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Dignity Health 

Rollins v. Dignity Health
United States District Court for the Northern District of California
Case No. 13-1450

Case Overview

Plaintiffs allege that Dignity Health (“Dignity”), a California non-profit corporation and the fifth largest healthcare provider in the United States, is improperly claiming that its defined benefit pension plan (the “Dignity Health Pension Plan” or the “Plan”) is exempt from the Employee Retirement Income Security Act of 1974 (“ERISA”), a federal law, pursuant to a statutory exemption intended for “church plans.”

Plaintiffs allege multiple reasons why the Dignity Health Pension Plan does not qualify as an ERISA-exempt church plan, including that Dignity is not controlled by or associated with a church and that the Plan does not satisfy the statutory requirement that a church plan be maintained by either a church or by a church-associated organization whose “principal purpose” is the funding or administration of benefit plans for church employees.

Plaintiffs allege that Defendants are violating ERISA by, among other things:

  • underfunding the Dignity Health Pension Plan;
  • failing to furnish Plaintiff or any member of the proposed Class with Pension Benefit Statements, Summary Annual Reports, Notifications of Failure to Meet Minimum Funding, or Funding Notices; and
  • failing to file an annual report with respect to the Plan with the Secretary of Labor.

Further, Plaintiffs allege that application of the church plan exemption to the Plan is an unconstitutional violation of the Establishment Clause.

Case Status

On December 12, 2013, the Honorable Thelton E. Henderson denied Defendants’ motion to dismiss, allowing Plaintiff’s claims to continue and holding as a matter of law that an ERISA-exempt church plan must be established by a church or by a convention or association of churches.

On July 22, 2014, Judge Henderson granted Plaintiff’s motion for partial summary judgment and denied Defendants’ motion for partial summary judgment.  In his order, Judge Henderson held that Plaintiff “is entitled to summary judgment on her claim for declaratory relief” because there is no genuine dispute that Dignity Health (formerly known as Catholic Healthcare West or CHW) established the Plan here and the Dignity/CHW “is not a church.”  Accordingly, the court held that the Plan “is not a church plan as defined by ERISA, and is therefore not exempt from ERISA.”  Dignity appealed to the United States Court of Appeals for the Ninth Circuit.

On July 26, 2016, the Ninth Circuit ruled in Plaintiff’s favor and affirmed the decision of the district court.  Agreeing with recent opinions in the Third and Seventh Circuits, the Ninth Circuit held that the “natural reading” of the statutory church plan definition is that “a church plan must be established by a church or by a convention or association of churches.”  The Ninth Circuit also held that the legislative history supports this result, and that agency interpretations to the contrary are incorrect and entitled to no deference.

On June 5, 2017, the Supreme Court reversed the opinion of the Ninth Circuit Court of Appeals, and held that a plan is not prevented from being a “church plan” just because it was not established by a church.  The Supreme Court acknowledged that it was not deciding whether this plan meets all other requirements to be exempt from ERISA as a “church plan,” and the Supreme Court remanded the case to allow Plaintiffs to continue to litigate, in district court, their additional claims why this plan is not a “church plan.”

Plaintiffs’ filed an Amended Complaint on November 3, 2017, which added an additional ERISA claim and several alternative claims under state law. On September 6, 2018, Judge Jon S. Tigar denied Defendants’ motion to dismiss the amended complaint except as to the claim for specific performance in new Count XI (state law contract claim). Plaintiffs filed a Second Amended Complaint on September 27, 2018, to amend that alternative Count to assert a claim for contract damages. Defendants filed their answer on October 25, 2018.

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