Dignity Health ‘Church Plan’ Litigation Defeats Dismissal Motions

The case already made it once to the Supreme Court which helped to clarify what it means to be a “church plan” run by a principal-purpose organization under ERISA—but the underlying facts of the lawsuit are still being fought over in district court.

The U.S. District Court for the Northern District of California has denied most, but not all, of the defense’s motions for summary judgement in the case of Rollins v. Dignity Health.

The case of Rollins v. Dignity Health has a long-running and complicated procedural history stretching back years. In July 2014, the same court granted a motion for partial summary judgment against Dignity Health, finding its pension plan was not a “church plan” as defined under the Employee Retirement Income Security Act (ERISA). In its decision, the court took a step toward granting plaintiff Starla Rollins’ ultimate appeal for declaratory and injunctive relief directing Dignity Health to bring its pension plan into compliance with ERISA—including its reporting, vesting and funding requirements. The 9th U.S. Circuit Court of Appeals agreed with the district court’s findings.

Dignity Health then successfully petitioned the Supreme Court to weigh in on the case. Following oral arguments in March in the related cases of Advocate Health Care Network v. StapletonSt. Peter’s Healthcare System v. Kaplan, and Dignity Health v. Rollins, the U.S. Supreme Court ruled plans maintained by principal-purpose organizations can qualify as “church plans.” However, it did not rule that the hospitals in these cases were principal-purpose organizations.

Following all this, the Rollins case was effectively remanded back to the district court, and the plaintiffs filed an amended complaint on November 3, 2017. The defendants naturally moved for summary dismissal of the complaint, leading to the latest decision. In a phrase, the decision is a mixed bag that falls more in favor of the plaintiffs, but it by no means concludes the litigation—not least because the plaintiffs have already filed a second amended complaint that is still pending. 

Details From the District Court Decision

The first section of the new District Court decision dives into the issue of “judicial noticeability,” responding to the fact that the defense submitted copies of websites and public statements in an attempt to prove the hospital is a primarily a religiously focused institution. Here, the Court draws the conclusion that publicly available websites or records of private parties such as Dignity Health—as opposed to government documents—have “no imprimatur of reliability.”

“There are at least a trillion web pages on the Internet, and many of the documents within those pages are unsupported, poorly supported, or even false,” the decision states. “Of course, that does not make all of those documents inadmissible for all purposes. But they are not inherently reliable, and courts should be cautious before taking judicial notice [during summary judgement considerations] of documents simply because they were published on a website. That is particularly so when a party seeks to introduce documents it created and posted on its own website, as Dignity does here.”

After making this distinction, the court still agrees to take notice of some of the defense-provided documents. Among others, these include the “Amended and Restated Bylaws of Dignity Health; a copy of the Restated Articles of Incorporation of Catholic Healthcare West; a copy of the Catholic Healthcare West Retirement Plan as Amended & Restated January 1, 2005; a copy of the Memorandum regarding and Religious Directives for Catholic Health Care Services; and a copy of the Dignity Health Pension Plan Amended and Restated January 1, 2014.” As explained by the decision, the reason these are “noticed” is that more justification is given for their relevance than the simple fact of their being publicly available.

So, Is This a Church Plan? We Still Don’t Know 

According to the District Court, church-affiliated organizations can be exempt from ERISA’s requirements as long as they meet three conditions. First, the entity must be a “tax-exempt nonprofit organization associated with a church.” Second, the retirement plan must be maintained by a principal-purpose organization, meaning that the plan must be “maintained by an organization whose principal purpose is administering or funding a retirement plan for entity employees.” Third, the principal-purpose organization itself must be controlled by or associated with a church.

On the “maintenance” question, the District Court rules firmly that the plaintiffs’ arguments are supported by ordinary principles of statutory construction. 

“If Congress had not intended to attach any significance to the word ‘maintained,’ it could have simply required that a plan be ‘administered or funded’ by a principal-purpose organization, and not also ‘maintained’ by one,” the decision states. “It did not make that choice. … Plaintiffs’ construction of ‘maintain’ is also supported by the multiple uses of ‘establish’ and ‘maintain’ as paired terms in U.S.C. Section 1002, which suggest a degree of responsibility not found in the word ‘administer.’”

The District Court further rules that the plaintiffs plausibly allege that Dignity is not associated with a church. The successful arguments are based on the fact that Dignity does not impose any denominational requirement on its employees; has a practice of affiliating with hospitals that claim no religious affiliation; provides non-denominational chapels; and does not impose any denominational requirement on its patients.

Siding with defendants, the court grants the dismissal motion pertaining to claims about investment performance. However, all other claims are dismissed.

It should be noted that the District Court granted the plaintiffs room to amend their complaint “to cure the defects identified in the order.” The plaintiffs have already filed a new amended complaint, attempting to do so.

«