August 13, 2019

The Seventh Circuit on Tuesday held that a lower court granted summary judgment too early in a suit accusing OSF HealthCare System of misusing the Employee Retirement Income Security Act's church exemption, saying the judge didn’t allow enough time for pertinent discovery.

The district court took an “unduly narrow” view of the facts of the case when it granted OSF’s motion months before discovery was to close in the case and denied postponement, the panel said. The court’s explanation that the employees failed to diligently conduct the needed discovery overlooked delays imposed by both the court and OSF, as well as the employees’ “sensible” approach to make sure document discovery would be complete before key witnesses were deposed, the panel said.

“With such high stakes, beneficiaries are entitled to conduct meaningful discovery before the courts decide legal issues such as whether formal structures are sufficient to satisfy the church plan definition, regardless of day-to-day realities," the appellate court said.

. . .

The employees contend that OSF overstated its connection with the Roman Catholic church in order to use ERISA’s church plan exemption, which they say allowed the company to underfund its pension plans by hundreds of millions of dollars and harmed more than 18,000 workers.

They claim the plans are subject to ERISA because they are not “maintained” by a permissible entity. The law clearly requires that church plans be maintained by either a church or an organization whose “principal purpose or function” is the “administration or funding” of benefit plans for church employees, they argued.

. . .

The workers are represented by Matthew M. Gerend, Laura R. Gerber, Ron Kilgard and Lynn Lincoln Sarko of Keller Rohrback LLP and Mary J. Bortscheller, Karen L. Handorf, Scott M. Lempert and Michelle C. Yau of Cohen Milstein Sellers & Toll PLLC.

The complete article can be viewed here.