Casto v. Unum Life Ins. Co. of Am.

508 F.Supp.3d 243

Teresa CASTO, Plaintiff,

v.UNUM LIFE INSURANCE COMPANY OF AMERICA, and Unum Group Corp., Defendants.

Case No. 1:19-cv-162

United States District Court, E.D. Tennessee, Southern Division, at Chattanooga.

Filed December 21, 2020

Hudson T. Ellis, Audrey Collins Dolmovich, Eric Buchanan & Associates, PLLC, Chattanooga, TN, for Plaintiff.

Tamra Harris, James T. Williams, IV, Miller & Martin, PLLC, Chattanooga, TN, for Defendants.

MEMORANDUM OPINION AND ORDER

TRAVIS R. MCDONOUGH, UNITED STATES DISTRICT JUDGE

This case involves the denial of long-term disability benefits to Plaintiff Teresa Casto. Casto sued Defendants Unum Life Insurance Company of America and Unum Group Corporation (collectively "Unum") for breach of contract and bad faith under Ohio common law in the Circuit Court for Hamilton County, Tennessee. (Doc. 1-3, 5–6.) Defendant timely removed this action to federal court. (Doc. 1.) Before the Court is Casto's motion to remand to state court. (Doc. 23.) For the following reasons, Casto's motion (Doc. 23) will be DENIED . Furthermore, the stay in this case (Doc. 34) will be LIFTED .

I. BACKGROUND

Casto worked as a nurse practitioner at Mount Carmel St. Ann's, a not-for-profit organization associated with Trinity Health and the Catholic Church. (Doc 1-3, at 2.) Trinity Health is a healthcare organization sponsored by Catholic Health Ministries, a public juridic person created by the Catholic Church to carry out the Church's healthcare initiatives. (Doc. 24, at 5.) Trinity Health provides service to 92 hospitals and hundreds of other such facilities in 22 states. (Doc. 29-1, at 1.)

Employees of Trinity Health are eligible for disability coverage through the Trinity Health Corporation Welfare Benefit Plan ("the Plan"). (Doc. 1-6.) Trinity Health administers the Plan. (Doc. 1-6.) Casto was eligible for long-term disability benefits under a policy from Unum through St. Ann's ("the Policy"). (Id. at 1.) Casto claims that Unum wrongly denied her long-term disability payments because she "has suffered and continues to suffer from a total disability as defined by the Policy." (Doc 1-3, at 5.)

Casto sued Unum in the Circuit Court of Hamilton County, Tennessee, alleging claims for breach of contract and bad faith under Ohio common law. (Doc. 1-3.) Unum timely removed the case to this Court.

(Doc. 1.) Casto then moved to remand this case to state court. (Doc. 23.)¹

II. DISCUSSION

On a motion to remand, the defendant bears the burden of proving the Court has jurisdiction. Williamson v. Aetna Life Ins. Co. , 481 F.3d 369, 375 (6th Cir. 2007). The only plausible ground for jurisdiction in this case is federal question jurisdiction. 28 U.S.C. § 1331. Generally, the Court can examine only the complaint, and even if the plaintiff's state-law claim may be preempted, a federal court cannot entertain jurisdiction. K.B. by and through Qassis v. Methodist Healthcare – Memphis Hosps. , 929 F.3d 795, 799–800 (6th Cir. 2019). But ERISA provides an exemption to this rule: A claim regarding an ERISA plan may "completely preempt" state law which gives the federal courts jurisdiction over the state law claim. Id. For this Court to have jurisdiction, Unum has to show that Casto: (1) is complaining about a denial of benefits under the terms of an ERISA plan and (2) "does not allege the violation of any legal duty (state or federal) independent of ERISA or the plan terms." Gardner v. Heartland Indus. Partners, LP , 715 F.3d 609, 613 (6th Cir. 2013) (quoting Aetna Health Inc. v. Davila , 542 U.S. 200, 210, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004) ); see also Qassis , 929 F.3d at 800.

Casto claims that Unum owes her payments because she "has suffered and continues to suffer from a total disability as defined by the Policy." (Doc. 1-3, at 5.) Her claim for breach of contract is, therefore, based on the (1) denial of benefits from Unum and (2) is "dependent on ... the ERISA plan's terms." Qassis , 929 F.3d at 800 (emphasis in original). As such, if the Plan is an ERISA plan, the Court can hear this claim. 28 U.S.C. §§ 1331, 1441.²

However, the parties dispute whether the Plan is an ERISA plan. (See Docs. 24, 29.) Casto argues that it is not an ERISA plan, because it is instead a "church plan," and church plans are exempt from ERISA. 29 U.S.C. § 1003(b)(2).

ERISA defines a church plan as "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 under section 501 of Title 26." 29 U.S.C. § 1002(33). ERISA also states:

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 by an organization, whether a civil law corporation or otherwise, the principal purpose or function of which is the administration or funding of a plan or program for the provision of retirement benefits or welfare benefits, or both, for the employees of a church or a convention or association of churches, if such organization is controlled by or associated with a church or a convention or association of churches.

Id. § 1002(33)(C)(i). That provision "is a mouthful, for lawyers and non-lawyers alike." Advocate Health Care Network v. Stapleton , ––– U.S. ––––, 137 S. Ct. 1652, 1656, 198 L.Ed.2d 96 (2017). Luckily, the Supreme Court clarified the text that follows "organization" "is just a (long-winded) description of a particular kind of church-associated entity," a "principal-purpose organization." Id.

Unum argues that these two provisions are exhaustive. According to Unum, for a plan to be a church plan it must be maintained by: (1) a church or (2) a principal-purpose organization associated with a church. (Doc. 29, at 1.) Casto argues that a plan can be a church plan as long as an organization associated with a church maintains the plan. (Doc. 32, at 7.) They both acknowledge some conflicting authority on the point. Compare Medina v. Catholic Health Initiatives , 877 F.3d 1213, 1222 (10th Cir. 2017) (requiring the administrator to be a principal-purpose organization); with Rinehart v. Life Ins. Co. of N. Am. , No. C08-5486, 2009 WL 995715, at *4 (W.D. Wash. Apr. 14, 2009) (stating the administrator just needs to be associated with a church).

Unum reads the statute correctly. The statute lays out in plain language that a "Church plan means a plan established and maintained ... by a church," and that definition "includes a plan maintained by a [principal-purpose organization.]" 29 U.S.C. § 1002 ; Stapleton , 137 S. Ct. at 1656. There is no other addition to the definition of church plan that would expand it to all entities merely associated with a church. Furthermore, when the Court in Stapleton addressed this provision, it consistently listed those two iterations as the only two possible definitions of a church plan. See Stapleton , 137 S. Ct. at 1656, 1658–59, 1163.

The Court's reading accords with the approach of the Tenth Circuit in Medina , 877 F.3d at 1221–22. The Court in Medina —which decided the issue after Stapleton —held that there is a three-step inquiry to determine if an organization, which is not a church, falls under the church plan exception:

1. Is the entity a tax-exempt nonprofit associated with a church?

2. If so, is the entity's retirement plan maintained by a principal-purpose organization? That is, is the plan maintained by an organization whose principal purpose is administering or funding a retirement plan for entity employees?

3. If so, is that principal-purpose organization itself associated with a church?

Id.³ This test squares with the plain text of ERISA and the Court's holding in Stapleton.

The courts that reach the opposite conclusion do so for two—ultimately unpersuasive—reasons. The first is that they omit the requirement of a principal-purpose organization when quoting 29 U.S.C. § 1002(33)(C)(i). For example, in Lown v. Cont'l Cas. Co. , 238 F.3d 543, 547 (4th Cir. 2001), a case decided before Stapleton , the Fourth Circuit stated that "the statute defines church plans to include plans ‘maintained by an organization, whether civil law corporation or otherwise, ... if such organization is controlled by or associated with a church ...." Id. (quoting 29 U.S.C. § 1002(33)(C)(i) ).⁴ Courts have since interpreted Lown to hold that an organization, which is not a principal-purpose organization, can administer a church plan. See Catholic Charities of Me., Inc. v. City of Portland , 304 F. Supp. 2d 77, 85 (D. Me. 2004).

However, Lown did not hold that an organization merely associated with a church could administer a church plan. The court in Lown decided that the organization that administered the plan at issue was not sufficiently associated with a church for the plan to be a church plan. 238 F.3d at 548.⁵ The court did not have to decide whether the organization was also required to be a principal-purpose organization. Id. Because the Fourth Circuit in Lown never reached that question, it did not hold that an organization associated with a church does not also have to be a principal-purpose organization to administer a church plan. Cooper Indus., Inc. v. Aviall Servs., Inc. , 543 U.S. 157, 170, 125 S.Ct. 577, 160 L.Ed.2d 548 (2004) ("Questions which merely lurk in the record, neither brought to the attention of the court nor ruled upon, are not to be considered as having been so decided as to constitute precedents.") (quoting Webster v. Fall , 266 U.S. 507, 511, 45 S.Ct. 148, 69 L.Ed. 411 (1925) ) (internal quotation marks omitted).⁶

Even if Lown held that a plan administered by any organization associated with a church is a church plan, the Court would decline to follow the Fourth Circuit's pre- Stapleton approach. Its interpretation would render most of § 1002(33)(C)(i) useless, and that oversight would conflict with the "surplusage cannon" which instructs the Courts to presume every word in the statute has meaning. Stapleton , 137 S....