Pension & Benefits Daily™ covers all major legislative, regulatory, legal, and industry developments in the area of employee benefits every business day, focusing on actions by Congress,...
July 26 — The nationwide litigation effort accusing large hospitals of using ERISA's church plan exemption to underfund their pension plans by hundreds of millions of dollars scored its third big victory ( Rollins v. Dignity Health , 2016 BL 239357, 9th Cir., No. 15-15351, 7/26/16 ).
In rejecting Dignity Health's attempt to treat its pension plan as a church plan exempt from federal funding requirements, the U.S. Court of Appeals for the Ninth Circuit on July 26 joined two other circuit courts—the Third and the Seventh—in holding that a church plan must be established by a church.
With this decision, the attorneys leading this litigation effort—which has spawned three dozen lawsuits against large hospitals throughout the country—are now 3-0 in the federal appellate courts.
While these decisions have turned on hypertechnical parsing of statutory language, the ramifications can be enormous. In all, these lawsuits allege that 247,000-plus hospital employees are facing a $3.5 billion shortfall in their pensions because the hospitals haven't complied with the funding requirements of the Employee Retirement Income Security Act.
The hospitals continue to dispute the claims made in these lawsuits, arguing that 30 years of guidance from the Internal Revenue Service bolsters their position. The Ninth Circuit in particular found this argument unpersuasive, saying that the IRS memo cited by the hospitals is based on an “obvious misreading of the statutory text.”
Karen Ferguson, director of the Pension Rights Center—which filed a brief in support of the workers suing Dignity Health—praised the Ninth Circuit's decision.
“The Court's opinion is excellent—straightforward and right on target,” Ferguson told Bloomberg BNA in a July 26 e-mail. “It says that ERISA only exempts pension plans that have been established by churches, and finds that this plain-reading of the law is supported by unambiguous legislative history.”
Robert W. Rachal, an ERISA attorney in Proskauer Rose LLP's New Orleans office who is defending other hospitals from church plan lawsuits, identified several problems he saw in the Ninth Circuit's decision.
In particular, Rachal faulted the court for giving no deference to the IRS, despite finding a point of ambiguity in the statutory language.
“Typically, agencies get deference when there is more than one possible way to read a statute, particularly when it is a long-standing, consistent read of that statute in an area—pensions—in which they have particular expertise,” Rachal told Bloomberg BNA in a July 26 e-mail.
Rachal also disagreed with how the Ninth Circuit parsed the statute, saying that the court failed to address certain changes made to the statutory language.
Judge William A. Fletcher wrote the Ninth Circuit's decision, which was joined by Judge A. Wallace Tashima and Senior District Judge Robert W. Gettleman of the U.S. District Court for the Northern District of Illinois, sitting by designation.
Arnold & Porter LLP, Nixon Peabody LLP and Manatt Phelps & Phillips LLP represented Dignity Health, along with Harvard Law School's David L. Shapiro. Keller Rohrback LLP and Cohen Milstein Sellers & Toll PLLC represented the Dignity Health employees.
To contact the reporter on this story: Jacklyn Wille in Washington at email@example.com
To contact the editor responsible for this story: Jo-el J. Meyer at firstname.lastname@example.org
Text of the decision is at http://www.bloomberglaw.com/public/document/Rollins_v_Dignity_Health_No_1515351_2016_BL_239357_9th_Cir_July_2.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)