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Supreme Court Hears "Church Plan" ERISA Class Action Cases

On Monday, the Supreme Court heard oral argument in the consolidated “church plan” cases, Advocate Health Care Network v. Stapleton, St. Peter’s Healthcare System v. Kaplan, and Dignity Health v. Rollins. As an initial matter, unless the Senate confirms Neil Gorsuch in the very near future, the case will be decided by an eight-Justice court. While it’s impossible to say for sure how Justices will vote, there may be cause for optimism for the Defendants (against whom the lower courts ruled in all three cases).

At first, Justices Sotomayor and Kagan both seemed hostile to the Defendants’ view of the construction of the church-plan exemption.  But this view seemed to change during the Plaintiffs’ presentation.  Justice Sotomayor commented to Plaintiffs’ counsel “I’m torn,” and – saying that ERISA’s church-plan provision “could be read either way” – asked counsel how to “break the tie.”  Both Sotomayor and Kagan also appeared to struggle with the idea that Plaintiffs’ reading would likely exclude some of the organizations that the 1980 amendments to the church plan exemption were intended to encompass.

Justices Alito and Kennedy seemed to focus on church-plan sponsors’ long-standing reliance on the IRS/PBGC interpretations of the exemption.  Defendants’ counsel noted that their liability for penalties alone could exceed $66 billion.  Justice Alito seized on Plaintiffs’ counsel suggestion that the church-plan cases were “primarily about forward-looking relief” (as opposed to penalties), going so far as to ask counsel to disavow seeking penalties in light of Defendants’ reliance on IRS letters.

Justice Kennedy also seemed concerned that hundreds of plans had sought and obtained the blessing of the IRS and/or PBGC, and could still face liability 30 years later.  Chief Justice Roberts appeared to align with this view, asking Plaintiffs’ counsel why those agencies took a view opposite to Plaintiffs’ interpretation.

Not surprisingly, Justice Ginsberg seemed to be squarely in Plaintiffs’ camp, and dismissed other Justices’ concerns by noting that the lower courts could fashion a remedy that takes Defendants’ good faith into account.

Justice Breyer took a pragmatic approach – he asked several hypotheticals, pressing Plaintiffs’ counsel to say whether a plan would be a church plan in each scenario.  This line of questioning seemed to highlight for Justice Sotomayor that Plaintiffs’ reading would deny church-plan status to many of the plans that lobbied for the 1980 amendments.

As usual, Justice Thomas was silent throughout.

In short, although any prediction would be speculative, the Justices’ questions suggest that Alito and Kennedy would take the defense view, based on the reliance concerns, likely joined by Roberts.  And it’s probably safe to assume Justice Thomas would side with these Justices.

Justices Sotomayor and Kagan could go either way, but if they adopt the Defendants’ view of the statute, it will probably be based on their concerns that the Plaintiffs’ reading ignores the purpose of the 1980 amendments (i.e., exempting plans maintained by church-affiliated groups).  If the conservative wing of the Court holds together, then the addition of either Sotomayor or Kagan would yield a victory.

However, if the usual ideological split prevails, a 4-4 tie would leave the adverse rulings intact.

Jackson Lewis P.C. © 2019

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About this Author

Charles Seeman, Jackson Lewis, ERISA, Employment Lawyer, Benefits Attorney
Principal

Charles F. Seemann, III, is a Principal in the New Orleans, Louisiana, office of Jackson Lewis P.C. His practice emphasizes ERISA and employment law, but encompasses a wide variety of litigation and counseling matters as well.

Mr. Seemann's primary practice focus includes the defense of ERISA plans and plan fiduciaries at both public and private companies, multi-employer plans and plan fiduciaries, and financial institutions providing services to ERISA plans. In addition to ERISA, Mr. Seemann has extensive experience in a wide range of employment matters,...

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René E. Thorne, Jackson Lewis, Employment Litigation, ERISA Attorney"
Office Managing Principal and Office Litigation Manager

René E. Thorne is Office Managing Principal of the New Orleans, Louisiana, office of Jackson Lewis P.C. Her practice covers the full range of employee benefit litigation matters, including representation of employers, plans, plan fiduciaries, and trustees.

In that regard, she has handled numerous ERISA class actions for clients such as Nortel Networks, Target, Krispy Kreme Doughnuts, Owens Healthcare, United Airlines ESOP Committee, Dunbar Armored, United Companies, Benefits Administration Corporation, and Beverly Enterprises. Ms. Thorne also has handled benefits and employment matters for such clients as for Alcatel-Lucent, Raytheon, Pfizer, Omega Protein, The Hartford, Northwest Airlines, Amtrak, United Airlines, Turner Industries, Starwood Hotels, and Sempra Energy. Ms. Thorne has been retained as an expert in complex ERISA breach of fiduciary duty, prohibited transaction, and cash balance cases. Ms. Thorne has been qualified and testified as an expert on ERISA matters in federal court.

504-208-1755