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Owens v. St. Anthony Medical Center, Inc.

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

June 18, 2015

LENORE R. OWENS, JEAN L. JEWETT, LORI L. BUKSAR, and JULIA SNYDER, on behalf of themselves, individually, and on behalf of all others similarly situated, Plaintiffs,
v.
ST. ANTHONY MEDICAL CENTER, INC., THE FRANCISCAN SISTERS OF CHICAGO SERVICE CORPORATION, FRANCISCAN COMMUNITIES, INC. f/k/a FRANCISCAN HOMES & COMMUNITY SERVICES, FRANCISCAN HOLDING CORPORATION, DONNA GOSCIEJ, LINDA HORNYAK, the ST. ANTHONY MEDICAL CENTER RETIREMENT COMMITTEE, LEONARD WYCHOCKI, WALTER GARBARCZYK, JULIE SECVIAR, CHESTER LABUS, SISTER HELENE GALUSZKA, SISTER M. FRANCIS CLARE RADKE, SISTER M. FRANCINE LABUS, ANNETTE SHOEMAKER, JILL KRUEGER, LAWRENCE LEAMAN, SANDRA SINGER, SUSAN NORDSTROM LOPEZ, and JOHN and JANE DOES 1-40, Defendants.

MEMORANDUM OPINION AND ORDER

SHARON JOHNSON COLEMAN, District Judge.

Plaintiffs Lenore R. Owens, Jean L. Jewett, Lori L. Buksar and Julia Snyder ("plaintiffs") filed a fourteen-count amended class action complaint against St. Anthony Medical Center, Inc. ("St. Anthony") and The Franciscan Sisters of Chicago Service Corporation ("Franciscan Sisters"), sponsors of the St. Anthony Retirement Plan (the "Plan"), and their related entities, the St. Anthony Retirement Committee, the members of that Committee, the members of the Franciscan Sisters Board of Directors, and other individuals alleged to have roles in the Plan's administration (together "defendants"). The complaint seeks declaratory relief pursuant to the Employee Retirement Income Security Act ("ERISA"), and also alleges various violations of ERISA. Defendants move to dismiss the complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). Plaintiffs move to strike certain exhibits to defendants' brief in support of its motion. For the reasons stated below, the Court will stay the motion to dismiss and denies the motion to strike.

Background

The following facts are taken from the complaint and accepted as true for the purposes of ruling on the instant motions. On March 1, 1975, St. Anthony established and adopted the Plan for the benefit of its employees. The Plan was established as a non-contributory defined benefit pension plan within the meaning of ERISA § 3(35), 29 U.S.C. § 1002(35).[1] Plaintiffs were employed by St. Anthony's hospital and were participants in the Plan. Franciscan Sisters is the sole corporate member of St. Anthony and served as the Plan's plan administrator along with the St. Anthony Retirement Committee.

In 1989, St. Anthony sought a letter ruling from the IRS that the Plan qualified as a "church plan" and was therefore exempt from many of the requirements of ERISA, including the funding requirements and the obligation to pay premiums to the Pension Benefit Guaranty Corporation to guarantee a certain level of benefits in the event the Plan was terminated. The IRS issued a letter ruling stating that the Plan qualified as a church plan as of March 1, 1975. It concluded that although the Plan was sponsored by St. Anthony, a non-church entity, the Plan still qualified as a church plan because it was managed by the St. Anthony Retirement Committee, which was controlled by St. Anthony and Franciscan Sisters, who were themselves controlled by the Catholic Church. Defendants have operated the Plan since 1989 as a church plan, exempt from and not subject to ERISA. St. Anthony and Franciscan Sisters are not churches.

On June 30, 1989, St. Anthony and Franciscan Sisters declared the Plan frozen with respect to all employees of its hospital. As a result, plaintiffs and other Plan participants ceased to accrue any additional benefits under the Plan but remained entitled, upon reaching retirement age, to receive accrued pension benefits on service performed prior to June 30, 1998. In 1999, the hospital was sold to Franciscan Alliance, but St. Anthony and Franciscan Sisters continued to be responsible for maintaining and administering the Plan. Over time, insufficient assets were retained and defendants made insufficient contributions to the Plan to meet the expected benefit payments to plaintiffs and other Plan participants. For the years from 2002 to 2011, the Plan was underfunded. The Plan was subsequently terminated effective March 31, 2012. Following termination, plaintiffs received pension benefits which were less than the actuarial equivalent of the pension benefits they had accrued under the Plan. Plaintiffs filed this action on June 2, 2014. Defendants' motion to dismiss the complaint has been fully briefed.

Legal Standard

A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of the complaint rather than the merits of the claim. Hallinan v. Fraternal Order of Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). When reviewing a defendant's Rule 12(b)(6) motion to dismiss, the Court accepts all well-pleaded factual allegations in the complaint as true and draws all reasonable inferences in the non-movant's favor. Erickson v. Pardus, 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007). Detailed factual allegations are not required, but the plaintiff must allege facts that when "accepted as true... 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 Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim has facial plausibility when the complaint's factual content allows the Court to draw a reasonable inference that the defendants are liable for the misconduct alleged. Id.

Discussion

1. Motion to Dismiss

Plaintiffs' fourteen-count complaint revolves around their claim that the IRS incorrectly granted defendants an exemption from ERISA coverage in 1989. Plaintiffs allege that since then defendants, relying on the IRS error, have failed to maintain, operate, or terminate the Plan as required under ERISA, which plaintiffs believe governs the Plan. Count 1 seeks equitable relief pursuant to ERISA § 502(a)(3), § 1132(a)(3), that the Plan is not a "church plan" as defined in ERISA § 3(33), § 1002(33), and therefore should be declared an ERISA-covered pension plan, and further that St. Anthony and Franciscan Sisters be ordered to bring the Plan into compliance with ERISA. Counts 2 and 3, brought pursuant to ERISA § 4070(a), § 1370(a), and ERISA § 4062(a) and (b), § 1362 (a) and (b), seek declaratory relief that the Plan should be terminated in compliance with ERISA and that St. Anthony and Franciscan Sisters are jointly and severally liable for payment of unfunded benefits due and minimum funding contributions to the Plan. Counts 4 through 8 and 10 allege that certain defendants violated various ERISA provisions, including those providing for reporting and disclosure, minimum funding, anti-cutback, establishing the Plan by written instrument and establishing a trust, and demand civil penalties. Count 9 asserts a claim for benefits under ERISA § 502(a)(1)(B), § 1102(a)(1)(B). Counts 11 through 13 allege that certain defendants breached their fiduciary duties under ERISA. And Count 14 seeks declaratory relief that the church plan exemption, as applied by defendants, violates the Establishment Clause.

Defendants' motion asks the Court to determine that the six-year statute of limitations[2] found in ERISA § 413, § 1113, bars plaintiffs' claim for declaratory relief, Count 1, which in turn precludes plaintiffs from establishing their remaining ERISA-based claims, Counts 2 through 13. In doing so, defendants essentially argue for a limitations period that applies to ERISA plans and ERISA claims. However, it would be inappropriate for the Court to determine the applicability of a statute of limitations based on ERISA claims before determining whether the church plan exemption applies and excepts the Plan from ERISA coverage. Further, the Seventh Circuit has found that dismissal under Rule 12(b)(6) on statute of limitations grounds is considered "irregular" because complaints are not required to anticipate affirmative defenses. United States v. Northern Trust Co., 372 F.3d 886, 888 (7th Cir. 2004). While dismissal is appropriate where a "complaint plainly reveals that an action is untimely under the governing statute, " here, the proposed governing statute is ERISA and the Court has not yet determined whether ERISA applies to the Plan. United States v. Lewis, 411 F.3d 838, 842 (7th Cir. 2005). Accordingly, the threshold issue for this Court is whether the church plan exemption applies.

Whether the Plan is covered by ERISA is essential to determining whether plaintiffs have stated a claim in each of their counts. Because each is brought pursuant to ERISA, the Plan's status as an ERISA-covered plan is essentially an element of each claim. Plaintiffs allege that the IRS determination in 1989 that the Plan met the church plan exemption requirements was incorrect. Defendants argue that the IRS determination as well was one made by the Pension Benefit Guaranty Corporation in 1990 are correct and controlling and should be followed or strongly considered by the Court. Plaintiffs disagree and ask this Court to conduct "its own independent analysis of the statute." (Pl. Br. Dkt. #138 at 8.) They argue that the Plan does not fit within ERISA's church plan definition, ERISA § 3(33), § 1002(33), because the statute requires such plans to be established by a church and defendants are not churches, despite their claimed church affiliation. In support plaintiffs cite Stapleton v. Advocate Health Care Network, No. 14-cv-01873, 2014 WL 7525481 (N.D. Ill.Dec. 31, 2014) (Chang, J.). There the court held, after analyzing the statutory text, statutory framework, and relevant authorities, that in order for a plan to qualify as a church plan, the plan must be established by a church. The court further determined that it is not enough for a plan to be maintained by a church-affiliated entity such as the defendant. Id. at *4-8. The defendant-employer sought appeal of the Stapleton court's order, in particular the court's interpretation of the church plan exemption. The court permitted the interlocutory appeal as its interpretation presented a "controlling question of law" and there is substantial ground for difference of opinion as to the right answer.[3] ( Stapleton, Dkt. #76 at 2.) Accordingly, the court certified the following question for interlocutory appeal to the Seventh Circuit:

In order for an employee benefit plan to qualify as a "church plan" under ERISA, 29 U.S.C. § 1003(b)(2) and § 1033, must the plan be established by a church (or by ...

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