Overview
On December 21, 2017, the Honorable Judge Richard D. Bennett of the United States District Court for the District of Maryland issued an Order and Final Judgment finally approving a $98.3 million settlement in Hodges v. Bon Secours Health System, et al.. The final judgment resolves all claims against the Bon Secours Health System, Inc. for allegedly denying participants and beneficiaries in seven defined benefit pension plans the protections of the Employee Retirement Income Security Act (“ERISA”). Plaintiffs alleged that Bon Secours Health Plan improperly defined these plans as “Church Plans,” which are exempt from ERISA, and for breaching their fiduciary responsibilities in managing the plans under ERISA. Plaintiffs further alleged that application of the Church Plan exemption to the Bon Secours Plans violated the Establishment Clause of the United States Constitution.
The $98 million settlement represents the total amount of the plans’ underfunding on an ERISA basis at the time the settlement was reached and also provides significant financial and administrative protections through August 31, 2025, such as a guarantee of the accrued benefits owed to participants under the terms of the plans, an anti-cutback provision, and requirements regarding information disclosure to participants in the plans.
This settlement is unique not only for covering the total amount the plans that were underfunded but also for the fact that it was reached while three similar Church Plan/ERISA exemption cases, also led by Cohen Milstein, were consolidated before and ultimately granted review by the Supreme Court of the United States.
Cohen Milstein was court-appointed co-lead counsel in this class action.
Background
Originally filed on April 11, 2016, participants and beneficiaries of seven pension plans managed by Bon Secours claimed that they were denied protections of ERISA because Bon Secours improperly defined the benefit pension plans as “Church Plans,” which are exempt from ERISA. In addition to other fiduciary mismanagement claims, plaintiffs further alleged that the Bon Secours Plans violated ERISA in a variety of ways, and, alternatively, that application of the Church Plan exemption to the Bon Secours Plans violated the Establishment Clause of the Constitution.
The seven pension plans under dispute included:
- Bon Secours Health System, Inc. Frozen Pension Plan
- Bon Secours Kentucky Health System, Inc. Pension Plan
- Bon Secours New York Health System Pension Plan
- Employees’ Retirement Plan of Bon Secours Baltimore Health Corporation
- Employees’ Retirement Plan of Bon Secours-St. Mary’s Hospital
- Memorial Regional Medical Center Pension Plan
- Retirement Plan of Bon Secours-Hampton Roads.
On October 6, 2016, plaintiffs filed a consolidated amended complaint, and on December 5, 2016, Bon Secours filed a motion to dismiss, arguing that plaintiffs lacked standing under Article III of the Constitution because they had not suffered an injury-in-fact, that plaintiffs failed to state a claim that the Bon Secours Plans were not proper Church Plans, and that ERISA’s Church Plan exemption did not violate the Establishment Clause.
While the court considered Bon Secours motion to dismiss, on January 13, 2017, more plaintiffs joined the litigation, whereupon plaintiffs filed a second consolidated amended complaint, rendering defendants’ motion to dismiss moot. Simultaneously, plaintiffs filed a motion to request to stay the case pending the Supreme Court’s ruling on three other, consolidated cases, addressing similar Church Plan definition and ERISA exemption issues: Advocate Health Care Network v. Stapleton, 817 F.3d 517 (7th Cir. 2016); St. Peter’s Healthcare System v. Kaplan, 810 F.3d 175 (3d Cir. 2015); and Dignity Health v. Rollins, 830 F.3d 900 (9th Cir. 2016), which the court granted.
Notably, Cohen Milstein was counsel in the afore mentioned cases consolidated before the Supreme Court.
While the case was stayed, plaintiffs and Bon Secours reached a settlement agreement.
Case name: Hodges, et al. v. Bon Secours Health System, Inc., et al., Civil No. 1:16-cv-01079-RDB, United States District Court for the District of Maryland