In November 2008, Arizona voters approved the Marriage Protection Amendment, which amended the state constitution to define marriage as the union between one man and one woman.

The politicians who promoted the amendment, and the citizens who voted for it, likley never imagined that it would come back to bite the state in the form of litigation challenging the legislature’s subsequent decision to exclude the domestic partners of state workers from health insurance benefits.

That litigation, brought on behalf of 10 gay and lesbian state employees whose partners lost health care coverage as a result of a 2009 state law, has embroiled Arizona in a lengthy court battle, with the state losing the first two rounds.

In the most recent decision in Diaz v. Brewer, the 9th Circuit in September upheld a lower court’s temporary injunction blocking the law eliminating health care benefits for domestic partners.

Although the law took benefits away from opposite-sex, as well as same-sex, domestic partners, the court found that it violated the equal protection provisions of the U.S. Constitution because the state had banned gay marriage.

“This case ultimately hinges on the fact that gay and lesbian couples can’t marry in the state of Arizona,” says Neil Alexander, a Littler Mendelson shareholder. “The court said opposite-sex domestic partners could retain coverage by marrying, while same-sex couples can’t. That’s the basis for constitutional adverse impact.”

Alexander notes the state had first offered benefits to domestic partners in 2008, and then took them away.

 “If they had never provided the benefits, it would have been difficult to argue a constitutional problem,” he says. “Because the benefits were granted and then taken away, it created an adverse action by the state.”

Financial Rationale

In its defense, Arizona said the law was passed to cut soaring health care costs in a time of budget crisis. But both the district court and the 9th Circuit found that the state failed to prove that the law was related to the state’s interest in cutting expenses. The plaintiffs claimed the law would have a minimal impact on state expenditures—they introduced expert evidence showing that same-sex partners tend to increase health plan enrollment by just 0.1 percent to 0.3 percent. The courts also emphasized that the state failed to provide evidence of the cost of providing benefits to same-sex partners. Its data on the number of domestic partners who participated in the health care plan didn’t specify how many of those were gay or lesbian.

“The amount of money involved is extremely small in terms of balancing the state budget,” says Daniel Barr, a Perkins Coie partner who represents the plaintiffs.

Alexander notes that the case is still at the preliminary injunction stage, so presumably the state will have another opportunity to justify its financial interest in maintaining the law.

“The state will have their opportunity to make their case for an important economic interest that outweighs the adverse impact,” he says. “The 9th Circuit has provided a road map—they are going to have to provide more detailed financial analysis if they expect this case to survive constitutional scrutiny.”

Gov. Jan Brewer, the defendant in the case, has asked for en banc review of the ruling on the temporary injunction. Should the case eventually return to the district court for a hearing on a permanent injunction, Alexander predicts another protracted court fight, perhaps going all the way to the Supreme Court.

“Arizona has not shied away from pursuing litigation challenges to legislation,” he says, noting two state immigration law challenges that the state has taken to the Supreme Court.

Limited Impact

Because the 9th Circuit decision in Diaz hinges on the equal protection provision of the Constitution, it does not apply to private employers. Significantly, the court emphasized that its decision did not grant a constitutional right to health care coverage. And other courts have upheld the right of private employers to limit coverage to married couples, according to Alexander. Nonetheless, 57 percent of Fortune 500 companies already provide health benefits to same-sex partners, according to a 2011 Human Rights Campaign report.

“Thousands of public and private employers recognize that if they’re going to attract the best and the brightest, they need to … (allow) lesbian and gay employees to cover family members in the same way that heterosexual workers can,” says Tara Borelli, a staff attorney with the gay rights group Lambda Legal, who also represents the plaintiffs in Diaz.

In fact, societal attitudes and state laws are changing so fast in accepting gay and lesbian partnerships that the Diaz case seems almost anachronisticto Barr.

“In some ways, I feel we are fighting about balls and strikes in the fourth inning of a game whose result everyone knows,” he says. “I can’t say when the game will end, but I don’t think there is any doubt about the way it turns out.”

Still, the majority of states, like Arizona, still ban gay marriage (see “Marriage Bans”), and many private employers don’t provide benefits to gay and lesbian partners of their employees. So gay rights advocates see Diaz as a way to spread the word to the corporate sector.

“While Diaz v. Brewer is not directly applicable to private employers, it sends a strong message to holdout employers who have not caught up with the times: Providing lesbians and gay men equal compensation is not only good for business, it’s the only fair way to treat one’s employees,” Borelli says.