Church Plan Challengers Win 3rd Victory; Magistrate Agrees With Majority Position

A Catholic health-care corporation's pension plan doesn't qualify as a church plan exempt from federal benefits law, a magistrate judge concluded (Medina v. Catholic Health Initiatives,D. Colo., No. 1:13-cv-01249-REB-KLM, 7/9/14).         

Siding with two federal courts and disagreeing with a third, Magistrate Judge Kristen L. Mix's July 9 report and recommendation looked to the “unambiguous language” of the Employee Retirement Income Security Act's church plan exemption to conclude that the plan wasn't a church plan because it wasn't “established and maintained by a church.”         

The magistrate also determined that the participant challenging the Catholic Health Initiatives plan was entitled to a declaration ordering the plan to be brought into compliance with ERISA. In so finding, she rejected Catholic Health's argument that it was entitled to a “correction period” in which to satisfy the requirements of the church plan exemption, finding that such a correction period applied only to plans established by churches.         

A final ruling disallowing its use of the church plan exemption could be extremely costly for Catholic Health, given ERISA's minimum funding requirements. According to the participant's complaint, the plan is underfunded by more than $892 million.         

Although Mix's conclusions are recommendations that must be considered by the presiding judge in the U.S. District Court for the District of Colorado, she closely followed the reasoning of two recent decisions by the U.S. District courts for the Northern District of California and the District of New Jersey (Rollins v. Dignity Health, 2013 BL 343403, 57 EBC 1346 (N.D. Cal. 12/12/13) (244 PBD, 12/20/13; 40 BPR 2937, 12/31/13); Kaplan v. Saint Peter's Healthcare Sys., 2014 BL 88288 (D.N.J. 3/31/14) (64 PBD, 4/3/14; 41 BPR 793, 4/8/14)).         

In this series of seven lawsuits challenging religiously-affiliated employers' reliance on ERISA's church plan exemption, only one court has upheld a plan's use of the exemption (Overall v. Ascension, 2014 BL 148842 (E.D. Mich. 5/13/14) (92 PBD, 5/13/14; 41 BPR 1084, 5/20/14)).         

Potential Circuit Split?          

This series of lawsuits—all filed over the past 18 months by plaintiffs' firms Cohen Milstein Sellers & Toll PLLC and Keller Rohrback LLP—has the potential to create a circuit split that could ultimately reach the U.S. Supreme Court.         

The seven suits have been filed in six district courts and could result in potentially conflicting rulings from five circuit courts of appeals—the Third, Sixth, Seventh, Ninth and Tenth.         

If the presiding judge in the Medina case agrees with the magistrate's recommendation, district courts in the Third, Ninth and Tenth circuits will have found that the challenged plans didn't qualify as church plans, while a district court in the Sixth Circuit disagreed with the reasoning of those cases and dismissed the challenge pending in that court.         

None of these cases have reached a circuit court of appeals. In March, the Northern District of California found that Dignity Health couldn't immediately appeal the court's ruling in favor of the Rollins participants to the Ninth Circuit.         

The other church plan challenges include:

Chavies v. Catholic Health E., No. 2:13-cv-01645-CDJ, E.D. Pa., complaint filed 3/28/13;

Stapleton v. Advocate Health Care Network &  Subsidiaries, No. 1:14-cv-01873, N.D. Ill., complaint filed 3/17/14;

Owens v. St. Anthony Med. Ctr., Inc., N.D. Ill., No. 1:14-cv-04068, complaint filed 6/2/14.         

Excerpted from a story that ran in Pension & Benefits Daily (07/10/2014).