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STUART F. DELERY Assistant Attorney General KATHLEEN R. HARTNETT Deputy Assistant Attorney General ARTHUR R. GOLDBERG (DC Bar No. 180661) Assistant Branch Director JEAN LIN (NY Bar No. 4074530) Senior Trial Counsel United States Department of Justice Civil Division Federal Programs Branch 20 Massachusetts Ave., N.W. Washington, DC 20530 (202) 514-3716 (202) 616-8470 (Fax) jean.lin@usdoj.gov Attorneys for Federal Defendants UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA (OAKLAND DIVISION) MICHAEL DRAGOVICH, MICHAEL Case No. CV 4:10-01564-CW GAITLEY, ELIZABETH LITTERAL, PATRICIA FITZSIMMONS, CAROLYN LIGHT, CHERYL LIGHT, DAVID BEERS, CHARLES COLE, RAFAEL V. DOMINGUEZ, FEDERAL DEFENDANTS ERRATA and JOSE G. HERMOSILLO, on behalf of REGARDING DOCKET NUMBER 158 themselves and all others similarly situated, Plaintiffs, v. UNITED STATES DEPARTMENT OF THE TREASURY, TIMOTHY GEITHNER, in his official capacity as Secretary of the Treasury, United States Department of the Treasury, INTERNAL REVENUE SERVICE, DOUGLAS SHULMAN, in his official capacity as Commissioner of the Internal Revenue Service, BOARD OF ADMINISTRATION OF CALIFORNIA PUBLIC EMPLOYEES RETIREMENT SYSTEM, and ANNE STAUSBOLL, in her official capacity as Chief Executive Officer, CalPERS, Defendants.

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Federal Defendants respectfully submit a corrected version of their filing made on February 13, 2014 (Dkt. 158), entitled Federal Defendants Brief Regarding Windsor v. United States and Hollingsworth v. Perry. The docket number for the document is 158 and the entry appears on the docket as follows: Supplemental Brief Regarding Implication of Windsor and Perry pursuant to 148 Order. The February 13, 2014 version inadvertently removed the line numbers from the document starting from page 2, and also omitted the tables of contents and authorities. A corrected copy is attached. Federal Defendants regret the errors. Date: March 10, 2014 Respectfully Submitted, STUART F. DELERY Acting Assistant Attorney General KATHLEEN R. HARTNETT Deputy Assistant Attorney General ARTHUR R. GOLDBERG Assistant Branch Director __/s/ Jean Lin___________ JEAN LIN Senior Trial Counsel U.S. Department of Justice, Civil Div. Federal Programs Branch 20 Massachusetts Ave., N.W. Washington, DC 20530 (202) 514-3716 (202) 616-8470 (Fax) jean.lin@usdoj.gov Attorneys for Federal Defendants

Fed Defs Errata re Dkt. 158 Case No. CV 4:10-01564-CW

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STUART F. DELERY Assistant Attorney General KATHLEEN R. HARTNETT Deputy Assistant Attorney General ARTHUR R. GOLDBERG (DC Bar No. 180661) Assistant Branch Director JEAN LIN (NY Bar No. 4074530) Senior Trial Counsel United States Department of Justice Civil Division Federal Programs Branch 20 Massachusetts Ave., N.W. Washington, DC 20530 (202) 514-3716 (202) 616-8470 (Fax) jean.lin@usdoj.gov Attorneys for Federal Defendants UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA (OAKLAND DIVISION) MICHAEL DRAGOVICH, MICHAEL Case No. CV 4:10-01564-CW GAITLEY, ELIZABETH LITTERAL, PATRICIA FITZSIMMONS, CAROLYN LIGHT, CHERYL LIGHT, DAVID BEERS, CHARLES COLE, RAFAEL V. DOMINGUEZ, FEDERAL DEFENDANTS BRIEF and JOSE G. HERMOSILLO, on behalf of REGARDING WINDSOR v. UNITED themselves and all others similarly situated, STATES AND HOLLINGSWORTH v. Plaintiffs, PERRY v. UNITED STATES DEPARTMENT OF THE TREASURY, TIMOTHY GEITHNER, in his official capacity as Secretary of the Treasury, United States Department of the Treasury, INTERNAL REVENUE SERVICE, DOUGLAS SHULMAN, in his official capacity as Commissioner of the Internal Revenue Service, BOARD OF ADMINISTRATION OF CALIFORNIA PUBLIC EMPLOYEES RETIREMENT SYSTEM, and ANNE STAUSBOLL, in her official capacity as Chief Executive Officer, CalPERS, Defendants.

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TABLE OF CONTENTS BACKGROUND ............................................................................................................................ 2

3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 i III. This Court Should Grant Judgment To Federal Defendants With Respect to the Domestic Partner Plaintiffs Claims Because 7702B(f) Satisfies Rational Basis Review. ....................................................................................................................... 9 CONCLUSION ............................................................................................................................. 13 II. The Supreme Courts Rulings in Perry and Windsor Remove the Fundamental Premise of this Courts Ruling in Favor of the Domestic Partner Plaintiffs. ...................... 5 DISCUSSION ................................................................................................................................. 4 I. This Court Should Vacate Its Judgment Regarding Domestic Partners Because California Law Continues to Pose An Independent Bar to Those Plaintiffs Eligibility in CalPERSs LTC Plan. ...................................................................................................... 4

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TABLE OF AUTHORITIES CASES Armour v. City of Indianapolis, 132 S. Ct. 2073 (2012) .............................................................................................................. 10 Baker v. City of Concord, 916 F.2d 744 (1st Cir. 1990) ..................................................................................................... 12 Calderon v. Ashmus, 523 U.S. 740 (1998) .................................................................................................................... 5 Dandridge v. Williams, 397 U.S. 471 (1970) .................................................................................................................. 12 Diaz v. Brewer, 656 F.3d 1008 (9th Cir. 2011) .................................................................................................... 8 Dragovich v. U.S. Dep't of the Treasury, 872 F. Supp. 2d 944 (N.D. Cal. 2012) ............................................................................ 3, 6, 7, 8 Dragovich v. U.S. Dep't of the Treasury, 764 F. Supp. 2d 1178 (N.D. Cal. 2011) ...................................................................................... 5 FCC v. Beach Commc'ns, Inc., 508 U.S. 307 (1993) .................................................................................................................... 9 Fitzgerald v. Racing Ass'n of C. Iowa, 539 U.S. 103 (2003) .............................................................................................................. 9, 10 Grauvogel v. Comm'r of IRS, 768 F.2d 1087 (9th Cir. 1985) .................................................................................................. 10 Heller v. Doe, 509 U.S. 312 (1993) .............................................................................................................. 9, 12 Hollingsworth v. Perry, 133 S. Ct. 2652 (2013) ................................................................................................................ 1 In re Marriage Cases, 43 Cal 4th 757 (2008) ........................................................................................................... 4, 12 Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) .................................................................................................................... 5

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Merrifield v. Lockyer, 547 F.3d 978 (9th Cir. 2008) ...................................................................................................... 9 Regan v. Taxation with Representation of Wash., 461 U.S. 540 (1983) .................................................................................................................. 10 Renne v. Geary, 501 U.S. 312 (1991) .................................................................................................................... 5 San Antonio Indep. Sch. Dist. v. Rodriguez, 411 U.S. 1 (1973) ........................................................................................................................ 9 United States v. Haggar Apparel Co., 526 U.S. 380 (1999) .................................................................................................................. 12 USDA v. Moreno, 413 U.S. 528 (1973) .................................................................................................................... 8 Vance v. Bradley, 440 U.S. 93 (1979) .................................................................................................................... 12 Village of Arlington Heights v. Metropolitan Housing Development Corporation, 429 U.S. 252 (1977) ................................................................................................................ 7, 8 STATUTES

15 16 17 18 19 20 21 22 Cal. Gov. Code 21661.............................................................................................................. 4, 5 23 24 25 26 27 28 iii 1 U.S.C. 7 ................................................................................................................................. 2, 3 26 U.S. C. 104(a)(3) ..................................................................................................................... 1 26 U.S.C. 151 ............................................................................................................................... 3 26 U.S.C. 213 ............................................................................................................................... 1 26 U.S.C. 7702B ................................................................................................................. passim Cal. Fam. Code 297.5(g) .......................................................................................................... 4, 5

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Pursuant to this Courts Orders of November 26, 2013 [Dkt. 148] and December 4, 2013 [Dkt. 151], Federal Defendants respectfully submit this brief regarding the import of the Supreme Courts decisions in Windsor v. United States, 133 S. Ct. 2675 (2013), and Hollingsworth v. Perry, 133 S. Ct. 2652 (2013), on this Courts prior May 24, 2012 order [Dkt. 124] and judgment [Dkt. 125] as they relate to the domestic partner plaintiffs. At issue is 7702B(f) of the Internal Revenue Code, 26 U.S.C. 7702B(f), which provides that enrollees in a state-maintained long-term care (LTC) plan can receive certain tax benefits if the plans enrollment is limited to state employees, their spouses and other specified relatives not including domestic partners.1 Applying rational basis review, this Court previously held that the omission of domestic partners from the list of eligible family members in 7702B(f) discriminated on the basis of sexual orientation in violation of equal protection because, even though both same- and opposite-sex domestic partners are excluded from taxfavored 7702B(f) plans, same-sex domestic partners in California could not become eligible for participation in such LTC plans by marrying (whereas opposite-sex domestic partners could marry and become eligible). In Perry, the Supreme Court found a lack of appellate standing, thereby leaving intact the district courts decision striking down Californias same-sex marriage ban, Proposition 8, as unconstitutional. Accordingly, same-sex couples can now marry in California. In Windsor, the Supreme Court struck down Section 3 of the Defense of Marriage Act (DOMA), which limited marriage for federal law purposes to opposite-sex married couples, as unconstitutional. Accordingly, under federal law, the terms spouse and marriage now no longer preclude same-sex spouses. As a result of these rulings, same-sex domestic partners in California can become eligible for tax benefits under 7702B(f) by marryingjust as opposite-sex domestic

An enrollee may deduct the premiums for LTC insurance as an itemized deduction if the enrollees total annual medical expenses, inclusive of the LTC insurance premiums, exceed 10% of the enrollees gross adjustable income. 26 U.S.C. 213(a), (d)(1), (d)(10). In addition, if and when the enrollee receives payments from the LTC plan, he or she can exclude the payments from gross income. Id. 104(a)(3), 7702B(a)(2), (d).
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partners in California can do. Because 7702B(f) now clearly treats California same-sex and opposite-sex couples exactly the same, and because rational bases support the omission of domestic partners from the list of relationships in 7702B(f), this Court should grant judgment in Federal Defendants favor on the domestic partner plaintiffs claims. BACKGROUND Plaintiffs are five same-sex couples who reside in Californiafour of the couples are married, and one couple has a registered domestic partnership under California law but is not married. Each couple includes a spouse or partner who is a state employee eligible to enroll in the LTC insurance plan maintained by the California Public Employees Retirement System (CalPERS). At the time this suit was filed, each couple also included a spouse or partner who wanted to enroll in CalPERSs LTC plan but could not do so, either because same-sex spouses were not recognized as spouses under federal law under Section 3 of DOMA, or because samesex domestic partners were excluded from the list of relatives included in 7702B(f). Plaintiffs brought this class action raising equal protection and substantive due process challenges to Section 3 of DOMA, 1 U.S.C. 7, and 7702B(f) of the Internal Revenue Code, 26 U.S.C. 7702B(f).2 Section 7702B was enacted by Congress in 1996 as part of the Health Insurance Portability and Accountability Act (HIPAA) to provide favorable tax treatment to LTC insurance plans that meet certain minimum requirements. Subsection 7702B(f) makes clear that enrollees in a state-maintained LTC plan can receive the same favorable tax treatments as do enrollees in a private, qualified 7702B plan, only if the state LTC plans coverage is limited to state employees, their spouses, and certain individuals who are related to the taxpayer as described in another part of the tax code. See 26 U.S.C.

On July 15, 2011, this Court certified a class that includes [p]resent and future CalPERS members who are in legally recognized same-sex marriages and registered domestic partnerships together with their spouses and partners, who as couples and families are denied access to the CalPERS LongTerm Care Program on the same basis as similarly situated present and future CalPERS members who are in opposite-sex marriages, and their spouses. [Dkt. 92] at 3.
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7702B(f)(2)(C). Specifically, 7702B(f)(2)(C) refers to individuals bearing a relationship to such employees or spouses which is described in any of subparagraphs (A) through (G) of section 152(d)(2) defining the term qualifying relatives for purposes of determining who may be the taxpayers dependent under 26 U.S.C. 151. Subparagraph (H) of 152(d)(2), which is another category of qualifying relatives that conceivably includes domestic partners, cousins, as well as a host of other individuals in the taxpayers household, is not included for purposes of determining eligibility for 7702B(f). At the time this lawsuit was filed, a state employees same-sex spouse also was excluded under 7702B(f) by virtue of Section 3 of DOMA, which defined spouse for purposes of federal law to include only opposite-sex spouses. 1 U.S.C. 7. On May 24, 2012, this Court entered judgment in favor of Plaintiffs, holding that Section 3 of DOMA violated the equal protection rights of the married plaintiffs and that 7702B(f) violated the equal protection rights of the domestic partner plaintiffs. Dragovich v. U.S. Dept of the Treasury, 872 F. Supp. 2d 944, 946-47 (N.D. Cal. 2012). The Court permanently enjoined State Defendants from denying class members enrollment in CalPERSs LTC plan on the basis of Section 3 of DOMAs exclusion of same-sex spouses and 7702B(f)s exclusion of domestic partners. Id. at 964. The Court also enjoined Federal Defendants from disqualifying the CalPERS long-term care plan from favorable tax status under 7702B(f) based on State Defendants compliance with the terms of th[e] injunction. Id. The Court later stayed enforcement of the judgment, and Federal Defendants and the Bipartisan Legal Advisory Group of the U.S. House of Representatives timely appealed. [Dkt. 132, 136]. The Court of Appeals stayed the appeal. Following the Supreme Courts decisions in Windsor and Perry, the Court of Appeals vacated that portion of this Courts judgment concerning the domestic partner plaintiffs, and remanded the case for further proceedings in light of subsequent legal developments, including the decisions in Windsor and Perry, as well

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as the resumption of marriage licenses for same-sex couples in California. Oct. 28, 2014 Order [Dkt. 147] at 2.3 DISCUSSION I. This Court Should Vacate Its Judgment Regarding Domestic Partners Because California Law Continues to Pose An Independent Bar to Those Plaintiffs Eligibility in CalPERSs LTC Plan. As an initial matter, Federal Defendants respectfully submit that this Courts judgment is merely advisory with respect to the claims of the domestic partner plaintiffs, because California law was not within the scope of the Courts judgment and continues to pose an independent bar to the participation of domestic partners in CalPERS. Despite the expansive list of eligible relatives in 152(d)(2)(A)-(G), as referenced by 7702B(f), the California legislature has opted to restrict eligibility for CalPERSs LTC plan to only state employees, their spouses, parents, adult siblings, and parents-in-laws. See Cal. Gov. Code 21661(d); see also In re Marriage Cases, 43 Cal. 4th 757, 805 n. 24 (2008) (under the relevant state statutory provision, CalPERSs long-term care plan may not provide coverage for an employees domestic partner); Cal. Fam. Code 297.5(g) (equal treatment of domestic partners does not modify eligibility for long-term

17 18 19 20 21 22 23 24 precludes domestic partners from participating in CalPERSs LTC plan, the domestic partner 25 26 27 28 In their motion to vacate in part and remand, the Federal Defendants stated that Windsor conclusively resolves the claims of plaintiffs in same-sex marriages, and that the federal government would not pursue that issue on appeal. Therefore, the Court of Appeals did not vacate this Courts judgment concerning the married plaintiffs.
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care plans). Plaintiffs have challenged California Family Code 297.5(g), but not California Government Code 21661(d), see 2d Amended Compl. [Dkt. 95] at 23, and this Courts judgment does not address either of the state law provisions. Consequently, nothing in the Courts judgment prohibits State Defendants from continuing to disallow the enrollment of domestic partners on the basis of state law. Federal Defendants previously argued that, because California law independently

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plaintiffs cannot satisfy the redressability prong of the standing requirement under Article III of the Constitution. See Fed. Def. Mot. to Dismiss [Dkt. 25] at 14. This Court rejected Federal Defendants argument on the basis that California Family Code 297.5(g) prohibits discrimination against couples and individuals based on their status as registered domestic partners. Although 297.5(g) specifically exempts its application for purposes of CalPERSs LTC plans, see Dragovich, 764 F. Supp. 2d 1178, 1182 (N.D. Cal. 2011), this Court found that the purpose of the exemption was to protect the LTC plans tax-qualified status under 7702B(f). See id. at 1188. The fact remains, however, that California Government Code 21661(d) continues to limit eligibility for CalPERSs LTC plan to only four categories of relatives, which do not include domestic partners. Because this Courts judgment has no effect on California Government Code 21661(d), and because California Family Code 297.5(g) presupposes that spouse does not include domestic partner, Federal Defendants respectfully submit that this Courts judgment does not

15 16 17 18 19 20 21 22 II. 23 24 25 26 27 28 At a minimum, this Court should clarify the effect of its order in light of the continued applicability of California Family Code 297.5(g) and California Government Code 21661(d).
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remedy the injury asserted by the domestic partner plaintiffs. See Renne v. Geary, 501 U.S. 312, 319 (1991) (noting redressability concern when it appeared that court was asked to declare a California law invalid while [a] separate California statute not at issue precluded the same activity); see also Calderon v. Ashmus, 523 U.S. 740, 746-47 (1998); Lujan v. Defenders of Wildlife, 504 U.S. 555, 568-69 (1992) (to establish Article III standing, an injury must be redressable by a favorable ruling). Accordingly, this Court should vacate its prior judgment.4 The Supreme Courts Rulings in Perry and Windsor Remove the Fundamental Premise of this Courts Ruling in Favor of the Domestic Partner Plaintiffs. Federal Defendants have argued in this case that 7702B(f)s omission of domestic partners as eligible relatives for state-maintained LTC plans is not a classification based on sexual orientation, or

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any other protected class, because it is neutral with respect to sexual orientation both on its face and as applied: it covers both same-sex and opposite-sex domestic partners. Among other things, Federal Defendants argued that 7702B(f)s exclusion of domestic partners is applied uniformly without regard to sexual orientation; it binds all qualified state LTC plans, it excludes both opposite-sex and same-sex domestic partners alike, and it also excludes a host of individuals described in 152(d)(2)(H) of the tax code. This Court rejected Federal Defendants arguments, finding that, with respect to the exclusion of domestic partners, 7702B(f) discriminates on the basis of sexual orientation. Dragovich, 872 F. Supp. 2d at 960-61. This is so, this Court reasoned, because laws excluding registered domestic partners use that status as a proxy for homosexuality. Id. at 960. This Court noted that in California, same-sex couples are relegated to domestic partnership because they are barred from civil marriage by California law. Id. at 961 (emphasis added). This Court further explained that [l]aws limiting same-sex couples to registered domestic partnerships, while precluding them from marriage, turn on sexual orientation, and the availability of registered domestic partnership to different-sex couples does not negate the burdens faced by same-sex registered domestic partners. Id. (emphasis added). The Court also found irrelevant that other relatives, such as cousins, and individuals who share a close, family-like relationship are omitted from the list of eligible relatives because the the relevant comparison is between 7702B(f)s treatment of domestic partners and its treatment of spouses. Id. Although acknowledging that there is no direct evidence of animus in the record pertaining to 7702B(f), the Court inferred discriminatory intent from Congress contemporaneous consideration of Section 3 of DOMA and its obvious animosity towards same-sex couples in those proceedings. Id. at 962. Because DOMA was enacted in the same legislative session as 7702B(f) and because Congress [also] had been banning the funding of the District of Columbias domestic partnership registry for years, the Court infer[red] that Congress acted on anti-gay animus in refusing to include registered domestic partnership in the list of relatives eligible to enroll in state-maintained long term care plans. Id. This Court thus concluded that the discriminatory impact on same-sex domestic

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partners could not be explained in neutral terms, but appear[ed] to be motivated by anti-gay animus. Id. at 964. The Supreme Courts rulings in Perry and Windsor have eliminated the fundamental premise of this Courts ruling that exclusion of domestic partners from LTC coverage under 7702B(f) is unconstitutional: that same-sex couples are relegated to domestic partnership under California law because they cannot marry or have federal recognition of their marriages. Same-sex couples may now marry freely in California, and those marriages are now recognized under federal law, including 7702B(f). See IRS, Revenue Ruling 2013-17, 2013-38 IRB 201. Specifically, following the Supreme Courts decision in Perry, California resumed same-sex marriages on a state-wide basis. See Governor Brown Directs California Department of Public Health to Notify Counties that Same-Sex Marriages Must Commence, June 28, 2013, (available at http://gov.ca.gov/news.php?id=18120). Thus, as a result of Perry, same-sex couples are no longer relegated to domestic partnership in California or barred from civil marriage by California law. Dragovich, 872 F. Supp. 2d at 960-61. And it is now clear that 7702B(f)s non-inclusion of domestic partners does not rely on domestic partnership as a proxy for homosexuality, because now, like opposite-sex domestic partners, same-sex domestic partners can marry. Id. at 960. In addition, as a result of Windsor, same-sex spouses also now may be recognized for purposes of federal law, including 7702B(f). After Windsor, which declared Section 3 of DOMA unconstitutional, the term spouse is no longer limited to opposite-sex spouses under federal law. In short, the Supreme Courts decisions in Windsor and Perry ensure that California domestic partnerswhether opposite-sex or same-sexare identically situated for purposes of CalPERS: both may participate fully simply by marrying under California law. If the domestic partner class members marry, the non-employee domestic partners will be eligible to enroll in CalPERSs LTC plan, just as would be the opposite-sex domestic partners of state employees who marry. Because 7702B(f) now treats California same-sex couples exactly the same way as it treats California opposite-sex couples, there is no longer any argument that the exclusion of domestic partners constitutes discrimination on the basis of sexual orientation.

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That 7702B(f) operates neutrally toward California couples (without a discriminatory impact) following Perry and Windsor requires rejection of the same-sex domestic partners constitutional claims. This Court previously cited Village of Arlington Heights v. Metropolitan Housing Development Corporation, 429 U.S. 252, 266-67 (1977), for the proposition that circumstantial evidence, such as the events leading to the enactment of a challenged statute, can be relevant in determining the presence of discriminatory intent. See Dragovich, 872 F. Supp. 2d at 962. But under Village of Arlington Heights, [t]he impact of an official action generally serves as the starting point for any such analysis. 429 U.S. at 266-67. And it is now clear that 7702B(f) no longer has any discriminatory impact on California same-sex couples. Accordingly, Arlington Heights does not support the domestic partner plaintiffs constitutional claims. In USDA v. Moreno, 413 U.S. 528, 529 (1973), the Supreme Court similarly focused on the practical effect of the challenged amendment to the food stamp program, which limited eligible recipients to groups of related individuals in order to prevent so-called hippies and hippie communes from participating in the food stamp program. Id. at 534. The Supreme Court found that the practical operation of the facially neutral amendment excluded not those persons who are likely to abuse the program, but, rather, only those persons who are so desperately in need of aid that they cannot even afford to alter their living arrangements so as to retain their eligibility. Id. at 538. Unlike the challenged amendment in Moreno, 7702B(f)after Windsor and Perrydoes not have a disparate impact on California same-sex domestic partners. The change in 7702B(f)s operative effect also distinguishes this case from Diaz v. Brewer, 656 F.3d 1008 (9th Cir. 2011), upon which this Court previously relied. See Dragovich, 872 F. Supp. 2d at 961. In Diaz, the plaintiffs moved to enjoin an Arizona law that would have terminated eligibility for health care benefits of state employees domestic partners. The law was enacted following Arizona voters approval of a state constitutional amendment to define marriage as between one man and one woman. See Diaz, 656 F.3d at 1010. Although the challenged law affected both same- and opposite-sex domestic partners of state employees, the Ninth Circuit, relying on Moreno, affirmed the district courts issuance of an injunction, concluding that the state law discriminated on the basis of sexual orientation
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because whereas same-sex couples would lose their benefits based on the change of law and not be able to marry in order to regain those benefits, different-sex couples wishing to retain their current family health benefits could alter their statusmarryto do so. Id. at 1014; see also Dragovich, 872 F. Supp. 2d at 957 (noting that the law in Diaz depended upon a distinction between same-sex and similarly situated heterosexual couples, because the heterosexual couples could preserve their benefits by marrying, whereas same-sex couples were barred from marriage by Arizonas constitutional law). Diaz thus is clearly inapplicable where, as here, both same- and opposite-sex domestic partners can simply alter their status and obtain benefits in the wake of Perry and Windsor. In sum, the fundamental premise of this Courts prior ruling in favor of the domestic partner plaintiffsthat 7702B(f) discriminates on the basis of sexual orientation by excluding domestic partnersis no longer valid. As discussed further below, because 7702B(f) otherwise satisfies rational basis review, this Court should modify its prior order regarding the claims of the domestic partner plaintiffs by awarding summary judgment to the Federal Defendants on those claims. III. This Court Should Grant Judgment To Federal Defendants With Respect to the Domestic Partner Plaintiffs Claims Because 7702B(f) Satisfies Rational Basis Review. Because 7702B(f) is not a classification based on sexual orientation, rational basis review applies. Such review is highly deferential. As ordinary economic legislation, 7702B(f) is accorded a strong presumption of validity and must be upheld if there is any reasonably conceivable state of facts that could provide a rational basis for the classification. Heller v. Doe, 509 U.S. 312, 319-20 (1993) (quoting FCC v. Beach Commcns, Inc., 508 U.S. 307, 313 (1993)). The Supreme Court has cautioned that rational basis review is not a license for courts to judge the wisdom, fairness, or logic of legislative choices, and courts are compelled under rational-basis review to accept a legislatures generalizations even when there is an imperfect fit between means and ends. Id. at 319-21; accord Merrifield v. Lockyer, 547 F.3d 978, 989 (9th Cir. 2008). Rationales that are merely plausible or arguable are sufficient to immuniz[e] the congressional choice from constitutional challenge, even where the assumptions underlying these rationales may be erroneous. Beach Commcns, 508 U.S. at 320 (citations and quotation marks omitted). [J]udicial review is at an end once the court identifies a
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plausible basis on which the legislature may have relied. Fitzgerald v. Racing Assn of C. Iowa, 539 U.S. 103, 108-09 (2003). Moreover, because 7702B(f) involves federal tax benefits, Congresss latitude is at its apogee. As the Supreme Court has said, in taxation, even more than in other fields, legislatures possess the greatest freedom in classification. San Antonio Indep. Sch. Dist. v. Rodriguez, 411 U.S. 1, 40-41 (1973); see also Regan v. Taxation with Representation of Wash., 461 U.S. 540, 547 (1983) (legislature has especially broad latitude in creating classifications and distinctions in tax statutes); accord Grauvogel v. Commr of IRS, 768 F.2d 1087, 1089 (9th Cir. 1985). [T]he Constitution grants legislators, not courts, broad authority (within the bounds of rationality) to decide whom they wish to help with their tax laws and how much help those laws ought to provide. Fitzgerald, 539 U.S. at 108. The Supreme Court also has recognized that [t]he task of classifying persons for . . . benefits . . . inevitably requires that some persons who have an almost equally strong claim to favored treatment be placed on different sides of the line. Id. But, the fact the line might have been drawn differently at some points is a matter for legislative, rather than judicial, consideration. Id. (internal quotation marks and citation omitted). Under this highly deferential standard, any of the justifications previously identified by Federal Defendants for the omission of domestic partners (along with other family-like relationships, including dependent relationships) in 7702B(f) is a plausible policy reason for upholding 7702B(f). Armour v. City of Indianapolis, 132 S. Ct. 2073, 2080 (2012); see Fed Defs Oppn to Pls Mot. for Summ. J. and Cross Mot. for Summ. J. [Dkt. 114, 116] (hereinafter Fed. Defs Summ. J. Br.) at 22-27. To summarize here, Congress could have determined that the list of eligible relatives who may purchase state-maintained LTC insurance coverage under 7702B(f) sufficiently serves the government interest in encouraging long-term care planning by state employees and their families. Because 7702B(f) expansively includes a long list of relatives of the state employee who are eligible to enroll in the LTC plan, that provision certainly serves the government interest in encouraging LTC planning by virtually all of the state employees family members.

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Moreover, Congress could have reasoned that those categories of relations not included in 7702B(f) are sufficiently encouraged to undertake long-term care planning by the tax benefits from purchasing a qualified, private 7702B policy. Both 7702B and the legislative history suggest that Congress intended to encourage all individuals, not just state employees and their families, to take financial responsibility for their long-term care needs, and therefore non-inclusion in 7702B(f) does not preclude (or even disincentivize) coverage. See H.R. Rep. No. 104-496(I), at 115 (1996). Section 7702B provides such tax benefits to all individuals buying a qualified plan, and 7702B(f) merely clarifies that a state-maintained LTC plan could equally qualify for the tax treatment set forth in 7702B, see H.R. Rep. No. 104-736 at 302-03 (Conf. Rep.) (1996), reprinted in 1996 U.S.C.C.A.N. 1990, 2116. Viewed as a whole, the statutory scheme ensures that all individuals can take advantage of the tax benefits in 7702Bregardless of whether their relationships are covered by 7702B(f). In other words, given that the domestic partners of state employees (along with other categories of individuals not included in 7702B(f)) could receive the same beneficial tax treatment by purchasing a qualified, private 7702B plan, Congress rationally could have concluded that there was no need to specifically include domestic partners (and these other individuals) in the list of eligible relatives for 7702B(f). Congress also could have assumed that because the provision of insurance generally is highly regulated by States, there would not be any significant disparity between qualified state LTC plans and private 7702B plans, in terms of cost or otherwise, that would make private 7702B plans an infeasible option. Indeed, not only do both state LTC plans and private LTC plans need to meet the stringent requirements set forth in 7702B, but California state law also requires a long list of consumer protections specifically with respect to LTC plans. See Fed. Defs Summ. J. Br. at 29. Moreover, in the case of CalPERSs LTC plan, the State does not fund any portion of the plan; rather, the plan is entirely funded by member premiums. The State also does not pay any portion of the enrollees premium, and unlike health insurance, each enrollee in CalPERSs LTC plan is underwritten separately, with the premium calculated based on each enrollees individual circumstances. See Fed. Defs Summ. J. Br. at 6; see also Fed. Defs Reply In Support of Mot. for Summ. J. [dkt. 122] at 6 n.1. Thus, Congress could
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have determined that any disparity in the cost between a state-maintained 7702B(f) and a private 7702B plan is sufficiently insignificant so as not to require an even more expansive list of eligible relatives in 7702B(f). In addition, Congresss failure in 1996 to include domestic partners as eligible relatives is not arbitrary because 7702B(f) is uniquely about state-maintained LTC plans, and at the time of the enactment of 7702B(f) in 1996, no State recognized domestic partnerships. It was not until 1999 that California became one of the first states to recognize domestic partnerships. See In re Marriage Cases, 183 P.3d 384, 413, 415 (Cal. 2008). Even today, only a handful of States recognize domestic partnerships. See Fed. Defs Summ. J. Br. at 24-26. Congress was by no means required to account for future changes in legal landscape, or even to account for state law variations when legislating a provision of the Internal Revenue Code. Cf. United States v. Haggar Apparel Co., 526 U.S. 380, 392 (1999) (Congress need not, and likely cannot, anticipate all circumstances in which a general policy must be given specific effect). The fact that 7702B(f) does not include domestic partners (in addition to other relationships) reflects no more than the type of line-drawing inherent in making legislative choices. As the Supreme Court has recognized, [t]he problems of government are practical ones and may justify, if they do not require, rough accommodations illogical, it may be, and unscientific. Heller, 509 U.S. at 321 (quotations and citations omitted). As with all tax legislation, Congress necessarily had to define the metes and bounds of eligibility for the tax treatment, and the classification may be ragged around the edges. Baker v. City of Concord, 916 F.2d 744, 753 (1st Cir. 1990). A classification does not fail rational basis review simply because it is not made with mathematical nicety or because in practice it results in some inequality. Dandridge v. Williams, 397 U.S. 471,485 (1970). In other words, legislative classifications may be both underinclusive and overinclusive and perfection is by no means required. Vance v. Bradley, 440 U.S. 93, 108 (1979). Even if this Court is of the view that domestic partners have an equally strong claim for coverage under 7702B(f) as spouses do, that is not sufficient to establish a constitutional violation, as rational basis review does not permit this Court to

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second-guess the wisdom, fairness, or logic of legislative line drawings such as that in 7702B(f). See Heller, 509 U.S. at 319-20. CONCLUSION In sum, this Court should vacate its prior order regarding domestic partner plaintiffs and grant judgment in favor of Federal Defendants with respect to those plaintiffs claims. Date: February 13, 2014 Respectfully Submitted, STUART F. DELERY Acting Assistant Attorney General KATHLEEN R. HARTNETT Deputy Assistant Attorney General ARTHUR R. GOLDBERG Assistant Branch Director __/s/ Jean Lin___________ JEAN LIN Senior Trial Counsel U.S. Department of Justice, Civil Div. Federal Programs Branch 20 Massachusetts Ave., N.W. Washington, DC 20530 (202) 514-3716 (202) 616-8470 (Fax) jean.lin@usdoj.gov Attorneys for Federal Defendants

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