Sanzone v. Health

326 F.Supp.3d 795

Sally SANZONE, et al., Plaintiffs,

v.Mercy HEALTH, et al., Defendants.

Case No. 4:16 CV 923 CDP

United States District Court, E.D. Missouri, Eastern Division.

Signed August 27, 2018

Scott M. Lempert, Pro Hac Vice, Karen Louise Handorf, Cohen and Milstein PLLC, Washington, DC, Laura R. Gerber, Keller Rohrback LLP, Seattle, WA, Ron Kilgard, Keller Rohrback LLP, Pheonix, AZ, James I. Singer, Rhona S. Lyons, Schuchat and Cook, St. Louis, MO, for Plaintiffs.

Jeffrey R. Fink, Richard J. Pautler, Allen D. Allred, Pro Hac Vice, Thompson Coburn, LLP, St. Louis, MO, for Defendants.

MEMORANDUM AND ORDER

CATHERINE D. PERRY, UNITED STATES DISTRICT JUDGE

Plaintiffs Sally Sanzone and Gene Grasle worked at different health care facilities operated by defendant Mercy Health. When they retired from Mercy in 2003 and 2013, respectively, they began receiving pension benefits from the Mercy Health MyRetirement Personal Pension Account Plan (the "Plan" or the "Mercy Plan"), and continue to do so. Plaintiffs bring this action against Mercy Health, the Mercy Health Benefits Committee, and the Mercy Health Stewardship Committee.

Plaintiffs allege that defendants have underfunded the Plan and have violated various provisions of the Employment Retirement Income Security Act (ERISA), including their duties under ERISA as fiduciaries or sponsors of the Plan. They contend that the Mercy Plan does not qualify for ERISA's "church plan" exemption because is it not maintained by an organization whose principal purpose is providing benefits for employees of a church. Plaintiffs also seek a declaration that ERISA's "church plan" exemption as applied to the Plan violates the Establishment Clause of the First Amendment. In alternative claims, plaintiffs seek relief under state law.

I agree with defendants that the Mercy Plan is an ERISA-exempt church plan and, further, that plaintiffs lack standing to bring their Establishment Clause claim. Therefore, I do not have subject-matter jurisdiction over any of plaintiffs' ERISA and constitutional claims. Without federal jurisdiction over those claims, I have no jurisdictional authority to consider plaintiffs' state law claims, so I will dismiss this case in its entirety without prejudice for lack of jurisdiction.

Background

Mercy Health is a 501(c)(3) nonprofit corporation operating one of the largest Catholic healthcare systems in the United States, with twenty-nine acute care hospitals, eleven specialty hospitals, and several hundred physician practices and outpatient facilities. Mercy Health offers a retirement plan for its employees, with more than 40,000 participants who are current or former employees of Mercy Health. The Mercy Health Benefits Committee is the Plan Administrator. The Mercy Health Stewardship Committee oversees and monitors the Plan's financial status. Mercy Health is the Plan's Sponsor.

The Plan was originally established in 1960 as "the Retirement Plan for Employees of the Religious Sisters of Mercy of the Union in the United States of America, Province of St. Louis." In 1991, it was renamed the Retirement Plan for Employees of the Sisters of Mercy of the Americas, St. Louis. Sponsorship of the Plan was transferred to the Sisters of Mercy Health System (now Mercy Health) in March 2007. In 2011, the name of the Plan was changed to its current name, the Mercy Health MyRetirement Personal Pension Account Plan.¹ The Plan specifically states its intention to be maintained as a church plan, and the Internal Revenue Service has recognized it as a church plan since April 1999.² Church plans are not considered to be ERISA plans and are exempt from compliance with ERISA's requirements. 29 U.S.C. § 1003(b)(2).

Plaintiffs Sanzone and Grasle are former employees of Mercy Health. Sanzone retired from Mercy Health in 2003 and began receiving pension benefits under the Plan. Grasle retired in 2013 and likewise began receiving pension benefits under the Plan. Both continue to receive benefits, and neither claim that their benefits have been reduced. In this putative class action,³ plaintiffs claim that the Plan is not a church plan and is therefore governed by ERISA. They seek equitable relief and statutory penalties against Mercy Health, the Benefits Committee, and the Stewardship Committee, alleging that the Plan violates several provisions of ERISA and that defendants breached their fiduciary duties under ERISA. Plaintiffs also seek alternative relief under the Establishment Clause and under state law.

The Second Amended Complaint

Plaintiffs bring their complaint in thirteen counts.

In Counts 1 through 8, plaintiffs seek a declaratory judgment that the Mercy Plan is not a church plan and, further, that it must comply with ERISA's requirements and take steps to be brought into compliance with ERISA. They also seek monetary penalties for the Plan Administrator's failure to meet certain statutory obligations under ERISA. They bring their ERISA claims as follows:

• Count 1 – for equitable relief under 29 U.S.C. §§ 1332(a)(2), 1332(a)(3), and 1109(a) ;

• Count 2 – for violating reporting and disclosure provisions under 29 U.S.C. §§ 1022, 1023, 1024(b)(3), 1021(d)(1), 1021(f), and 1025(a)(1) ;

• Count 3 – for failing to provide minimum funding under 29 U.S.C. § 1082 ;

• Count 4 – for failing to establish the Plan pursuant to a written instrument meeting ERISA requirements under 29 U.S.C. § 1102 ;

• Count 5 – for failing to establish a trust that meets ERISA requirements under 29 U.S.C. § 1103 ;

• Count 6 – to clarify participants' rights to future benefits under 29 U.S.C. § 1132(a)(1)(B) ;

• Count 7 – for civil penalties under ERISA for violations of 29 U.S.C. §§ 1021(d)(1), 1021(f), and 1025(a)(1) ; and

• Count 8 – for breach of fiduciary duties under 29 U.S.C. § 1132(a)(2).

Count 9 of the complaint is a contingent claim, alleging that if the Plan is an ERISA-exempt church plan, then the exemption as applied to the Plan violates the Establishment Clause of the First Amendment of the Constitution.

In Counts 10 through 13, plaintiffs seek alternative relief under state law for breach of contract, promissory estoppel, unjust enrichment, and breach of fiduciary duty.

Defendants seek dismissal of all of plaintiffs' ERISA and Establishment Clause claims under Fed. R. Civ. P. 12(b)(1) for this Court's lack of subject-matter jurisdiction over the claims. Defendants also seek dismissal of five of plaintiffs' eight ERISA claims under Rule 12(b)(6) for failure to state a claim. In addition, defendants seek a general merits determination that the Plan qualifies as an ERISA-exempt church plan, thereby subjecting all of plaintiffs' ERISA claims to dismissal. Finally, defendants contend that with the dismissal of plaintiffs' federal claims, I should decline to exercise supplemental jurisdiction over plaintiffs' state law claims.

For the following reasons, I do not have subject-matter jurisdiction over plaintiffs' ERISA and Establishment Clause claims and will grant defendants' motion to dismiss these claims. With no original jurisdiction over these claims, I have no authority to exercise supplemental jurisdiction over plaintiffs' remaining state law claims; and no independent jurisdictional basis exists for me to consider these claims. They will likewise be dismissed.

Discussion

Defendants invoke both Rule 12(b)(1) and 12(b)(6) to dismiss plaintiffs' federal claims. I consider the Rule 12(b)(1) challenge first because all other defenses are moot if I lack subject-matter jurisdiction.

Defendants base their jurisdictional argument on their claim that plaintiffs lack standing to raise any of their federal claims. I agree that plaintiffs lack standing to bring their Establishment Clause claim and arguably lack standing to bring some of their ERISA claims. However, in conducting a factual review of this Court's jurisdiction, I find that federal question jurisdiction does not exist over any of plaintiffs' ERISA claims because ERISA does not govern the Plan at issue. Although defendants do not raise lack-of-federal-question as a specific basis to dismiss these claims, I may consider jurisdictional issues not raised by the parties. Mansfield, C. & L.M. Ry. Co. v. Swan , 111 U.S. 379, 382, 4 S.Ct. 510, 28 L.Ed. 462 (1884) ; see also In re Gaines , 932 F.2d 729, 731 (8th Cir. 1991) (recognizing federal court's inherent power to determine, as a preliminary matter, subject-matter jurisdiction). Because the Court's "very power to hear the case" is at stake, I may consider matters outside the pleadings in determining whether, factually, this Court has subject-matter jurisdiction. Osborn v. United States , 918 F.2d 724, 729-30 (8th Cir. 1990) (quoting Mortensen v. First Fed. Sav. & Loan Ass'n , 549 F.2d 884, 891 (3d Cir. 1977) ).

A. ERISA Claims

ERISA generally requires private employers offering pension plans to adhere to a statutory framework designed to ensure plan solvency and to protect plan participants. But "[c]hurch plans are not ERISA plans" and are exempt from complying with ERISA's requirements. Chronister v. Baptist Health , 442 F.3d 648, 651 (8th Cir. 2006). Accordingly, if the Plan at issue here is a church plan, no federal question exists over plaintiffs' purported ERISA claims because the Plan is not covered by ERISA. Id. See also Koval v. Washington Cty. Redevelopment Auth. , 574 F.3d 238, 244 (3d Cir. 2009) (district court lacks subject-matter jurisdiction over benefits plan that is exempt from ERISA); Kemp v. International Bus. Machines Corp. , 109 F.3d 708, 714 (11th Cir. 1997) (no federal question jurisdiction over claims challenging non-ERISA plan); NJSR Surgical Ctr., L.L.C. v. Horizon Blue Cross Blue Shield of New Jersey, Inc. , 979 F.Supp.2d 513, 521 (D.N.J. 2013) (any liability for administering non-ERISA plan does not arise under ERISA).

For the following reasons, I conclude that the Mercy Plan here is a church plan and is not subject to ERISA. The ERISA claims raised in Counts 1 through 8 of the second...