Stapleton v. Advocate Health Care Network & Subsidiaries

• Decision Date: 31 December 2014
• Docket Number: No. 14 C 01873,14 C 01873
• Citation: 76 F.Supp.3d 796
• Court: U.S. District Court — Northern District of Illinois
• Parties: Maria Stapleton et al., on behalf of themselves, individually, and on behalf of all others similarly situated, and on behalf of the Advocate Plan, Plaintiffs, v. Advocate Health Care Network and Subsidiaries, et al., Defendants.

76 F.Supp.3d 796

Maria Stapleton et al., on behalf of themselves, individually, and on behalf of all others similarly situated, and on behalf of the Advocate Plan, Plaintiffs

v.Advocate Health Care Network and Subsidiaries, et al., Defendants.

No. 14 C 01873

United States District Court, N.D. Illinois, Eastern Division.

Signed December 31, 2014

James B. Zouras, Ryan F. Stephan, Stephan, Zouras, LLP, Chicago, IL, Bruce F. Rinaldi, Karen L. Handorf, Mary Joanne Bortscheller, Michelle C. Yau, Cohen Milstein Sellers & Toll PLLC, Washington, DC, Erin M. Riley, Havila C. Unrein, Lynn Lincoln Sarko, Keller Rohrback, LLP, Seattle, WA, for Plaintiffs.

David Benjamin Goodman, Courtney A. Adair, Greensfelder, Hemker & Gale, P.C., Chicago, IL, Amy L. Blaisdell, Daniel J. Schwartz, Heather M. Mehta, Greensfelder, Hemker & Gale, P.C., St. Louis, MO, for Defendants.

Memorandum Opinion and Order

Honorable EDMOND E. CHANG, United States District Judge

This action raises a question that has divided federal courts in recent years:

whether religiously affiliated employers like hospitals and charities are exempt from federal regulation of their employee-benefits plans based on a statutory exemption created for churches. Plaintiffs are current and former employees of Defendant Advocate Health Care Network, a non-profit corporation affiliated with two Christian denominations. Advocate is Illinois's largest health-care provider. Plaintiffs allege that Advocate has not maintained its pension plan according to standards set by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq., and seek money damages and equitable relief. R.1, Compl.¹ Alternatively, Plaintiffs seek declaratory relief that ERISA's “church plan” exemption violates the First Amendment's Establishment Clause.

Advocate has moved to dismiss the complaint under Federal Rules of Civil Procedure 12(b)(6) and 12(b)(1), R. 34, Mot. Dismiss, arguing that its plan falls within the church plan exemption, which Advocate further asserts is constitutional as a matter of law. As explained in detail below, because statutory analysis reveals that the Advocate plan does not qualify as a church plan and is instead fully subject to ERISA's requirements, the motion is denied. The Court accordingly need not address Plaintiffs' constitutional challenge.

I.

Advocate operates 12 hospitals and more than 250 other inpatient and outpatient healthcare locations across northern and central Illinois, employing 33,300 people and generating $4.6 billion in annual revenue. Compl. ¶ 19.² It was formed in 1995 as a 501(c)(3) non-profit corporation and it competes with other nonprofit as well as for-profit conglomerates in the commercial healthcare market. Id. ¶¶ 6, 40. Although it is affiliated with the United Church of Christ and the Evangelical Lutheran Church in America, Advocate is not owned or financially supported by either church. Id. ¶¶ 48–50. Advocate maintains a non-contributory, defined-benefit pension plan that covers substantially all of its employees. Id. ¶ 58.

Plaintiffs Maria Stapleton, Judith Lukas, Sharon Roberts, and Antoine Fox are former and current Advocate employees with vested claims to benefits under that plan. Id. ¶¶ 14–17. They have brought their complaint as a proposed class action on behalf of all participants or beneficiaries of the Advocate plan. Id. ¶ 108. Plaintiffs allege that by unlawfully operating the plan outside the scope of ERISA, Advocate breached its fiduciary duties and harmed the plan's participants by: requiring an improperly long period of five years of service to become fully vested in accrued benefits; failing to file reports and notices related to benefits and funding; funding the plan at insufficient levels; neglecting to provide written procedures in connection with the plan; placing the plan's assets in a trust that do not meet statutory requirements; and failing to clarify participants' rights to future benefits. Id. (Counts One–Nine). Alternatively, even if Advocate can evade liability on these counts under the church plan exemption, Plaintiffs allege that this provision of ERISA is void as an unconstitutional violation of the First Amendment's prohibition on state establishment of religion. Id. (Count Ten). They therefore seek a declaration that the Advocate plan is a benefits plan covered by ERISA, or in the alternative, a declaration that the church plan exemption is unconstitutional, as well as an injunction requiring Advocate to reform the plan to comply with ERISA's requirements and an award of civil penalties.Id. (Prayer for Relief).

II.

A Rule 12(b)(6) motion “challenges the sufficiency of the complaint to state a claim upon which relief may be granted.” Hallinan v. Fraternal Order of Police Chicago Lodge No. 7, 570 F.3d 811, 820 (7th Cir.2009). The complaint “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). The court must accept as true the complaint's factual allegations and draw reasonable inferences in the plaintiff's favor. Ashcroft v. al-Kidd, 563 U.S. 731, 131 S.Ct. 2074, 2079, 179 L.Ed.2d 1149 (2011). Nevertheless, the allegations “must be enough to raise a right to relief above the speculative level,” Twombly, 550 U.S. at 555, 127 S.Ct. 1955, and are entitled to an assumption of truth only so long as they are factual in nature, rather than mere legal conclusions. Iqbal, 556 U.S. at 678–79, 129 S.Ct. 1937.

Rule 12(b)(1) provides the procedural vehicle by which the defendant may move a federal court to dismiss a claim or suit on the ground that the court lacks jurisdiction. See Fed. R. Civ. P. 12(b)(1) ; Apex Digital, Inc. v. Sears, Roebuck & Co., 572 F.3d 440, 444 (7th Cir.2009). Although Advocate premises its motion to dismiss on both a failure to state a claim under Rule 12(b)(6) and a lack of subject matter jurisdiction under Rule 12(b)(1), only the former is at play here.

It is true that in the past some courts portrayed dismissals of ERISA claims based on exempt plans as dismissals for want of “jurisdiction”—if the plan itself falls outside the scope of federal law, the thinking went, a federal court cannot entertain actions raised against it. See, e.g., Tinoco v. Marine Chartering Co., 311 F.3d 617, 623 (5th Cir.2002) (“Where ... evidence fails to establish the existence of an ERISA plan, the claim must be dismissed for lack of subject matter jurisdiction.”) (quoting Kulinski v. Medtronic Bio–Medicus, Inc., 21 F.3d 254, 256 (8th Cir.1994) ). But the Supreme Court and the Seventh Circuit have instructed in recent years that courts must take care not to conflate a jurisdictional threshold with a plaintiff's initial burden to state a plausible claim.³ To ask whether a federal law like ERISA reaches a certain actor or conduct in the first place is itself a merits question, not a jurisdictional one. See Morrison v. Nat'l Australia Bank Ltd., 561 U.S. 247, 254, 130 S.Ct. 2869, 177 L.Ed.2d 535 (2010) ; Arbaugh v. Y&H Corp., 546 U.S. 500, 516, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006). Thus, where an action concerns allegations about a benefit plan's potential liabilities under federal law, “[a] federal district court is the right forum for a dispute about the meaning of ERISA.”

NewPage Wisconsin Sys. Inc. v. United Steel, Paper & Forestry, Rubber, Mfg., Energy Allied Indus. & Serv. Workers Int'l Union, AFL–CIO/CLC, 651 F.3d 775, 777 (7th Cir.2011) ( “Whether a claim is good differs from the question whether a district court possesses jurisdiction, a matter of adjudicatory competence.”); see also Smith v. Reg'l Transit Auth., 756 F.3d 340, 345 (5th Cir.2014) (surveying case law in five circuits holding that whether benefits plan is exempt under ERISA implicates not jurisdiction but an element of claim). The test then for Plaintiffs' complaint is not whether it properly invokes jurisdiction, which it does, but rather whether it states a plausible right to relief in light of Advocate's claimed church plan exemption.

III.

A.

ERISA was enacted in 1974, Pub. L. No. 93–406, 88 Stat. 829 (1974), to protect “the interests of participants in employee benefit plans and their beneficiaries by setting out substantive regulatory requirements” for the plans. Aetna Health Inc. v. Davila, 542 U.S. 200, 208, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004) (internal quotation marks and citations omitted). Although nothing in ERISA requires employers to create benefits plans in the first place or mandates any specific benefit that must be provided, the law seeks “to ensure that employees will not be left empty-handed once employers have guaranteed them certain benefits.” Lockheed Corp. v. Spink, 517 U.S. 882, 887, 116 S.Ct. 1783, 135 L.Ed.2d 153 (1996) (citations omitted); see also Sullivan v. CUNA Mut. Ins. Soc'y, 649 F.3d 553, 560 (7th Cir.2011) (“ERISA was enacted to protect employees from employers who mismanaged or even looted funds set aside to provide employee benefits—both pension plans and welfare plans.”) (citing Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983) ).

Congress explicitly exempted certain types of plans from the scope of ERISA, including those set up by federal, state, local, or tribal governments, 29 U.S.C. §§ 1002(32), 1003(b)(1), as well as any “church plan,” 29 U.S.C. §§ 1003(b)(2). Section 1002(33)(A) of Title 29 states that a church plan is “a plan established and maintained ... for its employees (or their beneficiaries) by a church or by a convention or association of churches which is exempt from tax [ ].” 29 U.S.C. § 1002(33)(A). Subsection 33(C) then adds:

(C) For purposes of this paragraph—

(i) A plan established and maintained for its employees (or their beneficiaries) by a church or by a convention or association of churches includes a plan maintained

...