Wheaton Franciscan Can’t Dictate Court in Church Plan Lawsuits

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 Jacklyn Wille

Nov. 1 — Illinois-based Wheaton Franciscan Services Inc. lost its bid to force two lawsuits over the way it manages its pension plan into its preferred federal court in St. Louis ( Curtis v. Wheaton Franciscan Servs., Inc. , 2016 BL 362515, N.D. Ill., No. 1:16-cv-04232, 10/31/16 ).

The Oct. 31 decision of a federal judge in Illinois refusing to transfer the proposed class actions comes six days after a different federal judge in the state transferred similar litigation against St. Louis’s SSM Health Care. Both hospitals—which are accused of underfunding their pension plans by improperly relying on a legal exemption for “church plans”—argued that the cases should be transferred out of Illinois based on pension plan clauses requiring litigation to be brought in the U.S. District Court for the Eastern District of Missouri.

The judge hearing the lawsuit against SSM agreed to enforce that company’s clause, but Judge Gary Feinerman of the U.S. District Court for the Northern District of Illinois declined to transfer the cases against Wheaton Franciscan, explaining that the hospital pension’s forum-selection clause wasn’t adopted until March 2016 and thus didn’t apply to workers who retired before that date.

Feinerman avoided deciding whether forum-selection clauses in benefit plans are permissible under the Employee Retirement Income Security Act. Despite longstandingopposition from the Department of Labor, a growing number of courts have upheld an ERISA plan’s ability to force litigation into its preferred jurisdiction. In recent months, courts have enforced forum-selection clauses in plans sponsored by NCR Corp., Bank of New York Mellon, AXA Equitable Life Insurance Co., Ascension Health Alliance and Caterpillar Inc.

In seeking a transfer, Wheaton Franciscan argued that even if the forum-selection clause didn’t apply to the three retired workers bringing these lawsuits, it likely applied to other members of the proposed class. Feinerman called this argument “premature,” noting that the workers had yet to move for class certification.

These lawsuits against Wheaton Franciscan are two of more than three dozen recently filed lawsuits accusing religiously affiliated hospitals of underfunding their pension plans by treating them as “church plans” exempt from the Employee Retirement Income Security Act.

The U.S. Supreme Court is expected to announce in the coming weeks whether it will wade into this ongoing controversy, in which plaintiffs claim that more than 300,000 hospital workers face a pension shortfall of about $4 billion. The litigation effort has scored victories in the U.S. courts of appeals for the Third, Seventh and Ninth circuits and has netted several multimillion-dollar settlements, including a $352 million deal by Washington-based Providence Health & Services announced in October.

Wheaton Franciscan is represented by Proskauer Rose LLP. The retired worker who first sued Wheaton in April is represented by Kessler Topaz Meltzer & Check LLP and Collins Law Firm PC. The two retirees who sued Wheaton in June are represented by Cohen Milstein Sellers & Toll PLLC and Keller Rohrback LLP.

Feinerman is hearing both cases but has yet to rule on a pending motion for consolidation.

To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bna.com

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

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.

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