Settlement Agreement Reached in Dignity Health Church Plan Suit

In a Joint Notice of Settlement the plaintiffs and defendants in a lawsuit alleging Dignity Health’s pension plan is not a “church plan” as defined by the Employee Retirement Income Security Act (ERISA) notified the U.S. District Court for the Northern District of California that they have reached a settlement in principle with the assistance of a private mediator, and have approved a term sheet incorporating the major terms of the settlement.

In the court document, the parties say they anticipate they will execute the settlement and the plaintiffs will file an unopposed motion and memorandum for preliminary approval of the settlement by approximately May 15.

In July 2014, the District Court granted a motion for partial summary judgment against Dignity Health, finding its pension plan was not a “church plan” as defined under 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 the related cases of Advocate Health Care Network v. Stapleton, St. 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.

Back for a second time with the District Court, it granted the plaintiffs room to amend their complaint “to cure the defects identified in the order,” and the plaintiffs filed an amended complaint, attempting to do so.