Bailey et al v. OSF Healthcare System et al

Filing 61

ORDER entered by Judge Sara Darrow on MArch 23, 2017. Plaintiffs' 17 motion for an order designating interim class counsel is DENIED WITHOUT PREJUDICE; proposed intervenors Kasandra Anton and Sheilar Smith's 23 motion to intervene is G RANTED as specified herein; their 25 motion to transfer this case to the Southern District of Illinois is DENIED; their 33 motion for leave to file a reply to the responses thereto is GRANTED; Defendants' 34 motion for a hearing on the motions to intervene and transfer is DENIED; and Plaintiffs' 44 motion to file a notice of supplemental information is GRANTED. (SC, ilcd)

E-FILED

Thursday, 23 March, 2017 10:47:43 AM
Clerk, U.S. District Court, ILCD
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF ILLINOIS
PEORIA DIVISION
BONNIE BAILEY, PEGGY WISE, and
JUNE SCHWIERJOHN, individually and on
behalf of themselves and all others similarly
situated,
Plaintiffs,
v.
OSF HEALTHCARE SYSTEM, THE
SISTERS OF THE THIRD ORDER OF ST.
FRANCIS EMPLOYEES PENSION PLAN
ADMINISTRATIVE COMMITTEE, THE
SAINT ANTHONY’S HEALTH CENTER
RETIREMENT COMMITTEE, and JOHN
DOES 1–20,
Defendants.

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Case No. 1:16-cv-01137-SLD-TSH

ORDER
Before the Court are Plaintiffs’ motion for an order designating their present counsel,
Kessler Topaz Meltzer & Check, LLP, Izard Kindall and Raabe LLP, and the Janssen Law
Center, as interim lead class counsel pending a motion for class certification, ECF No. 17;
proposed intervenors Kasandra Anton and Sheilar Smith’s (“the Smith plaintiffs”) motion to
intervene, ECF No. 23; their motion to transfer this case to the Southern District of Illinois, ECF
No. 25; their motion for leave to file a reply to the responses thereto, ECF No. 33; Defendants’
motion for a hearing on the motions to intervene and transfer, ECF No. 34; and Plaintiffs’ motion
to file a notice of supplemental information, ECF No. 44. For the following reasons, the motion
to appoint interim lead counsel is DENIED WITHOUT PREJUDICE, the motion to intervene

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GRANTED as specified herein, the motion to transfer DENIED, the motion for hearing
DENIED, and the motions for leave to file GRANTED.
BACKGROUND
This lawsuit was filed on May 3, 2016, initially only by Plaintiffs Bailey and Wise.
Compl., ECF No. 1. They alleged that Defendant OSF HealthCare System (“OSF”) maintains a
retirement savings plan (“the plan”) for the benefit of its employees, but that this plan is
underfunded by at least $350 million. Id. at 1–2. Bailey and Wise alleged that this was so
because, while OSF claims that the plan falls within the “church plan” exemption to the
Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001–1461 (“ERISA”), the
plan does not fall within the exemption and must be funded at the level ordinarily required by
ERISA. Id. at 2. Both plaintiffs were or had been employees at OSF’s Saint Francis Medical
Center (“Saint Francis”) in Peoria, Illinois. They purported to sue on behalf of themselves and
“[a]ll participants in and beneficiaries of The Sisters of the Third Order of St. Francis Employees
Retirement Savings Plan . . . .” Id. at 4.
However, OSF operates eleven hospitals, only six of which, including Saint Francis, are
located within the Central District of Illinois. See Defs.’ Resp. Mot. Transfer 3, ECF No. 32.
One hospital, Saint Anthony’s Medical Center (“Saint Anthony’s”), is located in the Southern
District of Illinois. Id. Six days before Bailey and Wise filed this suit in the Central District,
prospective intervenor Smith, a former employee of Saint Anthony’s, filed a similar lawsuit in
the Southern District alleging much the same thing as to all OSF retirement plans—that OSF is
justifying underfunding its retirement plan by treating it as a church plan exempt from the
requirements of ERISA. Smith Compl. 2, ECF No. 1; Smith v. OSF, No. 3:16-cv-00467-SMYRJD (S.D. Ill. Apr. 27, 2016) (hereafter “Smith”). Smith purported to sue on behalf of “all

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participants and beneficiaries of defined benefit pension plans that are established, maintained,
administered, and/or sponsored by OSF, OSF’s affiliates,” or other OSF committees. Id. at 1.
Both sets of plaintiffs have since amended their initial complaints, adding plaintiffs. The
plaintiffs in this case have added one plaintiff, Schwierjohn, who is a participant in the plan run
by Saint Anthony’s. Pls.’ Mot. Leave File Notice 2.
OSF, a named defendant in both cases and represented by the same counsel in both,
moved on June 13, 2016 in the Southern District to transfer Smith to the Central District. ECF
No. 33; Smith. On July 25, 2016, Judge Yandle denied that motion. ECF No. 37; Smith.
Plaintiffs filed their motion for an order appointing their counsel interim lead counsel on July 19,
2016. The Smith plaintiffs then filed their motions to intervene and transfer on August 9, 2016.
DISCUSSION
I.

The Motion to Intervene
The Smith plaintiffs, because they are not parties to this case, must intervene in order to

move for the transfer of the case, as they concede. Mem. Supp. Mot. Intervene 1, ECF No. 24.
They argue that the court must permit their intervention, pursuant to Federal Rule of Civil
Procedure 24(a), because disposition of this case could impair their interest in the outcome of
theirs, and because their interests in that disposition may not adequately be protected by
Plaintiffs. Id. at 8–10. In the alternative, they argue that the Court should permit them to
intervene pursuant to Rule 24(b), because their suit shares questions of law and fact with
Plaintiffs’. Id. at 11. Plaintiffs argue that the Smith plaintiffs cannot intervene “of right,” but
concede that the Court should permit the intervention under Rule 24(b). Pls.’ Resp. Mot.
Intervene 1; ECF No. 28. Defendants echo the position. Defs.’ Resp. Mot. Intervene 1; ECF No.
31.

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a. Standard on a Motion to Intervene
Rule 24 provides for two kinds of intervention by a non-party to a suit. “On timely
motion, the court must permit anyone to intervene who” is supplied such a right by statute, or
who “claims an interest relating to the property or transaction that is the subject of the action, and
is so situated that disposing of the action may as a practical matter impair or impede the
movant’s ability to protect its interest, unless existing parties adequately represent that interest.”
Fed. R. Civ. P. 24(a) (emphasis added). This kind of intervention is called intervention of right.
Id. Alternatively, the court “may permit anyone to intervene,” termed permissive intervention,
when someone so moves who is given a conditional right to do so by statute, or who “has a claim
or defense that shares with the main action a common question of law or fact.” Fed. R. Civ. P.
24(b) (emphasis added). On a motion for intervention of right under Rule 24(a), the movant
bears the burden of showing that the requirements of the rule are met, which the Seventh Circuit
has summarized as requiring him to “(1) make a timely application, (2) have an interest relating
to the subject matter of the action, (3) be at risk that that interest will be impaired by the action’s
disposition and (4) demonstrate a lack of adequate representation of the interest by the existing
parties.” Vollmer v. Publishers Clearing House, 248 F.3d 698, 705 (7th Cir. 2001).
Interventions of right may be subject to “appropriate conditions or restrictions responsive among
other things to the requirements of efficient conduct of the proceedings.” Fed. R. Civ. P.
24(a)(2) advisory committee’s notes to 1966 amendment. On a motion for permissive
intervention, the latter three requirements for an intervention of right are dropped, and all that an
intervenor need show is that (1) their motion is timely and (2) “the applicant’s claim or defense
and the main action have a question of law or fact in common.” Flying J, Inc. v. Van Hollen,
578 F.3d 569, 573 (7th Cir. 2009).

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b. Analysis
Plaintiffs and Defendants argue strenuously that the Smith plaintiffs should not be
permitted an intervention of right under Rule 24(a), but concede that the Court should permit
them to intervene under Rule 24(b), without explaining what turns on the distinction. Granting a
motion to intervene produces the same result regardless of which section of the rule is taken as
authority; the difference between the sections is whether a court must or only may grant the
properly supported motion. Perhaps the Plaintiffs and Defendants simply do not want the Court
to make a finding that Plaintiffs do not adequately represent the interests of OSF plan
beneficiaries—although, as the Smith plaintiffs argue, all a 24(a) intervenor need make is a
“minimal” showing of possible inadequacy. Trbovich v. United Mine Workers of Am., 404 U.S.
528, 538 (1972); see also Fed. R. Civ. P. 24(a)(2) advisory committee’s notes to 1966
amendment (explaining that the standard for a showing of inadequacy of representation is low in
order to prevent a potential intervenor in a class action from being rebuffed by the counterargument that, if present representation is inadequate, res judicata will not operate to foreclose
his own suit rights and he is thus not entitled to intervene).
In any event, the parties all agree, as does the Court, that (a) the Smith plaintiffs’ motion
for intervention is timely, coming as it does shortly after the filing of each lawsuit and before the
major phases of litigation have begun in either; and (b) that the Smith plaintiffs’ claims share
questions of law and of fact with those of Plaintiffs. Indeed, both sets of plaintiffs appear to wish
to certify classes composed of all beneficiaries of any retirement plans that OSF administers, and
to do so on the basis of the same legal argument—that OSF has underfunded its plan or plans by
improper reliance on the “church exemption.” (Helpfully, Plaintiffs have made this overlap even
clearer in their Second Amended Complaint, ECF No. 43, specifically alleging that they seek to

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sue on behalf of all employee beneficiaries of “the Retirement Plan for Employees of Saint
Anthony’s Health Center.” Second Am. Compl. 5.) The Court permits the Smith plaintiffs to
intervene, and therefore need not reach the question of whether such an intervention is
mandatory.
There is a further complication. The Smith plaintiffs seek to intervene “for the limited
purpose of seeking to transfer this action to the Southern District of Illinois . . . .” Mem. Supp.
Mot. Intervene 1. They do so presumably because, should they be unsuccessful (which, as is
explained below, they are) they do not wish to participate actively in this case, but wish instead
to pursue their already-pending litigation in the Southern District. Both Plaintiffs and
Defendants—the latter of whom, of course, recently moved to transfer the Southern District case
here, and then moved again for reconsideration of the denial of that motion—argue that the Court
should treat the motion to intervene as a consent to litigate the matter entirely in the Central
District. See Defs.’ Resp. Mot. Intevene 1–2 (“[I]t is reasonable and appropriate that [the Smith
plaintiffs] should be required to [intervene] as if they were an ‘original party’ to this action—
thereby agreeing to adjudicate those issues in this forum and subject to this Court’s
jurisdiction.”). In essence, Plaintiffs and Defendants argue that, in seeking to intervene only in
order to transfer the case to the Southern District, the Smith plaintiffs have accomplished by
inadvertence what Judge Yandle repeatedly denied Defendants: a transfer, in the other direction,
of all the Smith plaintiffs’ claims to this Court.
An intervention of right may be subject to appropriate conditions and restrictions; all the
more so a permissive intervention. The Court can see no reason to penalize the Smith plaintiffs
for seeking to appear in order to make their argument for transfer, aside from Plaintiffs’ and
Defendants’ obvious desire, which is insufficient. The Court will not enter an order effectively

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abrogating Judge Yandle’s order denying transfer. Instead, the Court grants the Smith plaintiffs’
motion to intervene for the limited purpose of seeking to transfer the case. Since the Court is
denying that motion, there is no need for the Smith plaintiffs even to be added to the docket in
this case.
II.

The Motion to Transfer
The Smith plaintiffs argue that this case should be transferred to the Southern District

because doing so is in the interests of justice, and because it is more convenient for the parties
and potential witnesses. Mem. Supp. Mot. Transfer 3–6, ECF No. 26. Plaintiffs respond that (a)
having intervened as a plaintiff in this case, the Smith plaintiffs cannot seek to transfer venue,
because such motions are designed to alleviate hardship on defendants, Pls.’ Resp. Mot. Transfer
2–3; and (b) because, while venue is proper in both the Central and Southern Districts, private
convenience and the public interest militate against a transfer, id. at 4–12. Defendants add that
OSF, as an organization, is far more substantially located within the Central District, and thus, all
Defendants and the community they serve have a strong interest in having this case adjudicated
here. Defs.’ Resp. Mot. Transfer 3–4, ECF No. 32.
a. Legal Standard on a Motion to Transfer Venue
“For the convenience of parties and witnesses, in the interest of justice, a district court
may transfer any civil action to any other district or division where it might have been brought or
to any district or division to which all parties have consented.” 28 U.S.C. § 1404(a). Section
1404 permits a transfer to maximize overall utility. Because convenience for some litigants is
frequently inconvenient for others, courts considering motions to transfer must engage in a
“case-by-case consideration of convenience and fairness” for all parties and potential witnesses.
Research Automation, Inc. v. Schrader-Bridgeport Int’l, Inc., 626 F.3d 973, 977 (7th Cir. 2010)

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(quoting Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22, 29 (1988)). District courts are
therefore granted “a substantial degree of deference . . . in deciding whether transfer is
appropriate.” Research Automation, 626 F.3d at 977–78.
The analysis is bipartite. The first part focuses on the “availability of and access to
witnesses, and each party’s access to and distance from resources in each forum,” id. at 978, the
second on factors relating to “the efficient administration of the court system,” id., such as
docket congestion, relative familiarity with relevant law, the respective desirability of resolving
controversies in each locale, and the relationship of each community to the controversy, id. In
evaluating a motion to transfer venue where a related suit has already been filed in the transferee
jurisdiction, the time at which each lawsuit was filed is relevant but not dispositive. See id. at
982 (“[W]here a district court faces one of two identical lawsuits and one party moves to transfer
to the other forum, the court should do no more than consider the order in which the suits were
filed among the factors it evaluates under 28 U.S.C. § 1404(a).”); Tempco Elec. Heater Corp. v.
Omega Eng’g, Inc., 819 F.2d 746, 750 (7th Cir. 1987) (“Although a ‘first to file’ rule would have
the virtue of certainty and ease of application . . . the cost—a rule which will encourage an
unseemly race to the courthouse and, quite likely, numerous unnecessary suits—is simply too
high.). The burden of showing that transfer is warranted lies with the party seeking transfer—
typically, a defendant, but here, an intervening plaintiff. See In re Nat’l Presto Indus., Inc., 347
F.3d 662, 663 (7th Cir. 2003).
b. Analysis
All parties agree that, given OSF’s tentacular reach, with hospitals and employees located
in both the Central and Southern district, venue is proper in either district. Mem. Supp. Mot.
Transfer 3; Pls.’ Resp. Mot. Transfer 4–5, ECF No. 29; Defs.’ Resp. Mot. Transfer 2.

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The Smith plaintiffs assert that the convenience of parties and witnesses cuts in neither
direction, since the Southern and Central Districts are adjacent to each other, one of the named
plaintiffs worked at Saint Anthony’s in the Southern District, and employees enrolled in the
plans at issue reside in (at least) both the Central and Southern Districts. Mem. Supp. Mot.
Transfer 3–4. Plaintiffs respond that the plaintiffs and defendants all live in the Central District
and would have to travel a substantial distance, to East St. Louis, were proceedings to be moved
there. Pls.’ Resp. Mot. Transfer 5. They add that the bulk of OSF’s hospitals and employees are
located in the Central District, and that thus it is reasonable to assume that more time and money
would have to be spent by parties and witnesses to conduct this litigation in the Southern
District. Id. at 6–8. Defendants add that all potential witnesses thus far disclosed in this
litigation live in either the Central or Northern Districts of Illinois, Defs.’ Resp. Mot. Transfer 2,
and that the Sisters of the Third Order of Saint Francis, who assertedly will be key witnesses,
live in East Peoria, in the Central District, id. at 2–3. From all the information submitted to the
Court regarding the locations of parties and witnesses, it appears that virtually all of the parties
and witnesses in the instant case would find it easier, or at least equally burdensome, to travel to
the Central District. Thus, the convenience of the parties and witnesses works against transfer of
the case to the Southern District.
However, the Smith plaintiffs rest most of their argument on the basis of the final portion
of the analysis, the interests of justice, which “may be determinative in a particular case, even if
the convenience of the parties and witnesses might call for a different result.” Coffey v. Van
Dorn Iron Works, 796 F.2d 217, 220 (7th Cir. 1986).
First, the Smith plaintiffs note that they filed their lawsuit first. Mem. Supp. Mot.
Transfer 4–5. While this is true, they did so by less than a week, and do not identify any reason

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other than the bare fact of their marginally earlier filing to explain why the timing augurs in
favor of transfer. Granting an effective right to determine forum to the first filer amongst many
in a putative class action, on the basis of a 6-day difference, without further justification, would
indeed encourage “unseemly race[s] to the courthouse.” Tempco Elec. Heater, 819 F.2d at 750.
This Court has no desire to sponsor or referee such contests. The time at which the actions were
filed does not work in favor of a transfer.
Second, the Smith plaintiffs argue that judicial efficiency would be promoted by the
consolidation and joint litigation of both their and the instant case. Mem. Supp. Mot. Transfer at
5–6. In a curious way, the Smith plaintiffs repeat their first-to-file argument by claiming that,
since Judge Yandle has already rejected Defendants’ repeated efforts to have Smith transferred to
the Central District, and trying all claims against OSF’s plans together would be more efficient,
the most efficient course is to permit this case to be transferred to the Southern District. Id. The
argument assumes that once this case was transferred, it would be consolidated; in effect, the
Smith plaintiffs ask the Court to prospectively approve the consolidation of this case with their
case in the Southern district. Indeed, they put the cart so far before the horse as to argue the
relatively greater breadth of their claims as compared to Plaintiffs’—arguments that might be
relevant to a determination of which firm to appoint as lead counsel, and which case to make the
lead case, if and when these cases are consolidated, or on a motion for class certification, but
which have little to do with whether venue for the instant action is more appropriate in the
Southern District of Illinois. Class certification, rather than a motion to transfer, is the
appropriate point in the litigation process for a court to consider the representativeness of
proposed class plaintiffs and their claims, and the adequacy of proposed class counsel to litigate

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those claims. See Fed. R. Civ. P. 23(b); see also Manual for Complex Litigation, Fourth,
§ 21.272 (2004) (describing methods for selecting class counsel).
Of the other factors relating to the efficient administration of the court system, none
weigh in favor of transferring the case. The Smith plaintiffs do not argue that the docket in the
Southern District is less congested, or that the court there is more familiar with relevant law.
While Saint Anthony’s is located in the Southern District, as already observed, many more OSF
hospitals are located in the Central District, making it desirable to resolve in this district claims
that would affect beneficiaries of all OSF employee pension plans. And, as Defendants argue,
OSF has operated primarily in the Central District for “close to 150 years.” Defs.’ Resp. Mot.
Transfer 3. An estimated 13,170 class members reside in the Central District, where OSF is one
of the largest employers. Id. In light of these facts, it is desirable and in the public interest that
the instant case be resolved where Plaintiffs chose to file it—in the Central District of Illinois.
The Smith plaintiffs’ motion to transfer is neither convenient for parties and witnesses, nor in the
interests of justice, and must be denied.
III.

Motion to Appoint Interim Lead Counsel
Plaintiffs’ attorneys—Kessler Topaz Meltzer & Check, LLP, Izard Kindall & Raabe LLP,

and The Janssen Law Center—seek an order designating them interim counsel.1 Mot. Entry
Order 1–4. Rule 23(g)(3) countenances the appointment of such counsel before a motion to
certify a class is made in a class action suit, permitting but not requiring a court to designate
class counsel under certain circumstances.
If the lawyer who filed the suit is likely to be the only lawyer seeking
appointment as class counsel, appointing interim class counsel may be
unnecessary. If, however, there are a number of overlapping, duplicative, or
competing suits pending in other courts, and some or all of those suits may be
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The first two firms seek designation as co-lead counsel. The Janssen Law Center seeks designation as “interim
liaison class counsel.” Mem. Supp. Mot. Entry Order 1; ECF No. 18.

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consolidated, a number of lawyers may compete for class counsel appointment.
In such cases, designation of interim counsel clarifies responsibility for protecting
the interests of the class during precertification activities, such as making and
responding to motions, conducting any necessary discovery, moving for class
certification, and negotiating settlement.
Manual for Complex Litigation, § 21.11. As the Manual explains, appointment of interim lead
counsel can help clarify responsibilities amongst attorneys when a number of attorneys are
involved in litigation, some but not all of whom may ultimately end up being named class
counsel. Here, while there is obviously a duplicative or competing suit in another court, counsel
in that case have sought for this case to be transferred and consolidated with their case, not to
join this case. Since only the counsel seeking appointment as interim lead counsel are currently
involved in this case, there is no need to clarify responsibility within this case as to which
attorneys bear which responsibilities. Indeed, Plaintiffs’ attorneys demonstrate, in their motion
and its supporting affidavits, that they have organized litigation responsibilities amongst
themselves. Until and unless other parties seek to join the case before the class certification
phase, there is no need to appoint interim counsel, whether or not the Rule 23(g) factors are
satisfied. A review of similar cases suggests that interim lead counsel is typically appointed only
when multiple attorneys seek the role in a single case. See, e.g., Walker v. Discover Fin. Servs.,
No. 10-CV-6994, 2011 WL 2160889, at *2–4 (N.D. Ill. May 26, 2011) (appointing interim
counsel from amongst several competitors).
The motion is therefore denied without prejudice.
CONCLUSION
Accordingly, Plaintiffs’ motion for an order designating interim class counsel, ECF No.
17, is DENIED WITHOUT PREJUDICE; proposed intervenors Kasandra Anton and Sheilar
Smith’s motion to intervene, ECF No. 23, is GRANTED as specified herein; their motion to

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transfer this case to the Southern District of Illinois, ECF No. 25, is DENIED; their motion for
leave to file a reply to the responses thereto, ECF No. 33, is GRANTED; Defendants’ motion for
a hearing on the motions to intervene and transfer, ECF No. 34, is DENIED; and Plaintiffs’
motion to file a notice of supplemental information, ECF No. 44, is GRANTED.

Entered this 23rd day of March, 2017.
s/ Sara Darrow
SARA DARROW
UNITED STATES DISTRICT JUDGE

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