A federal district court judge has dismissed some claims and declined to dismiss others against former retirement committee members for the pension plan of St. Elizabeth Medical Center.

The case, as with many other cases filed against health care entities, challenges the medical center’s pension plan’s “church plan” status under the Employee Retirement Income Security Act (ERISA). The plaintiffs seek a declaration that the plan is not a church plan under ERISA and therefore, must follow ERISA’s reporting and funding requirements.

The plan document’s named fiduciary is the St. Elizabeth Medical Center Employees’ Pension Plan Administrative Committee. Former committee members—who were not members at the time the complaint was filed—filed motions to remove themselves as defendants in the case. Some of the motions were granted for certain counts that did not specifically point to the former committee members as violating certain duties; however, the court found reason to discuss other motions and denied some.

No injury-in-fact?

The plaintiffs allege that the defendants breached their fiduciary duties by failing to “create and enforce adequate funding policies,” leading to a loss to the plan “equal to the foregone funding and earnings thereon.” The former committee members argue that this claim should be dismissed because the plaintiffs do not have standing, as they have not alleged that they sustained and injury-in-fact. The plaintiffs contend they do have standing, because the underfunding of the plan creates a “substantial risk” of harm.

U.S. District Judge David L. Bunning of the U.S. District Court for the Eastern District of Kentucky, noted in his opinion that the former committee members rely heavily on Lee v. Verizon Commc’ns, Inc., in which the 5th U.S. Circuit Court of Appeals held that the named plaintiff lacked standing to assert a claim under ERISA Section 502(a)(2) because he had not alleged “an injury in fact sufficient to support constitutional standing” by alleging “injury against [his] individual benefit payments, rather than injury to the plan as a whole.” Bunning found the 5th Circuit’s interpretation is unworkable for breach-of-fiduciary-duty claims.

“Under this interpretation, no claim for a violation of ERISA Section 409 could ever be brought by a participant or beneficiary on behalf of a defined-benefit plan under ERISA Section 502(a)(2),” Bunning wrote. “It is undisputed that the only entity that can recover under a suit brought pursuant to ERISA Section 502(a)(2) is the plan itself. But ERISA Section 502(a)(2) does not give the plan statutory standing to sue on its own behalf, instead giving that right to participants, beneficiaries, fiduciaries, and the Secretary of Labor, none of whom can be individually redressed by a favorable judicial decision.”

According to Bunning, the 5th Circuit’s requirement of an actual individualized injury in a suit brought under ERISA Section 502(a)(2) would render that section’s remedy meaningless. He found that the plaintiffs have pled facts sufficient to establish standing by alleging a financial loss to the plan premised on its underfunding. In addition, Bunning said that accepting the allegations in the complaint as true and drawing all reasonable inferences in favor of the plaintiffs’, he finds that the plaintiffs have alleged sufficiently concrete and particularized injuries to establish standing in this case.

According to the court opinion, the plaintiffs alleged that as of December 2016, the plan was only funded 66.5%, and just one year before, it had only been 58% funded. The plaintiffs allege that, as the plan is a defined benefit plan, if St. Elizabeth “does not make adequate financial contributions to the plan there will not be enough money to pay participants the retirement income that St. Elizabeth Healthcare promises.” In addition, according to the plaintiffs, “[they] face a substantial risk of their pensions being lost or severely reduced … as the Plan Document gives St. Elizabeth the power to terminate the plan at any time.” Bunning denied the former committee members’ motion to dismiss this count in the complaint.

Regarding required reporting

Bunning did grant the former committee member’s motion to dismiss allegations against them regarding required reporting under ERISA. “Because the plaintiffs have alleged that the defendants violated their annual reporting obligations under ERISA Section 103 and their notification and funding-notice obligations under ERISA Sections 101(d)(1) and (f).against the former committee members in their fiduciary capacities only, and because the former committee members are no longer able to provide the equitable relief plaintiffs seek in Count Two, the former committee members’ motion to dismiss Count Two is granted,” he wrote.

Countercliam dismissed

The plaintiffs moved to dismiss the defendants’ counterclaim under Rule 12(b)(6), alleging that they failed to state a claim upon which relief can be granted. According to the opinion, count one of the plaintiff’s amended complaint seeks “declaratory relief that the plan is not a ‘church plan’ within the meaning of ERISA Section 3(33).” Bunning noted that the defendants’ counterclaim is the mirror-image of count one, seeking “a declaration from this court that its pension plan … is a ‘church plan’ under ERISA Section 3(33).

Bunning cited the “mirror-image rule” under Federal Practices and Procedures, which basically encourages courts to exercise discretion to dismiss counterclaims that are redundant and not useful.

However, the defendants also argue that their counterclaim details the administrative duties of the committee, the committee members’ religious affiliation, and contains an allegation that the Internal Revenue Service previously recognized the plan as a church plan, none of which are appropriately raised and discussed in the amended complaint. “In other words, defendants would argue that the mirror-image rule refers to the identity of factual and legal allegations, not identity of factual and legal issues. But this is not the law,” Bunning wrote.

He found that the legal and factual issues attendant to the question of whether the plan is a church plan under ERISA will be the same, regardless of who is seeking the declaration, so he granted the plaintiffs’ motion to dismiss the defendants’ counterclaim.