ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE
Before Gibbons and Weis, Circuit Judges, and Bechtle,*fn* District Judge. Before Aldisert, Adams, Gibbons, Hunter, Weis, Garth, Higginbotham and Sloviter, Circuit Judges.
The Wilmington Medical Center has been embroiled in litigation for the past five years because of its proposal to construct a new building in the suburbs and renovate one of its buildings in downtown Wilmington, Delaware. In this latest appeal, we hold that disparate impacts of a neutral policy may be adequate to establish discrimination under Title VI of the Civil Rights Act of 1964. Assuming, without deciding, that the plaintiffs presented a prima facie case, we conclude that the Medical Center produced adequate evidence to justify its relocation and reorganization plan. Accordingly, we will affirm the action of the district court in refusing to enjoin implementation of the proposal.
Alleging unlawful discrimination, the plaintiff organizations, representing minority, handicapped, and elderly persons, sought an injunction against the relocation and reorganization of the Medical Center. After we held that the plaintiffs had private rights of action under Title VI of the Civil Rights Act of 1964, 42 U.S.C. § 2000d et seq. (1976), and § 504 of the Rehabilitation Act of 1975, 29 U.S.C. § 794 (Supp. II 1978), see NAACP v. The Medical Center, Inc., 599 F.2d 1247 (3d Cir. 1979), the district court brought the matter to trial. The City of Wilmington was added as a party plaintiff, and the complaint was amended to include allegations that the Age Discrimination Act, 42 U.S.C. §§ 6101-6107 (1976 & Supp. II 1978) had been violated. In addition, plaintiffs charged the defendant with intentional discrimination as well as conduct that had a disparate impact on the classes represented by the plaintiffs.
Following a bench trial lasting more than a month, the district court filed a comprehensive and detailed opinion, concluding that the plaintiffs had failed to prove discrimination under any of the three statutes. Judgment was accordingly entered for the defendant. NAACP v. Wilmington Medical Center, Inc., 491 F. Supp. 290 (D.Del.1980).*fn1 The plaintiffs' appeal was heard initially by a panel and then, because of the nature of the issues, was reheard by the court in banc.
The Wilmington Medical Center (WMC) was organized in 1965 by the merger of three non-profit hospitals, General, Memorial, and Delaware, in different areas of Wilmington. WMC furnishes general medical and surgical services, as well as secondary and tertiary hospital care. It provides 1,104 of the 1,471 non-profit, acute general hospital beds in New Castle County. Other institutions in the county include St. Francis Hospital, which has approximately 290 beds, and Riverside Osteopathic Hospital, with a capacity of 100. The concentration of hospital beds in Wilmington proper is higher than is desirable under national standards, while at the same time the southwestern part of the county surrounding Newark, Delaware, is quite underserved.
WMC is the only hospital in the county with a teaching program approved by the American Medical Association. Medical students and residents are important to WMC's delivery of health care to the community. Without their assistance, current levels of care could not be maintained.
Because its physical structures are aging and are not in compliance with Delaware's licensing law, WMC has encountered serious problems. Recruitment for its residency program has been hindered by the fragmenting of its plants, as well as by a lack of conference space and adequate research facilities. The surgical residency program has been placed on probation by its accrediting body and WMC itself is also in danger of losing its certification by the Joint Commission on Accreditation of Hospitals. On two recent occasions, only "probational" accreditation was granted. Loss of accreditation could result in denial of Medicare and Medicaid reimbursements, a situation which would be disastrous to WMC financially, since it relies on these funds for more than one third of its total budget.
WMC has other monetary problems. It provides the largest amount of free care in the county approximately $8,000,000 annually. Because Medicare and Medicaid do not reimburse it for any portion of fees attributable to subsidization of free care, WMC must depend upon its endowment and the fees assessed upon paying patients and private insurers.
The population shift to the southwestern suburbs and the possibility that another health care institution might be established in that area present another threat to WMC. If it should lose the patronage of people there, most of whom pay for services or are privately insured, the subsidization of a higher percentage of unreimbursed care would become an even more serious drain on its financial resources.
Recognizing the need for remedial action, the WMC Board canvassed the options open to it. After studying about 50 plans for relocation and consolidation, it decided upon Plan Omega. Essentially, this proposal would close the General and Memorial facilities, renovate the Delaware one, and reduce the number of downtown beds to 250. In addition, a new facility of 780 beds would be built in the suburban area 9.35 miles southwest of the Delaware plant. A division of services between the two locations was part of the arrangement.*fn2
After the district court ordered a departmental review, HEW found discriminatory effects in the plan. To ensure that Omega would comply with Title VI and the Rehabilitation Act, WMC contracted to make a number of modifications. Because no public transportation to the southwest site is available, WMC agreed to provide shuttle bus service between the Delaware and Southwest divisions for the convenience of patients, visitors, and employees. In addition, WMC committed itself to renovate the Delaware plant, devise inpatient service plans for the two branches to prevent racial identifiability at either location, and operate the two facilities on a unitary basis.
Upon acceptance of these conditions, HEW withdrew its objections to Omega.*fn3 Plaintiffs, however, continued their opposition, contending in the district court that the relocation would subject members of the class to inferior health care and disproportionate travel burdens. Moreover, it was alleged that there has been a misallocation of services between the two divisions.
The district court analyzed the case under alternate theories of intentional discrimination and unintended discriminatory effects. The court first determined that there was no evidence of discriminatory purpose. It then applied a disparate effect standard, but concluded after a lengthy review of the evidence that plaintiffs had failed to present a prima facie case.
Rather than ending the inquiry at that point, the court assumed arguendo that a showing of disparate impact had been made. The record was then scrutinized to determine if the defendant had successfully rebutted the plaintiffs' contentions. The court concluded that even if disparate impact had been shown, WMC had demonstrated it had bona fide needs that could not be satisfied by any less discriminatory plan. Finally, the court determined that plaintiffs did not prove that a feasible alternative to Omega was available.
Consideration of the alleged disparate impact was divided into several general categories access, quality of care, linguistic discrimination, and racial identifiability. Initially, the court found that Plan Omega would bring about vast improvements in the quality of care for all patients, including the classes represented by the plaintiffs. The detrimental effects to minorities and the elderly were determined to be minor and insignificant. With respect to the handicapped, plaintiffs failed to show any adverse impact.
The first issue considered was the plaintiffs' contention that they will lack access to the Southwest facility and, consequently, will suffer a diminution in health care. The court found that WMC would meet its obligation under the HEW agreement to provide adequate shuttle bus and ambulance service. Furthermore, the court concluded that the increased travel time would generally not deter patients from seeking treatment for serious illness at the Southwest division.
A possible exception was a group of women in need of services at the high risk obstetrical clinics at the Southwest division. It was acknowledged that minority women have a greater incidence of high risk pregnancies and that patients seeking prenatal care are more likely to be deterred from seeking medical attention than others. However, the court found that the plaintiffs had overestimated minority usage of the high risk clinics in the Southwest facility and that utilization by whites would be slightly less proportionately.
The plaintiffs' expert erroneously included in her high risk category minority teenagers who are poor users of health care and statistically more likely to have pregnancies with complications. Omega, however, included special clinics at the Delaware division for teenagers and Hispanics. Thus, the group affected by the location of high risk clinics at Southwest division would be much smaller than plaintiffs projected. In addition, the WMC director of obstetrics testified that if a large number of high risk patients appeared at the Delaware division, a clinic would be created at that location, although some patients might have to be referred to Southwest where the most sophisticated equipment would be placed.
Plaintiffs also were concerned with the fact that because obstetrical services would be offered at the Southwest division, emergency room treatment of those cases at Delaware would be inferior. The court, however, found that the vast majority of women about to deliver and those with obstetrical problems would go directly to Southwest. In only exceptional instances would the absence of inhouse obstetricians affect emergency room treatment, because an obstetrical resident would be assigned to the clinics and obstetricians would be on call. The court opined that the cases where treatment would be impaired would be extremely rare, assuming that any at all would occur. In this context, therefore, the possibility of detrimental effects was insignificant, particularly when contrasted with the improvement in quality of care Omega would provide.
The other adverse impact that plaintiffs attributed to travel difficulties is a possible decrease in the number of minority and elderly visitors to inpatients at the Southwest facility. Plaintiffs suggested that visitors would be discouraged by the longer ride to unfamiliar surroundings. Evening visits would be further hindered because the proposed shuttle bus service would stop at 7:00 p. m.
The district judge found that elderly inpatients might have fewer visitors at the Southwest division. While this might result in some detriment to the health of elderly patients, the district court characterized the level of harm as "very minor." 491 F. Supp. at 332. The court similarly concluded that the negative impact on obstetrical patients would be "insubstantial." Id.
Plaintiffs also argued that another group, minority pediatric inpatients, would be adversely affected by a decrease in the number of visitors caused by the location of services at Southwest. Recognizing the importance of family visits to the health of a child, the court determined that steps would be taken under Omega to provide those visits. Parents would be encouraged, and in some cases required, to spend the night with their children. When parents of infants could not stay, the hospital would assign staff members to give special attention to those children.*fn4
With respect to plaintiffs' second major contention that treatment at the Delaware division would be inferior the court stated, "(T)he general medical and surgical care that will be rendered at the Delaware Division under Omega will be entirely equal to that rendered at the Southwest Division and superior to that which is now rendered by WMC." 491 F. Supp. at 325.
Plaintiffs asserted that the Delaware division would be housed in an inferior building and even after the proposed renovations, the two facilities would not be comparable. Moreover, it was questioned whether WMC would be financially able to meet its commitment to rehabilitate the Delaware plant. The court described these contentions as "purely speculative and wholly unsupported on the record." 491 F. Supp. at 325. In addition to assuming an obligation under the HEW agreement to refurbish, WMC had allocated more than $12,000,000 for that purpose up to the time of trial. This amount, coupled with projected commitments and funds to be set aside under the agreement, produced a total of $18,000,000 committed to renovation. The judge concluded that the additional $4,000,000 needed to complete the work could be raised from either the operating budget or unrestricted funds.
Furthermore, the court was convinced that shuttle bus service would, in fact, be provided. The cost would be minimal in comparison with WMC's annual budget and could be absorbed with no strain on the institution's financial resources.
After their expert suggested that operating deficits might occur in the years following completion of construction, plaintiffs questioned whether the high cost of Omega would cause WMC to discontinue the remodeling and free care. The court found such evidence irrelevant and believed that financial feasibility of Plan Omega would be determined by bond market forces: "(T)he Court refuse(d) to construe the civil rights statutes as a license ... to act as a financial overseer to those who provide services to minorities." 491 F. Supp. at 328.
Finally, the district court rejected the claims that Omega would create linguistic discrimination or racial identifiability. Plaintiffs' fear of a shortage of interpreters for Hispanics at the Southwest division was rejected. The trial judge found no present shortage of WMC personnel capable of acting as interpreters for Hispanics and expected that none would arise under Plan Omega. Additionally, the court held that Plan Omega as drafted would not create two racially identifiable facilities but if, in practice, problems arose, remedial measures would be taken. All other arguments raised by the plaintiffs were found to be frivolous, and the court concluded that they had failed to present a prima facie case of disproportionate impact.
Recognizing that review in this lengthy and hard-fought litigation was inevitable, however, the trial judge assumed arguendo that a prima facie case had been established and discussed the defendant's burden. Concluding that the defendant was required to go forward with rebuttal evidence, the court found that WMC had met its burden of showing that it had bona fide needs, that Omega would satisfy them, and that other, less discriminatory plans would not.
The court recognized that WMC's immediate need to preserve its educational program and accreditation, as well as improve its quality of care, made it obvious that something had to be done. WMC was aware that to insure its financial stability, and at the same time care for those dependent on its services, it had to provide facilities both in the city and on the outskirts. Omega met these requirements, and the court found "Omega can be completed within WMC's means and will allow WMC to hold its costs down." 491 F. Supp. at 340.
Although the WMC Board had investigated many different plans, six alternatives were discussed. Assuming that any plan which had all or substantially more beds in Wilmington would be less discriminatory, the court found that these plans would not meet WMC's needs. Some were financially infeasible, as in the example of a single large hospital in the city. Rehabilitation of all existing structures within the city was objectionable because it would perpetuate excessive fragmentation. A more even division of services between the Delaware and Southwest facilities (450 beds at Delaware, 570 at Southwest) was rejected by the medical staff as failing to meet the goal of consolidation. Thus after reviewing the options, the court concluded, "WMC has met its burden upon rebuttal by showing that even if Omega may have some meager disparate impacts, those impacts are justified by bona fide needs which could not be accomplished by any less discriminatory plan." 491 F. Supp. at 343.
In turn, plaintiffs attempted to show that "Reverse Omega" (800 beds at Delaware and 200 at Southwest) was a feasible alternative. The court, however, found that cost estimates of reverse Omega given by plaintiffs' expert were unreliable, and concluded that this plan would be "prohibitively expensive." 491 F. Supp. at 342. The court determined, therefore, that "plaintiffs have failed to meet their burden of persuasion of showing a feasible, less discriminatory alternative." 491 F. Supp. at 345.
The lengthy recitation of the background makes it clear that this case turns largely on factual matters. There are, however, several discrete legal issues essential to a resolution of the dispute. The first that we shall discuss implicates the nature of the evidence necessary to show a violation of Title VI. If the plaintiff must show intent to discriminate, then our task is a simple one because the trial court found no such evidence and that holding is not contested. We are persuaded, however, that intent is not required under Title VI and proof of disparate impact or effects is sufficient. Our conclusion applies to the other two statutes that have been invoked as well.
Title VI of the Civil Rights Act of 1964, 42 U.S.C. § 2000d (1976), bans discrimination based on race, color, or national origin in any program receiving federal financial assistance.*fn5 WMC concedes that Medicare and Medicaid payments made to it call Title VI into play.
In Lau v. Nichols, 414 U.S. 563, 94 S. Ct. 786, 39 L. Ed. 2d 1 (1974), the Supreme Court was confronted with a racial discrimination charge growing out of a school system's decision not to provide English language instruction to students of Chinese ancestry. The Court declined to reach an equal protection argument but chose instead to rely on Title VI, interpreting it as follows:
"Discrimination is barred which has that effect even though no purposeful design is present: a recipient "may not ... utilize criteria or methods of administration which have the effect of subjecting individuals to discrimination' or have "the effect of defeating or substantially impairing accomplishment of the objectives of the program as respect individuals of a particular race, color, or national origin.' "
Id. at 568, 94 S. Ct. at 789 (emphasis the Court's), quoting HEW regulation, 45 C.F.R. § 80.3(b)(2).
Lau makes it clear that discriminatory impact is enough to constitute a violation of Title VI. WMC, however, argues that Lau was overruled by Board of Education v. Harris, 444 U.S. 130, 100 S. Ct. 363, 62 L. Ed. 2d 275 (1979), and Regents of the University of California v. Bakke, 438 U.S. 265, 98 S. Ct. 2733, 57 L. Ed. 2d 750 (1978).*fn6 We are not convinced, however, that either case did so.
In Bakke, the question was whether a state school could properly adopt an admissions policy clearly intended to prefer minorities. It is true, as WMC notes, that five justices expressed reservations in Bakke about the holding in Lau. In the opinion written by Justice Brennan, in which Justices White, Marshall, and Blackmun joined, it was said, "(W)e have serious doubts concerning the correctness of what appears to be the premise of (Lau )." 438 U.S. at 352, 98 S. Ct. at 2779.
The issue did not have to be resolved, however, because "even accepting Lau's implication that impact alone is in some contexts sufficient to establish a prima facie violation of Title VI, contrary to our view that Title VI's definition of racial discrimination is absolutely coextensive with the Constitution's, this would not assist the respondent in the least." 438 U.S. at 352-53, 98 S. Ct. at 2779. It did not matter, the group wrote, whether Title VI proscribed some acts, such as those at issue in Lau, that would survive constitutional scrutiny. As the group read the legislative history of the Civil Rights Act, Congress did not intend to proscribe the particular type of practice challenged by Bakke preferences designed to remedy past discrimination. As stated in another portion of the opinion, "Applied to the case before us, Title VI goes no further in prohibiting the use of race than the Equal Protection Clause of the Fourteenth Amendment itself." 438 U.S. at 325, 98 S. Ct. at 2766 (emphasis supplied).
In a separate opinion, Justice Powell used language that may be inconsistent with Lau, but he stopped short of advocating that the case be overruled. He wrote, "Title VI must be held to proscribe only those racial classifications that would violate the Equal Protection Clause or the Fifth Amendment." 438 U.S. at 287, 98 S. Ct. at 2746. He then went on to distinguish Lau, saying significantly, "(T)he "preference' approved (in Lau ) did not result in the denial of the relevant benefit "meaningful opportunity to participate in the educational program' to anyone else." 438 U.S. at 304, 98 S. Ct. at 2755.
In determining what weight is to be given to these separate statements, it is important to recognize that the issue presented to the Court in Bakke differs substantially from that in the case at bar. It was clear in Bakke that whatever the reach of Title VI, the plaintiff had established a prima facie case by showing intentional discrimination. The question facing the Court, then, was whether some forms of intentional discrimination were nevertheless permissible. A majority of the Court concluded that those forms of intentional discrimination that would survive constitutional analysis also were exempt from Title VI. Congress, in enacting the Civil Rights Act of 1964, did not intend to prohibit those racial preferences that are permitted under the Constitution.
It does not inexorably follow, however, that Congress also intended the constitutional standard to control every allegation of discrimination. It would be consistent with Congress's expansive, remedial intent to interpret Title VI as prohibiting acts that have the effect of discrimination yet permitting patent preferences designed to remedy past discrimination.
The Powell-Brennan opinions, therefore, may be read as expressing the theory that at least when the charge is intentional discrimination in the nature of a governmental preference, Title VI incorporates the constitutional standard. The case sub judice, however, is not one of a discriminatory governmental preference but one of a neutral program with disparate impact. As we see it, it is still permissible to hold that when the charge is disparate impact, a prima facie case can be established without proof of intent.
The other case on which defendant relies, Board of Education v. Harris, supra, held that § 702(b) of the Emergency School Aid Act (ESAA) prohibits school districts from maintaining racially identifiable faculties even when the segregation is unintentional. The Court upheld the power of Congress in the exercise of its authority under the spending clause to require the recipients of federal funds to go further in eliminating discrimination than mandated by the Constitution. Lau v. Nichols was not cited.
In dissent, Justice Stewart argued that since five justices in Bakke had stated Title VI prohibited only intentional discrimination, the same premise should govern claims under the ESAA. 444 U.S. at 160, 100 S. Ct. at 379. In this argument, however, he was joined only by Justice Powell. The majority expressly disclaimed any necessity to pass on the standard applicable to Title VI. Id. at 149, 100 S. Ct. at 373.
Fullilove v. Klutznick, 448 U.S. 448, 100 S. Ct. 2758, 65 L. Ed. 2d 902 (1980), is another case that considered the constitutionality of a statutory preferential program. A plurality of the Court cited with approval Lau's validation of the HEW regulation proscribing actions "which have the effect" of discriminating. 448 U.S. at 479, 100 S. Ct. at 2775 (emphasis supplied by Court). Joining in the opinion were Justices White and Powell, who in Bakke had taken the position that intent was necessary to establish a Title VI violation.
Although there is ample ground for argument that the Supreme Court has doubts about Lau's continued viability, a requiem may be premature and, in any event, should not be sung by this choir. The prerogative of overruling its cases rests with the Supreme Court, and not with us. Americans United for Separation of Church and State, Inc. v. HEW, 619 F.2d 252, 271 (1980) (Weis, J., dissenting ), cert. granted, Valley Forge Christian College v. Americans United for Separation of Church and State, Inc., 450 U.S. 909, 101 S. Ct. 1345, 67 L. Ed. 2d 332 (1981); United States ex rel. Gockley v. Myers, 450 F.2d 232 (3d Cir. 1971), cert. denied, 404 U.S. 1063, 92 S. Ct. 738, 30 L. Ed. 2d 752 (1972).*fn7
The question is not one of congressional power but rather of intent. Providing federal funding conditioned on an even-handed application is a positive measure to discourage all forms of discrimination, intentional or not. The use of an effects test, therefore, is consistent with the legislative aim of eliminating discrimination and is in harmony with Title VII of the same Act, and Title VIII, Resident Advisory Board v. Rizzo, 564 F.2d 126 (3d Cir. 1977), cert. denied, 435 U.S. 908, 98 S. Ct. 1457, 55 L. Ed. 2d 499 (1978), as well as our previous reference to Title VI in Shannon v. United States Department of Housing & Urban Development, 436 F.2d 809, 816, 820 (3d Cir. 1970) (Title VI provides redress for discriminatory effects of local housing plans). Moreover this approach parallels regulations adopted by HEW and other departments charged under § 602 of the Civil Rights Act, 42 U.S.C. § 2000d-1, with enforcing the statute.*fn8
With due deference to Lau v. Nichols and congressional intent as we perceive it, therefore, we conclude that plaintiffs in a Title VI case alleging discrimination in the application of federal funds in a facially neutral program need only establish disparate impact. The Rehabilitation Act and the Age Discrimination Act of 1975 provide equally strong cases for application of ...