May 01, 2019

A New Jersey federal judge won’t let Saint Peter’s Healthcare System off the hook in an Employee Retirement Income Security Act suit accusing it of underfunding its pension plan while wrongly claiming a “church plan” exemption, rejecting Saint Peter’s argument that the ex-worker behind the case lacked standing.

U.S. District Judge Michael A. Shipp said in his Tuesday order denying Saint Peter’s motion to dismiss that Laurence Kaplan didn’t merely allege “bare procedural ERISA violations,” as the hospital group contended. The judge noted Kaplan had claimed the Saint Peter’s pension plan had been operated as an ERISA plan for more than 30 years but was now underfunded by $130 million and no longer insured by the Pension Benefit Guaranty Corp.

Judge Shipp further noted that Saint Peter’s disputed that the plan was subject to ERISA’s requirements, a point the judge said was critical.

“Taken together, these allegations suggest that defendants may have enhanced the risk of the [Saint Peter’s Healthcare System]’s plan’s default by operating the [Saint Peter’s Healthcare System] plan as if it were a church plan and exempt from ERISA, which constitutes an injury-in-fact,” Judge Shipp wrote.

. . .

Kaplan first filed his proposed class action against Saint Peter’s in May 2013, initially scoring a victory when the district court ruled that the pension plan wasn’t a church plan exempt from certain ERISA requirements. The hospital group appealed the finding midsuit, but the Third Circuit affirmed the decision.

Saint Peter’s then took the issue to the U.S. Supreme Court, which ultimately reversed the lower court’s finding in its June 2017 ruling in Advocate Health Care Network et al. v. Maria Stapleton et al. In that decision, the high court held that ERISA’s carveout for church plans applies to plans that are maintained by church-affiliated organizations whose principal purpose is to administer or fund the plans, even when those plans haven’t been established by a church.

The case returned to the district court, and Kaplan filed an amended complaint in August, still contending that the Saint Peter’s plan didn’t qualify as a church plan, among other things. Kaplan also argued, alternatively, that the church plan exemption violated the establishment clause of the U.S. Constitution.

. . .

Kaplan is represented by Karen L. Handorf, Scott M. Lempert, Jamie L. Bowers of Cohen Milstein Sellers & Toll PLLC, and Lynn Lincoln Sarko, Havila Unrein, Matthew M. Gerend, Ron Kilgard and Laurie Ashton of Keller Rohrback LLP.

The complete article can be accessed here.