishing or enforcing defendants' use of sex-segregated mortality tables. Nor is there any suggestion that the New York statutes and regulations governing insurance are intended overtly or covertly to foster or encourage discrimination against women. Although the Superintendent of Insurance approves defendants' contracts and certificates, such action in no way indicates encouragement for particular terms therein, but merely constitutes a determination that the contracts and certificates are not unlawful. See Reichardt v. Payne, 396 F. Supp. 1010, 1015-16 (N.D.Cal.1975). Such an exercise of a choice allowed by state law where the initiative comes solely from the private party and not from the state is insufficient to constitute state action. Accordingly, Spirt fails to state a claim under § 1983.

 § 1985

 Plaintiff appears to place more stock in her argument that defendants have engaged in a conspiracy to deprive her of her Fourteenth Amendment right to equal protection that, even absent state action, is actionable under 42 U.S.C. § 1985(3). *fn23" This allegation is derived from Griffin v. Breckenridge, 403 U.S. 88, 91 S. Ct. 1790, 29 L. Ed. 2d 338 (1971), in which the Supreme Court held that certain wholly private conspiracies to deprive persons of equal protection of the laws or equal privileges and immunities under the laws may be redressed under § 1985(3) if accompanied by "some racial, or perhaps otherwise class-based, invidiously discriminatory animus behind the conspirators' action." Id. at 101-02, 91 S. Ct. at 1798.

 Griffin upheld a remedy under § 1985(3) for black citizens assaulted in the course of interstate travel on a public highway on the basis of section 2 of the Thirteenth Amendment which granted Congress the authority to create "a statutory cause of action for Negro citizens who have been the victims of conspiratorial, racially discriminatory private action" intended to deprive them of their basic rights. Id. at 105, 91 S. Ct. at 1800. The Court based its holding alternatively on the right to interstate travel, a right and privilege of national citizenship assertable against private as well as state interference. Id. at 105-06, 91 S. Ct. 1790, Citing Shapiro v. Thompson, 394 U.S. 618, 629-31, 89 S. Ct. 1322, 22 L. Ed. 2d 600 (1969); Id. at 642-44, 89 S. Ct. at 1335-1336 (concurring opinion); United States v. Guest, 383 U.S. 745, 757-60 & n. 17, 86 S. Ct. 1170, 16 L. Ed. 2d 239 (1966); Twining v. New Jersey, 211 U.S. 78, 97, 29 S. Ct. 14, 53 L. Ed. 97 (1908); Slaughter-House Cases, 16 Wall. 36, 83 U.S. 36, 79-80, 21 L. Ed. 394 (1873); Crandall v. Nevada, 6 Wall. 35, 73 U.S. 35, 44, 48-49, 18 L. Ed. 745 (1868); Passenger Cases, 7 Haw. 283, 48 U.S. 283, 492, 12 L. Ed. 702 (1849) (Taney, C. J., dissenting).

 In the instant case, Spirt does not allege a conspiracy to deprive her of her rights under the Thirteenth Amendment or her right to interstate travel. Rather she claims to be the victim of a sex-based conspiracy *fn24" to deprive her of the right to equal protection of the laws under the Fourteenth Amendment. Whether § 1985(3) extends the Fourteenth Amendment's protections to private action is an issue left open by the Supreme Court in Griffin, 403 U.S. 88 at 107, 91 S. Ct. 1790, 29 L. Ed. 2d 338 and which has since divided the lower courts. *fn25" However, the question appears to have been recently resolved in Great American Federal Savings & Loan Ass'n v. Novotny, 442 U.S. 366, 99 S. Ct. 2345, 60 L. Ed. 2d 957 (1979). There the Supreme Court clearly stated that § 1985(3) creates no substantive rights, but is rather "a purely remedial statute, providing a civil cause of action when some otherwise defined federal right . . . is breached by a conspiracy in the manner defined by the section." 99 S. Ct. at 2349, 2351. By contrast to the right under the Thirteenth Amendment to be free from the incidents of slavery and the right to interstate travel, the federal right to equal protection under the Fourteenth Amendment relied on by plaintiff affords protection only against unequal treatment by the state. Jackson v. Metropolitan Edison Co., supra, 419 U.S. at 349, 95 S. Ct. 449; Moose Lodge No. 107 v. Irvis, supra, 407 U.S. at 172, 92 S. Ct. 1965; Shelley v. Kraemer, 334 U.S. 1, 13, 68 S. Ct. 836, 92 L. Ed. 1161 (1948); See United Steelworkers of America v. Weber, 443 U.S. 193, 99 S. Ct. 2721, 61 L. Ed. 2d 480 (1979). Thus, state action is an essential element of a § 1985(3) claim premised thereon. As Justice Stevens stated in his concurring opinion in Novotny :


Some privileges and immunities of citizenship, such as the right to engage in interstate travel and the right to be free of the badges of slavery, are protected by the Constitution against interference by private action, as well as impairment by state action. Private conspiracies to deprive individuals of these rights are, as this Court held in Griffin v. Breckenridge, 403 U.S. 88, 91 S. Ct. 1790, 29 L. Ed. 2d 338, actionable under § 1985(c) without regard to any state involvement.


Other privileges and immunities of citizenship such as the right to due process of law and the right to the equal protection of the laws are protected by the Constitution only against state action. Shelley v. Kraemer, 334 U.S. 1, 13, 68 S. Ct. 836, 842, 92 L. Ed. 1161. If a state agency arbitrarily refuses to serve a class of persons Chinese Americans, for example, see Yick Wo v. Hopkins, 118 U.S. 356, 6 S. Ct. 1064, 30 L. Ed. 220 it violates the Fourteenth Amendment. Or if private persons take conspiratorial action that prevents or hinders the constituted authorities of any State from giving or securing equal treatment, the private persons would cause those authorities to violate the Fourteenth Amendment; the private persons would then have violated § 1985(c).


If, however, private persons engage in purely private acts of discrimination for example, if they discriminate against women or against lawyers with a criminal practice, see Dombrowski v. Dowling, 459 F.2d 190, 194-196 they do not violate the Equal Protection Clause of the Fourteenth Amendment. The rights secured by the Equal Protection and Due Process Clauses of the Fourteenth Amendment are rights to protection against unequal or unfair treatment by the State, not by private parties. Thus, while § 1985(c) does not require that a defendant act under color of state law, there still can be no claim for relief based on a violation of the Fourteenth Amendment if there has been no involvement by the State. The requirement of state action, in this context, is no more than a requirement that there be a constitutional violation.

 Id. 99 S. Ct. at 2354-55 (Stevens, J., concurring) (footnotes omitted).

 In the present case, the Court has held that there is no state action. Consequently, Spirt cannot state a claim under 42 U.S.C. § 1985(3). Inasmuch as plaintiff has not established either a Title VII or Equal Protection violation by TIAA, her motion for summary judgment is denied as to that defendant. TIAA's cross-motion for summary judgment is granted.

 III. Relief

 The Court faces the task of framing a remedy that will eliminate CREF and LIU's unlawful discrimination against plaintiff while at the same time safeguarding the legal and equitable rights of others potentially affected by a decree and minimizing the financial dangers which could result from the restructuring of a major retirement program.

 The Court's task is eased by the fact that Spirt is a "deferred annuitant," who has not yet begun to receive annuity benefits. The sex-based mortality tables which result in the instant violations of Title VII are not used by CREF until the date of retirement. Prior to that time, premium payments to CREF purchase "accumulation units," each unit representing a small share of participation in every investment in the CREF portfolio. The number of accumulation units purchased with each monthly payment varies depending on the current value of CREF's accumulation fund and the total number of accumulation units outstanding among all participants. At retirement, a participant's total accumulation units are converted into a fixed number of "annuity units." The number of annuity units received is based essentially on the number of accumulation units owned by the participant, the type of annuity selected, and the life expectancy of the annuitant(s) calculated according to the mortality tables used by CREF. Under present practice, if a male and a female participant of the same age retire with the same number of accumulation units and they choose, for example, the same single life annuity, the woman will be allocated a smaller number of annuity units than the man (leading to smaller monthly benefits) because her life expectancy is deemed greater.

 Because the number of annuity units to which Spirt is entitled has not yet been calculated, the Court believes that her rights can be adequately protected by the issuance of purely prospective relief. It therefore enjoins CREF from using sex-based mortality tables *fn26" in calculating the number of annuity units to which plaintiff and its other deferred annuitants are entitled. *fn27" The Court further enjoins LIU from both making contributions on behalf of its employees and from requiring its employees to contribute to any retirement plan that uses sex-based mortality tables in calculating periodic benefits.

 The above remedy avoids the necessity of any retroactive payments or other increase in costs that might jeopardize the financial stability of the TIAA and CREF plans. See generally Manhart, supra, 435 U.S. at 718-23, 98 S. Ct. 1370; Colby College, supra, 589 F.2d at 1144-46. Moreover, since the only participants who need be affected are deferred annuitants such as Spirt, the relief ordered by the Court should also avoid any possible question of impairment of the contract rights of male participants, *fn28" See Colby College, supra, 589 F.2d at 1145, or violation of the Equal Pay Act. *fn29"

 Compliance with the Court's decree may only require new mathematical computations based on currently available statistics. The Court is mindful, however, of the Supreme Court's admonition in Manhart as to "the difficulty of amending a major pension plan, a task that cannot be accomplished overnight." 435 U.S. at 719 n. 36, 98 S. Ct. at 1381 n. 36. It therefore stays enforcement of its decree until the termination of the 1979-80 academic year: CREF is directed to comply with the Court's order with regard to the computation of annuity units for all participants retiring on or after May 1, 1980; LIU is directed to comply with the Court's order with regard to all employment contracts becoming effective on or after June 1, 1980.

 Settle order on notice.

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