Church plan fiduciaries can be sued, U.S. judge says

Fiduciaries of church-affiliated defined benefit plans can be sued for breach of duty, even if the plan has church plan status, a federal judge has ruled.

In a court order filed Sept. 30 in a class-action lawsuit against Denver-based Catholic Health Initiatives, U.S. District Judge Robert Blackburn in Denver said the case against individual members of CHI's benefits and human resources committees and board of trustees could proceed because of their “functional authority” under the Employee Retirement Income Security Act.

Denying the fiduciaries' motion to dismiss the case, Mr. Blackburn said that plaintiff Janeen Medina's allegations of fiduciary inaction were “adequate to put the individual defendants on notice that they each allegedly failed to exercise the power of their positions to make the plan compliant with ERISA.”

The order was filed in response to recommendations made by U.S. Magistrate Judge Kristen Mix, who had earlier called for Catholic Health Initiatives' church plan status to be revoked because the plan was not established by the Catholic Church. In August, Mr. Blackburn rejected that recommendation.

“We are looking forward to following through on the issues that remain to be decided in discovery and at trial,” said Ron Kilgard, one of the plaintiff attorneys with law firm Keller Rohrback LLP in Phoenix.

Catholic Health Initiatives spokesman Michael Romano declined to comment. Calls to CHI attorneys in the case were not returned at press time.

The case, Medina vs. Catholic Health Initiatives, is one of eight related cases that are collectively seeking more than $2 billion in missed pension contributions and other damages, and to have the plan sponsors' church plan status revoked. The lawsuits filed by law firms Keller Rohrback in Seattle and Cohen Milstein Sellers & Toll PLLC in Washington are challenging interpretations made by the Internal Revenue Service and the Department of Labor that allowed large non-profit hospitals with varying degrees of church associations to be exempt from ERISA.