UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
argued: March 22, 1976.
CAROLE BRODERICK, MARGARET RALPH, AND YOLANDA PICCONE, APPELLANTS
THE ASSOCIATED HOSPITAL SERVICE OF PHILADELPHIA, TRADING AS BLUE CROSS OF GREATER PHILADELPHIA AND THE MEDICAL SERVICE ASSOCIATION OF PENNSYLVANIA, TRADING AS PENNSYLVANIA BLUE SHIELD, APPELLEES CANDACE S. CUMMINGS, MARGARET W. KEENEY AND ELLEN Q. SURIA, INTERVENOR PLAINTIFFS
APPEAL FROM AN ORDER OF THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA. (D.C. Civil No. 72-74)
Garth, Circuit Judge. Seitz, Chief Judge, concurring.
GARTH, Circuit Judge.
On this appeal we must determine whether the mere requirement that Pennsylvania approve Blue Cross and Blue Shield contracts and the rates to be charged their subscribers is sufficient to constitute "state action" which would support a complaint brought pursuant to 42 U.S.C. § 1983. The plaintiffs' civil rights complaint*fn1 attacks the defendants' enrollment and rate policies claiming that they discriminate against married women. The district court dismissed the complaint holding that state action was not present. We affirm.
The Associated Hospital Service of Philadelphia, trading as Blue Cross of Greater Philadelphia (Blue Cross), and the Medical Service Association of Pennsylvania, trading as Pennsylvania Blue Shield (Blue Shield), are nonprofit corporations which provide medical and hospitalization insurance to the general public of Eastern Pennsylvania. Both Blue Cross and Blue Shield are subject to regulation by the Insurance Department of the Commonwealth of Pennsylvania.*fn2 As part of the regulatory scheme, the Insurance Department must give its prior approval to all subscriber rates and contracts of Blue Cross and Blue Shield. 40 P.S. §§ 6124(a), 6329(a).
It is undisputed as to Blue Cross, that until 1972 married men could enroll under individual non-group coverage without enrolling their wives. Married women, however, could not obtain individual non-group coverage without enrolling their husbands. The minimum rates charged a married woman for her non-group coverage (which necessarily included her husband) were more than two times greater than the rate for individual non-group coverage then available to married men.*fn3 In 1972 Blue Cross amended its enrollment policy to require a married man as well as a married woman to enroll a spouse in order to obtain non-group coverage.*fn4 The rate for such coverage is the same for a married woman and her husband as for a married man and his wife.
As to Blue Shield, from 1939 to 1972, a married woman was required to enroll her husband in order to obtain non-group coverage, while a married man was permitted to obtain individual non-group coverage without enrolling his wife.*fn5 The rate charged a married woman who was obliged to enroll her husband was at least two times the rate charged a married man who chose not to enroll his wife.*fn6 In 1972 Blue Shield amended its enrollment policy to require all married non-group subscribers to enroll their spouses.*fn7 The rate for such coverage was the same whether the subscriber was the husband or wife. In 1973 Blue Shield again amended its enrollment requirements so as to allow either married women or married men to obtain non-group individual coverage at one-half the cost of two-person (husband and wife) marital coverage.*fn8
In summary therefore, prior to 1972, both Blue Cross and Blue Shield permitted a married woman to enroll as a non-group subscriber only if she purchased coverage which included her husband. No such requirement was imposed upon a married man. The rate applicable to such coverage was at least two times higher than the comparable individual non-group rate charged a married man.*fn9
In 1972, plaintiffs Carole Broderick, Margaret Ralph and Yolanda Piccone filed their complaint as a class action*fn9a in the United States District Court for the Eastern District of Pennsylvania alleging that the enrollment and rate requirements of Blue Cross and Blue Shield discriminated against married women. The complaint, which sought declaratory and injunctive relief and damages, also contained a pendent state claim for violation of the Pennsylvania Constitution.*fn10
On January 10, 1975 plaintiffs*fn11 moved for partial summary judgment seeking relief from the alleged discriminatory enrollment and rate requirements. They contended that the Pennsylvania statutory scheme which requires that the rates of Blue Cross and Blue Shield be first approved by the Pennsylvania Insurance Department created such a nexus with the Commonwealth as to constitute action taken by the defendants under color of state law.
On July 31, 1975, the district court filed its opinion in which, relying on the recent Supreme Court decision of Jackson v. Metropolitan Edison Co., 419 U.S. 345, 42 L. Ed. 2d 477, 95 S. Ct. 449 (1974), it held that the actions of Blue Cross and Blue Shield were not taken under color of state law. Thereafter, an order dismissing the action for lack of subject matter jurisdiction was entered on August 4, 1975.*fn11a This appeal followed.
In order to maintain an action under 42 U.S.C. § 1983*fn12 the plaintiffs were required to establish that the actions of the defendants in adopting the alleged discriminatory policies and rates constituted state action. Jackson v. Metropolitan Edison Co., 419 U.S. 345, 42 L. Ed. 2d 477, 95 S. Ct. 449 (1974); Shelley v. Kraemer, 334 U.S. 1, 92 L. Ed. 1161, 68 S. Ct. 836 (1948). The Supreme Court has recognized that there is no easy answer to the question of whether particular discriminatory conduct is "private" or has such a state involvement or nexus which would permit relief under § 1983. Moose Lodge No. 107 v. Irvis, 407 U.S. 163, 172, 32 L. Ed. 2d 627, 92 S. Ct. 1965 (1972). The facts in each case must be sifted and the circumstances weighed before a determination as to whether state action exists can be made. Burton v. Wilmington Parking Authority, 365 U.S. 715, 722, 6 L. Ed. 2d 45, 81 S. Ct. 856 (1961).
However, at least some guidelines have been established by the Supreme Court for the determination of the existence of state action. For state action to be found where the impetus for the discrimination is private, the record must demonstrate that the state has become significantly involved with the discriminatory action alleged. Moose Lodge No. 107 v. Irvis, 407 U.S. at 173. In Jackson v. Metropolitan Edison Co., supra the Supreme Court employed the following analysis:
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. . . .
419 U.S. at 351. Such is the identical inquiry to be made here. Magill v. Avonworth Baseball Conference, 516 F.2d 1328, 1332 (3d Cir. 1975).
Plaintiffs contend that the regulation of Blue Cross and Blue Shield by the Insurance Department demonstrates the existence of the required "close nexus" with the state.*fn13 Plaintiffs focus exclusively on the Pennsylvania statutory requirement that the Insurance Department approve the rates and subscription agreements of Blue Cross and Blue Shield. At the time this action was commenced, the relevant statutory provision as it pertained to Blue Cross was 40 P.S. § 1404:*fn14
§ 1404. Regulation of rates and contracts; approval; appeal.
The rates charged to subscribers by nonprofit corporations, subject to the provisions of this act, all rates of payments to hospitals made by such corporations pursuant to the contracts provided for in this act, all acquisition costs in connection with the solicitation of subscribers to such hospital plans, the reserves to be maintained by such corporations, the certificates issued by such corporations representing their subscribers' agreements, and any and all contracts entered into by any such corporation with any hospital, shall, at all times, be subject to the prior approval of the Insurance Department. . . . (Emphasis added.)
As to Blue Shield, the relevant portion of 40 P.S. § 1442*fn15 provided:
§ 1442. Contracts subject to supervision of insurance department.
All rates charged subscribers or groups of subscribers by any nonprofit medical, osteopathic, dental and podiatry service corporation, and the form and content of all contracts between any such corporation and its subscribers or groups of subscribers, all methods and rates of payment by such corporation to doctors of medicine, doctors of osteopathy, doctors of dental surgery or doctors of podiatry serving its subscribers, all acquisition costs in procuring subscribers, the reserves to be maintained by such corporation, and all contracts entered into by any such corporation and extending over a period of more than twelve (12) months or calling for the expenditure by the corporation of any amount in excess of twenty (20) percent of its reserves, shall be approved by the Insurance Department before they become effective. (Emphasis added.)
While it is conceded that the Commonwealth extensively regulates both Blue Cross and Blue Shield, the mere fact of state regulation alone, however, does not transform what is essentially private action into state action.*fn16
As the Supreme Court stated in Moose Lodge No. 197 v. Irvis, supra, (involving a claim of state action based upon the issuance of a liquor license to private clubs by the Pennsylvania Liquor Authority):
The Court has never held, of course, that discrimination by an otherwise private entity would be violative of the Equal Protection Clause if the private entity receives any sort of benefit or service at all from the State, or if it is subject to state regulation in any degree whatever. Since state-furnished services include such necessities of life as electricity, water, and police and fire protection, such a holding would utterly emasculate the distinction between private as distinguished from state conduct set forth in The Civil Rights Cases, supra, [109 U.S. 3, 3 S. Ct. 18, 27 L. Ed. 835] and adhered to in subsequent decisions. Our holdings indicate that where the impetus for the discrimination is private, the State must have "significantly involved itself with invidious discriminations," Reitman v. Mulkey, 387 U.S. 369, 380, 18 L. Ed. 2d 830, 87 S. Ct. 1627 (1967), in order for the discriminatory action to fall within the ambit of the constitutional prohibition.
407 U.S. at 173.
In Jackson v. Metropolitan Edison Co., supra the Supreme Court, answered a contention similar to that raised here by stating:
The nature of governmental regulation of private utilities is such that a utility may frequently be required by the state regulatory scheme to obtain approval for practices a business regulated in less detail would be free to institute without any approval from a regulatory body. Approval by a state utility commission of such a request from a regulated utility, where the Commission has not put its own weight on the side of the proposed practice by ordering it, does not transmute a practice initiated by the utility and approved by the Commission into "state action."
419 U.S. at 357.
Jackson involved an action against the Metropolitan Edison Co., a privately owned electric utility company regulated by the Pennsylvania Public Utility Commission. The utility had filed a general tariff with the Commission. A provision of that tariff permitted the discontinuance of service on reasonable notice to any customer for non-payment of bills. Upon termination of Jackson's electrical service, an action for damages and injunctive relief under § 1983 was commenced. Jackson alleged that the termination of electrical service by the utility constituted state action because the state had authorized and approved the tariff provision. In holding that the regulation of the utility by the Pennsylvania Commission was insufficient to establish state action, the Jackson Court stated that:
At most, the Commission's failure to overturn this practice amounted to no more than a determination that a Pennsylvania utility was authorized to employ such a practice, if it so desired. Respondent's exercise of the choice allowed by state law where the initiative comes from it and not from the State does not make its action in doing so "state action" for purposes of the Fourteenth Amendment.
419 U.S. at 357 (footnote omitted).
The plaintiffs attempt to distinguish Jackson from this case by contrasting state inaction (Jackson) with affirmative state action (Blue Cross/Shield). They argue that no state approval was required for the Jackson tariff provision which provided for the discontinuance of electric service.*fn17 By contrast, they assert that as to Blue Cross and Blue Shield, the affirmative approval of the Insurance Department is required before any rate or contract provision can become effective. Thus, they argue that in the instant case, unlike Jackson, the imprimatur of the state has been placed upon the challenged practices of the defendants thereby resulting in discriminatory state action.
We are not persuaded that the record before us supports the distinction which the plaintiffs seek to draw between Jackson and the present case. Whatever differences may exist between Blue Cross and Blue Shield as to their respective practices, none exist with respect to their enrollment underwriting policies. It is the enrollment underwriting policy which is at the heart of the plaintiffs' complaint, and the record reveals that these policies are formulated and established by Blue Cross and Blue Shield without the necessity of approval or action by the Insurance Department.
Blue Cross asserts that its policy in establishing and amending enrollment requirements is not and has not been passed upon by the Insurance Department.*fn18 The certificates issued by Blue Cross which represent its agreements with its subscribers are not part of the record.*fn19 We thus cannot ascertain whether the certificates contain any of the challenged enrollment provisions.*fn19a It is only these certificates and the rates charged subscribers which the Insurance Department is required to approve. 40 P.S. § 1404. As Blue Cross correctly observes, the plaintiffs have pointed "to nothing in the rate structure (and nothing in the agreements with subscribers) which in any way suggests that the Insurance Department ever considered the challenged underwriting requirement." (Blue Cross br. at 15-16). Moreover, the relationship, if any, between the challenged enrollment practices on the one hand, and the certificate and rates on the other is neither established nor ascertainable from this record.
Similarly with respect to Blue Shield, the plaintiffs have relied solely upon statutory provisions in order to establish the requisite "state action." The Blue Shield statute only requires Insurance Department approval for rates and for the form and content of its subscribers' contracts. 40 P.S. § 1442. Blue Shield contends, as does Blue Cross, that its enrollment practice is neither a "rate" nor a "contract provision." It asserts that there is no evidence that any statement or description of its enrollment practice ever appeared in a rate schedule or contract or was otherwise submitted to the Insurance Department. Blue Shield also claims that no proof in the record exists that the Insurance Department was required to approve its enrollment practices or that such practices were approved.
We agree with the defendants that, other than what appears in the respective Blue Cross and Blue Shield statutes, the record is otherwise silent as respects state involvement. With the record in this posture, the evidence of state action in this case is no more compelling than the evidence in Jackson where the Supreme Court found state action to be lacking.
Here, there is no evidence that the defendants submitted enrollment requirements for married women to the Insurance Department or that the Insurance Department considered or approved such requirements. Nor is there evidence that the enrollment requirements are part of the contracts or certificates,*fn20 or are otherwise intertwined with the rate structure. In short, the plaintiffs' complaint insofar as state action is concerned necessarily depends on proof of state involvement in defendants' enrollment practices, and the existence of a relationship between those practices and defendants' rates and certificates or contracts. As we have indicated, neither state involvement, nor the requisite relationship leading to state involvement, appears in this record. Unlike the requirement that the Insurance Department approve the rates and certificates or contracts, the enrollment practices of the defendants insofar as this record reveals are determined solely by them and do not require state approval.
The mere statutory requirements of prior approval of rates and certificates or contracts of subscription without more, and without a relationship to the challenged discriminatory action charged to the defendants, is insufficient to establish state action. Jackson, supra; Moose Lodge No. 107 v. Irvis, supra.
In the absence of proof that Pennsylvania has "put its own weight,"*fn21 on the side of the privately initiated enrollment practice, we hold, as did the district court, that on this record, plaintiffs have not carried their burden of establishing state action. We will therefore affirm the district court's order filed August 4, 1975 which dismissed the action for lack of subject matter jurisdiction.*fn22 Each party will bear its own costs.
SEITZ, Chief Judge.
The plaintiffs seek to distinguish Jackson v. Metropolitan Edison Co., 419 U.S. 345, 42 L. Ed. 2d 477, 95 S. Ct. 449 (1974), on the ground that the provision challenged therein became effective unless specifically disproved by the state regulatory agency while here approval by the Pennsylvania Insurance Department was required before the rates and contracts used by the defendants went into effect. Judge Garth concludes that the record does not support such a factual distinction in that the plaintiffs were, in essence, challenging underwriting enrollment policies which did not require prior state approval. I am willing to assume that the factual distinction pressed by plaintiffs does exist because I do not believe that, on the facts of the instant case, it changes the result.*fn1 I read Jackson to say that mere state approval of the practice or policy of the kind presented herein does not constitute state action, at least where the challenged practice or policy was not instituted or prompted by the state. Thus, I concur in Judge Garth's conclusion on a broader basis.