A nurse manager who claims she was fired by an Illinois hospital due to the escalating medical treatment costs of her husband's cancer may pursue her claim under the Americans with Disabilities Act for “association discrimination,” the U.S. Court of Appeals for the Seventh Circuit held, partially reversing a lower court (Dewitt v. Proctor Hosp. , 7th Cir. , No. 07-1957 , 2/27/08).

Phillis Dewitt asserts that Peoria, Ill.'s Proctor Hospital, which, as her employer, provided partially self-insured health care coverage for her and her husband Anthony, who had prostate cancer, and fired her to avoid having to continue to pay for his substantial medical costs, in violation of 42 U.S.C. §12112(b)(4). A federal trial court granted summary judgment to the hospital on her claim but that was error, a unanimous panel ruled, because Dewitt established a prima facie associational bias claim under the direct method of proof.

“That the powers-that-be at Proctor were interested specifically in the high cost of Anthony's medical treatment is obvious,” Judge Terence T. Evans said. “[Mary Jane] Davis, Dewitt's supervisor (and the person who ultimately fired her), pulled Dewitt aside twice in five months to inquire about Anthony's condition. These conversations indicate that Davis was very interested in limiting Anthony's claims,” he wrote.

“A reasonable juror could conclude that Proctor, which faced a financial struggle of indeterminate length, was concerned that Anthony--a multi-year cancer veteran--might linger on indefinitely,” the court found. “This later fact distinguishes Dewitt's case from the situation in Larimer where the fired employee's twin daughters were 'healthy and normal' and thus no longer disabled when the employment termination decision was made,” it said, Larimer v. International Bus. Machs. Corp., 370 F.3d 698, AD Cases (7th Cir. 2004) (22 EDR 681, 6/16/04).

Coverage Costs Rose.

Under its health insurance plan, Proctor paid for plan members' yearly medical coverage up to the “stop-loss” mark of $250,000. All of a plan member's yearly health care costs exceeding that amount fell under a separate policy with the Standard Security Life Insurance Company of New York.

Dewitt, who started at the hospital in September 2001, apparently “was a valuable employee,” rising in one month from an “as needed” role to a permanent position as a clinical manager, in which she supervised other nurses and staff members. In her last evaluation, Davis said she was an “outstanding clinical manager [who] consistently goes the extra mile.”

Dewitt--and, through her, Anthony--participated in Proctor's health insurance plan throughout her tenure at the hospital. Even when she assumed a part-time, second-shift clinical manager role in summer 2005, she maintained that coverage, as Proctor agreed to credit her with “hospital approved absence” or unpaid time, which enabled her to reach the minimum hours necessary to qualify under the plan.

Proctor monitored the costs of the self-insured portion of its medical plan through quarterly “stop-loss reports” on all employees whose recent medical claims exceeded $25,000. When Anthony began undergoing costly medical procedures in 2003, the Dewitts' quarterly medical expenses for the first time jumped above the $25,000 threshold. As a result, the hospital started receiving stop-loss reports regarding Dewitt and, over the next three years, her medical claims for Anthony grew from $71,684 in 2003 to $177,826 in 2004 to $67,281 for the first eight months of 2005.

Davis first confronted Dewitt about those rising costs in September 2004, telling her that a committee was reviewing Anthony's expenses as unusually high, asking about the treatment he was receiving, and suggesting that he consider less expensive hospice care. She approached Dewitt again about Anthony's treatment in February 2005 and in May 2005 called a meeting of clinical managers and stated that Proctor faced financial difficulties that would require “creative” cost cuts.

Dewitt was fired Aug. 3, 2005. Although Proctor helped her pay for COBRA coverage after its medical plan coverage lapsed at the end of the month, it designated her, without explanation, as “ineligible to be rehired in the future.” Anthony died Aug. 9, 2006.

Direct Claim Established.

Dewitt sued, asserting ADA association, age, and gender bias claims. She sought to add a retaliation claim under §510 of the Employee Retirement Income Security Act but her motion for leave to amend was denied as futile. After summary judgment was granted on her other claims, she appealed.

Summary judgment was improper on Dewitt's ADA claim, Evans said. “Because Dewitt has established that direct evidence of 'association discrimination' may have motivated Proctor in its decision to fire her, a jury should be allowed to consider her claim,” he wrote.

Evans noted that ADA §12112(b)(4) prohibits employers from discriminating against an employee based on “the known disability of an individual with whom [the employee] is known to have a relationship or association.” In Larimer, he said, the court established that claims asserting a violation of §12112(b)(4) generally fit one of three categories--expense claims, which charge that an employee was subjected to adverse action because his or her family member has a disability that is costly to his or her employer; disability by association claims; and distraction claims--and “tweaked” for such claims the traditional-McDonnell Douglas test used as the indirect method of proof for other types of employment discrimination claims.

“While all this may be well and good, we think Dewitt's case, in the final analysis, does not have to be considered in light of the tweaked McDonnell Douglas test because she has fairly persuasive circumstantial evidence suggesting that her case is best viewed as one relying on direct evidence,” the court concluded. It cited Davis's conversations with Dewitt about her husband's rising medical costs.

“During their first chat, Davis informed Dewitt that a Proctor committee was reviewing Anthony's unusually high medical expenses. She also asked Dewitt whether Anthony's doctor had considered hospice placement--a far cheaper 'alternative' to the costly chemotherapy and radiation Anthony was receiving,” Evans wrote. “Finally, the timing of Dewitt's termination suggests that the financial albatross of Anthony's continued cancer treatment was an important factor in Proctor's decision. … One could reasonably infer that Dewitt was terminated after Proctor conducted its latest periodic analysis of medical claim 'outliers' and, this time around, decided that its 'wait and see' strategy with the Dewitts was costing the hospital tens of thousands of dollars every year,” he said.

The court noted that Dewitt's age and gender discrimination claims failed for the reason stated by the trial court: her inability to identify someone outside her protected classes who was treated more favorably. But it was error not to allow her to add an ERISA retaliation claim to her case, it ruled.

Although it asserted “without elaboration” that it fired Dewitt for insubordination, Proctor did not “push” that argument, Evans said. He noted, however, that her proposed ERISA retaliation claim overlapped, “perhaps completely,” with her ADA association claim, and that, “on remand, some thought should be given to whether having two claims here instead of one does anything other than unduly complicate the proceedings.”

Judge Richard D. Cudahy joined the opinion.

'Difference Between Distaste and Expense.'

Judge Richard A. Posner concurred in a separate opinion, arguing that the majority opinion failed to distinguish “between distaste and expense” as a basis for suing for association bias under the ADA.

Under Larimer's “expense” category, “an employer who discriminates against an employee because of the latter's association with a disabled person is liable even if the motivation is purely monetary,” Posner wrote. “But if the disability plays no role in the employer's decision--if he would discriminate against any employee whose spouse or dependent ran up a big medical bill--then there is no disability discrimination. It's as if the defendant had simply placed a cap on the medical expenses, for whatever cause incurred, that it would reimburse an employee for,” he said.

Given the proof, the instant case might be “such a case,” although the hospital has not so asserted, Posner said. But that argument may be raised on remand, he suggested, “unless the district judge finds that it has been forfeited by being withheld for so long.”

Nile J. Williamson of Peoria represented Dewitt.

Richard A. Russo of Davis & Campbell in Peoria represented the hospital.

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Full text of the opinion is available at http://op.bna.com/eg.nsf/r?Open=pdon-7c9l97.

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