Church Plan Litigation Reaches Next Level, District Court Allows Interlocutory Appeal

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Matthew Loughran

Sept. 22 — The debate over whether an employee benefit plan for a religiously affiliated health-care organization is an exempt church plan under ERISA has moved to the federal appellate courts as a federal court in New Jersey has certified its earlier denial of a motion to dismiss for interlocutory appeal to the U.S. Court of Appeals for the Third Circuit.

In a Sept. 19 unpublished opinion, Judge Michael A Shipp granted Saint Peter's Healthcare System's motion to appeal its earlier denial of a motion to dismiss on the grounds that the corporation's pension plan isn't an Employee Retirement Income Security Act-exempt church plan and that the federal courts thus had subject matter jurisdiction over the case.

The appeal will be the second of the eight pending church plan cases to reach the federal appellate courts with the plaintiff in a case against Ascension Health appealing to the U.S. Court of Appeals for the Sixth Circuit on a ruling by the U.S. District Court for the Eastern District of Michigan dismissing her claims on the grounds that the plan was an ERISA-exempt church plan (Overall v. Ascension Health, 2014 BL 132116, 58 EBC 1885 (E.D. Mich. 5/13/14).

Church Plan Requirements 

In the past year, four of the eight pending cases challenging the use of the church plan exemption as defined in Section 3(33) of ERISA by private nonprofit health-care corporations have resulted in opinions construing that provision.

The cases have broken down along two lines with two district courts, the instant court and the U.S. District Court for the Northern District of California in Rollins v. Dignity Health, N.D. Cal., No. 3:13-cv-01450, 7/22/14, ruling that Section 3(33)(A) acts as the “gatekeeper” of the statute and provides that a church plan requires establishment by a church or association of churches.

According to both courts, Section 3(33)(C) of the statute, under which all of the health-care corporations in these cases reside, simply provides clarification for what types of organizations may maintain a church plan, but it doesn't change the requirement that a church or association of churches must establish the plan in the first instance.

The other two courts, the Overall court and the U.S. District Court for the District of Colorado in Medina v. Catholic Health Initiatives, 2014 BL 240546 (D. Colo. 8/26/14) have ruled that Section 3(33)(C) provides an additional means by which a church plan can be established, pointing to the language at the beginning of that section that states that a plan established and maintained by a church includes a plan maintained by an organization similar to the health-care corporations being sued in these cases.

Cases in the Sixth and Tenth Circuits

In the Overall case, the Eastern District of Michigan dismissed claims against a health-care corporation affiliated with the Catholic Church, finding that the corporation's pension plan was a church plan and thus exempt from the statute. The plaintiff in Overall has appealed this result to the Sixth Circuit, which has docketed the appeal.

Meanwhile, in the Medina case, the court cited the opinion in Overall in rejecting the recommendation by a magistrate judge who had urged the district court to grant the participant's motion for summary judgment on the question of whether the plan is an exempt church plan.

The Medina court, which is controlled by precedent from the U.S. Court of Appeals for the Tenth Circuit, was careful to constrain its opinion only to the question of statutory construction, claiming that discovery would be required before ruling whether the plan in question in fact qualified as a church plan.

As a result, although the district court has determined the statutory construction of the ERISA provisions at issue, it hasn't yet provided a final ruling on the merits of the claim that could be appealed to the Tenth Circuit.

Cases in the Ninth and Third Circuits

Similar to the court in the instant case, the Rollins court, also denied a motion to dismiss in December 2013.

However, in a March order, the court declined to allow interlocutory appeal to the U.S. Court of Appeals for the Ninth Circuit, finding that the issue wasn't one of controlling law and didn't provide extraordinary circumstances to allow such an appeal.

The court in the instant case referenced the Rollins court's March order, saying that the difference between the two cases arose from the fact that the Rollins motion was decided on the basis of a failure to state a claim under the statute, not under an analysis of the court's subject matter jurisdiction.

The Rollins court has since granted the participant partial summary judgment, declaring that the plan wasn't an ERISA-exempt church plan, an order which is presumably final and appealable to the Ninth Circuit.

In this case, the court ruled that interlocutory appeal was allowed, because the decision on the motion was made on jurisdictional grounds and that a reversal by the Third Circuit could strip the district court of jurisdiction to even hear the court in the first place.

The court also found that interlocutory appeal was permissible because one of the still undecided church plan cases, Chavies v. Catholic Health E., E.D. Pa., No. 2:13-cv-01645-CDJ, 3/28/13, is pending in a district court controlled by the Third Circuit and any ruling by the federal appellate court would also assist in the determination of that litigation as well.

Other Church Plan Cases

None of the other three church plan cases currently pending has resolved the construction of the statute one way or the other.

Of those three, two are pending in district courts controlled by precedent from the U.S. Court of Appeals for the Seventh Circuit (Stapleton v. Advocate Health Care Network & Subsidiaries, N.D. Ill., No. 1:14-cv-01873, 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).

The other case is pending in a district court controlled by precedent from the U.S. Court of Appeals for the Fourth Circuit (Lann v. Trinity Health Corp., D. Md., No. 8:14-cv-02237, complaint filed, 7/11/14).

Saint Peter's was represented by Jeffrey J. Greenbaum, James M. Hirschhorn, and Katherine Marguerite Lieb of Sills Cummis & Gross PC in Newark, N.J.

The participant in the instant case was represented Daniel S. Sommers of Cohen, Milstein, Sellers & Toll, PLLC in Washington.

To contact the reporter on this story: Matthew Loughran in Washington at

To contact the editor responsible for this story: Jo-el J. Meyer at

Text of the opinion is at


Request Pension & Benefits Daily™