Le v. Unum Life Insurance Co of America
Filing
38
ORDER AND REASONS granting 11 Motion for Summary Judgment and denying 14 Motion for Summary Judgment. IT HEREBY ORDERED that Plaintiff's "Motion for Summary Judgment" on the issue of whether the plan is governed by ERISA is GRA NTED. IT IS FURTHER ORDERED Defendant's "Motion for Summary Judgment" on the issue of whether the plan is governed by ERISA is DENIED. IT IS FURTHER ORDERED that the parties must submit briefing regarding whether subject matter jurisdiction exists over the case, on a ground not yet presented to the Court, within fourteen (14) days of this Order. Signed by Chief Judge Nannette Jolivette Brown on 8/21/2018. (crt,Dauterive, C)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
PAULA LE
CIVIL ACTION
VERSUS
CASE NO. 17-833
UNUM INSURANCE COMPANY OF AMERICA
JUDGE: NJB
MAGISTRATE JUDGE: KWR
ORDER AND REASONS
This is an action brought by Plaintiff Paula Le (“Plaintiff”) for denial of long-term
disability benefits under an employee welfare benefit plan (“the plan”), written through her
employer, the Opelousas General Health System (“OGHS”), and insured by Defendant Unum Life
Insurance Company of America (“Defendant”).1 The parties have filed cross motions for summary
judgment on the issue of whether the plan is governed by the Employee Retirement Income
Security Act of 1974, 29 U.S.C. § 1001, et seq. (“ERISA”).2 Having considered the motions, the
memoranda, the record, and the applicable law, the Court will grant Plaintiff’s motion, deny
Defendant’s motion, and hold that the employee benefit plan established and maintained by OGHS
is a “governmental plan,” which is exempt from ERISA coverage pursuant to 29 U.S.C.
§ 1003(b)(1).
1
Rec. Doc. 1-1.
2
Rec. Docs. 11, 14. The parties refer to their respective motions as motions for summary judgment. However,
the motions are in fact motions for partial summary judgment because they do not seek judgment on Plaintiff’s
underlying claims.
1
I. Background
A.
Factual Background
Plaintiff was involved in a serious vehicular collision on March 20, 2013, in which she
sustained spinal injuries.3 As a result of those injuries, Plaintiff underwent several surgical
procedures performed by Dr. George Raymond Williams.4 Plaintiff also underwent several
procedures as a result of injuries to her hands and arms.5 Since undergoing these surgeries, Plaintiff
has been declared totally and permanently disabled.6
At the time of her injury, Plaintiff was insured under an employee benefit plan, written
through her employer, OGHS, and insured by Defendant.7 Plaintiff applied for benefits and was
awarded long-term disability benefits beginning September 12, 2013.8 On or about January 5,
2017, Plaintiff received notification that her disability benefits were being terminated, which
Plaintiff alleges was done without just cause.9
B.
Procedural Background
On May 10, 2017, Plaintiff filed a petition in the 27th Judicial District Court for the Parish
of St. Landry, State of Louisiana, seeking damages as a result of the allegedly unreasonable denial
3
Rec. Doc. 1-1 at 1.
4
Id.
5
Id.
6
Id.
7
Id.
8
Id.
9
Id. at 2.
2
of benefits under the plan.10 In the petition, Plaintiff brings claims for alleged violations of
Louisiana law, asserting that OGHS “operates as a political subdivision” and the plan is therefore
exempt from coverage under ERISA.11
On June 28, 2017, Defendant removed the case to the United States District Court for the
Western District of Louisiana.12 In the Notice of Removal, Defendant asserts that this Court has
original jurisdiction over this matter under 28 U.S.C. § 1331.13 Specifically, Defendant contends
that Plaintiff’s claim is for benefits under an employee benefit plan governed by the ERISA and is
completely preempted by ERISA.14
On September 27, 2017, Plaintiff filed a motion for summary judgment on the issue of
whether the plan is governed by ERISA.15 On October 18, 2017, Defendant filed an opposition to
Plaintiff’s motion for summary judgment.16 On October 27, 2017, with leave of Court, Plaintiff
filed a reply brief in further support of the motion for summary judgment.17
On October 2, 2017, Defendant filed a cross motion for summary judgment on the issue of
whether the plan is governed by ERISA.18 On October 24, 2017, Plaintiff filed an opposition to
10
Id.
11
Id. at 3.
12
Rec. Doc. 1.
13
Id. at 2.
14
Id. at 3–4.
15
Rec. Doc. 11.
16
Rec. Doc. 22.
17
Rec. Doc. 28.
18
Rec. Doc. 16.
3
Defendant’s motion for summary judgment.19 On November 7, 2017, with leave of Court,
Defendant filed a reply brief in further support of the motion for summary judgment.20 On July 26,
2018, the case was reassigned to the undersigned Chief United States District Judge.21
II. Parties’ Arguments
A.
Plaintiff’s Motion for Summary Judgment
1.
Plaintiff’s Arguments in Support of the Motion
Plaintiff contends that her employer, OGHS, is a political subdivision of the State of
Louisiana, and as such the plan is exempt from ERISA.22 Therefore, Plaintiff submits that the plan
is not an ERISA plan and moves for summary judgment on this issue.23
Plaintiff cites Hightower v. Texas Hospital Association, where the Fifth Circuit held that if
a plan was “established or maintained for its employees by the Government of the United States,
by the government of any State or political subdivision thereof, or by any agency or instrumentality
of any of the foregoing,” the plan was exempt from coverage under Title I of ERISA.24 Here,
Plaintiff asserts that the plan was established and maintained by OGHS for the benefit of the
employees of Opelousas General Hospital employees.25 Furthermore, Plaintiff argues that OGHS
19
Rec. Doc. 23.
20
Rec. Doc. 34.
21
Rec. Doc. 37.
22
Rec. Doc. 11-1 at 1.
23
Id. at 2.
24
Id. at 3 (citing 65 F.3d 443, 445 (5th Cir. 1995)).
25
Id. at 3–4.
4
is a political subdivision of the State of Louisiana.26
Plaintiff contends that in Bertrand v. Sandoz the Louisiana Supreme Court held that
Hospital District No. 2 (“HSD”), which Plaintiff contends later became OGHS, is a political
subdivision of the State.27 Plaintiff cites Buller v. American United Life Ins. Co., a case decided
by a district judge in the Western District of Louisiana, holding that OGHS is a political
subdivision of the State and that a policy established by OGHS for its employees was exempt from
ERISA coverage.28 Plaintiff also cites Andrus v. Unum Life Insurance Company of America, a case
decided by a district judge in the Eastern District of Louisiana, holding that OGHS is a political
subdivision of the State and that the same policy at issue in this case was exempt from ERISA
coverage.29 Thus, Plaintiff asserts that “there can be no question that Opelousas General Health
System is a governmental entity,” and “any Plan or Policy established and/or maintained by
Opelousas General Health System and/or Opelousas General Hospital is exempt under ERISA.”30
Accordingly, Plaintiff urges the Court to grant the motion for summary judgment and find that the
plan is exempt from ERISA coverage.31
2.
Defendant’s Arguments in Opposition to Plaintiff’s Motion
In response, Defendant first states that it does not dispute that HSD is a political subdivision
26
Id. at 4.
27
Id. (citing 255 So. 2d 754 (La. 1971)).
28
Id. (citing Rec. Docs. 11-16, 11-17, 11-18).
29
Id. (citing 2017 WL 2364247 (E.D. La. May 31, 2017)).
30
Id. at 7.
31
Id.
5
of the State of Louisiana.32 However, Defendant contends that OGHS is a trust established for a
public purpose, and is not a political subdivision of the State of Louisiana.33
Defendant argues that the exhibits submitted in connection with this motion establish that
OGHS became the operating entity of the hospital by way of a resolution transferring the
management of the hospital from the Hospital Corporation of the Sisters Marianites of the Holy
Cross to OGHS.34 Defendant contends that OGHS did not become a political subdivision of the
State by operating the hospital under the terms of this agreement.35
According to Defendant, HSD and OGHS are distinct legal entities, and only HSD is a
political subdivision of the State.36 Defendant asserts that Plaintiff’s position is based on the
erroneous premise that HSD and OGHS are the same legal entity, and Defendant argues there is
no documentation showing that HSD ever became OGHS, as Plaintiff suggests.37 Defendant
contends that Plaintiff misreads the holding of the Louisiana Supreme Court in Bertrand.38
According to Defendant, the Louisiana Supreme Court held that HSD was a political subdivision
and that OGHS was a public trust, not a political subdivision.39 Moreover, Defendant contends
that HSD has no control over the employment or benefit operations of OGHS, and OGHS
32
Rec. Doc. 22 at 2.
33
Id.
34
Id. at 2–3 (citing Rec. Doc. 11-5).
35
Id. at 3.
36
Id. at 4.
37
Id.
38
Id.
39
Id. (citing 255 So. 2d at 763).
6
establishes and maintains its own employee benefit plan for its employees.40
Defendant contends that the district court cases cited by Plaintiff are merely interlocutory
orders that should not be considered, even as persuasive authority, because Defendant alleges that
the Louisiana Supreme Court has decided the question presented.41 Defendant acknowledges that
the issue as to whether the OGHS plan is governed by ERISA is a question that is to be determined
under federal law.42 However, Defendant posits that “it is appropriate for the highest court of the
state to make a determination as to whether a specific entity is a political subdivision of the state.”43
Because there is no governing federal authority that is determinative of the issue, Defendant
submits that this Court should look to the ruling of the Louisiana Supreme Court that definitively
established that OGHS is not a political subdivision of the State.44
3.
Plaintiff’s Arguments in Further Support of the Motion
In the reply brief, Plaintiff contends that Defendant “ignores the factors which establish
that OGHS is in fact a political subdivision or, at a minimum, an agency or instrumentality of a
state or political subdivision.”45 According to Plaintiff, OGHS was created as a public trust and
specifically refers to itself as an instrumentality of the State.46 Plaintiff also asserts that OGHS is
40
Id. at 5–6.
41
Id. at 6.
42
Id. at 8.
43
Id.
44
Id.
45
Rec. Doc. 28 at 2.
46
Id.
7
a “public corporation of the beneficiary” and subject to the “Public Contracts Law, Public Records
Law, Public Meetings Law, Code of Ethics, and the Bond Validation Procedures Law.”47 Plaintiff
notes that all of OGHS’s meetings are open to the public.48 Furthermore, Plaintiff states that the
trust is exempt from all state and federal taxes and the property of the trust is considered public
property.49
Plaintiff also disputes Defendant’s assertion that OGHS operates independently from HSD
and is not subject to its supervision and control.50 According to Plaintiff, the Board of Trustees,
which conducts the affairs of OGHS, is appointed by the HSD, and five of the nine trustees are
commissioners of HSD.51 Plaintiff contends that the Commission of HSD has the power to remove
a trustee of OGHS for cause.52 Moreover, Plaintiff asserts that the Commission must approve
OGHS’s bylaws, and the Commission has the power to veto the bylaws or propose changes to
them.53 Therefore, Plaintiff asserts that “[t]here is no question that control of OGHS is vested with
Hospital Service District No. 2, and the District Commission controls the governing board of
OGHS.”54
According to Plaintiff, in Bertrand the Louisiana Supreme Court held that HSD could raise
47
Id. (citing La. Rev. Stat. § 9:2343(D)).
48
Id.
49
Id. at 3 (citing La. Rev. Stat. § 9:2347(M)).
50
Id.
51
Id.
52
Id. (citing La. Rev. Stat. § 9:2343(F)(3)).
53
Id. (citing La. Rev. Stat. § 9:2343(C)).
54
Id. at 3–4.
8
funds through a public trust without a vote from the citizens of St. Landry Parish.55 However,
Plaintiff notes that the Louisiana Supreme Court was not analyzing OGHS’s status under ERISA
and did not address whether the public trust was created by the State so as to constitute a political
subdivision of the State.56
Finally, Plaintiff contends there is no legal authority to prevent the Court from reviewing
the district court cases cited in Plaintiff’s original brief.57 At a minimum, Plaintiff argues “the
interim ruling in Andrus is more relevant to this Court than the ruling in Bertrand, which is clearly
distinguishable from the facts herein.”58
B.
Defendant’s Cross Motion for Summary Judgment
1.
Defendant’s Arguments in Support of the Motion
In the motion for summary judgment, Defendant again asserts that in Bertrand the
Louisiana Supreme Court held that HSD was a political subdivision and that OGHS was a public
trust, not a political subdivision.59 Defendant notes that “OGHS’s status as a political subdivision
is currently at issue in pending litigation in the Eastern District of Louisiana involving the same
Unum policy.”60 Defendant argues that the district court in Andrus incorrectly determined that
OGHS was a political subdivision, but Defendant asserts that “[t]he district court’s interim ruling
55
Id. at 4 (citing 255 So. 2d at 763).
56
Id.
57
Id.
58
Id. at 5.
59
Rec. Doc. 14-1 at 6 (citing 255 So. 2d at 763).
60
Id. at 7 (citing Andrus v. Unum Life Insurance Company of America, 2017 WL 2364247 (E.D. La. May
31, 2017)).
9
cannot be considered as binding or even persuasive authority for the proposition that the OGHS
plan is exempt from coverage under ERISA.”61 Therefore, Defendant contends that this Court
should find that OGHS is not a political subdivision and the plan is governed by ERISA.62
Defendant points to the application for group long term disability coverage that OGHS
submitted to Defendant on July 16, 2009, where OGHS identified itself as a “Non-Profit
Organization,” not as a “Government Organization.”63 According to Defendant, the plan is only
offered to employees who are directly employed by OGHS.64
Defendant asserts that in 1953 the St. Landry Parish Police Jury, a political subdivision of
the State of Louisiana, adopted an ordinance creating HSD.65 Defendant contends that HSD is
statutorily designated as a political subdivision, which operates through a five member Board of
Commissioners, and has the authority to incur debt, expropriate property, issue bonds, and levy
taxes.66 According to Defendant, HSD is also statutorily authorized to enter into an agreement with
a hospital management firm to manage, operate, and administer a hospital for the benefit of the
hospital service district.67 Defendant also notes that HSD “has never operated the hospital directly,
nor has it employed its personnel or established an employee welfare benefit plan for hospital
61
Id.
62
Id. at 8.
63
Id. at 9 (citing Rec. Docs. 14-3, 14-5).
64
Id.
65
Id. at 10 (citing Rec. Doc. 14-8).
66
Id. (citing La. Rev. Stat. §§ 46:1055; 46:1060).
67
Id. (citing La. Rev. Stat. § 46:1055).
10
employees.”68 According to Defendant, in 1971, a trust indenture was entered with certain citizens
of Opelousas, Louisiana, for the purpose of financing, operating, constructing, leasing, renting,
managing, and administering the hospital facilities, which became known as the Opelousas
General Health Authority and operates under the trade name OGHS.69
Defendant asserts that under Fifth Circuit law an entity is a political subdivision if it is
either: “(1) created directly by the state, so as to constitute departments or administrative arms of
the government, or (2) administered by individuals who are responsible to public officials or to the
general electorate.”70 Defendant contends that OGHS was not created directly by the State of
Louisiana.71 Although ERISA is governed by federal law, Defendant contends that the Fifth Circuit
has recognized that “state law statutes and cases on the issue of whether an employer is considered
to be a political subdivision are relevant to the inquiry when examining whether the entity was
created directly by the state so as to constitute a department or an administrative arm of the
government.”72 Again, Defendant argues that in Bertrand the Louisiana Supreme Court held that
OGHS was a public trust, not a political subdivision.73 Defendant also contends that this case is
similar to Shannon v. Shannon, where the Seventh Circuit determined that a nonprofit corporation
68
Id. at 11 (citing Rec. Doc. 14-8).
69
Id. at 11 (citing Rec. Doc. 14-9).
70
Id. at 15 (citing Smith v. Regional Transit Authority, 827 F.3d 412, 417 (5th Cir. 2016); NLRB v. Natural
Gas Utility District of Hawkins County, 402 U.S. 600, 604–05 (1971)).
71
Id.
72
Id. at 15–16 (citing N.L.R.B. v. Highview, Inc., 590 F.2d 174, 176 (5th Cir. 1979), vacated in part on other
grounds, 595 F.2nd 339 (5th Cir. 1979)).
73
Id. at 17 (citing 255 So. 2d at 763).
11
that operated a hospital pursuant to a lease with the City was created by ten incorporators “under
the laws of Wisconsin as a private, non-stock, nonprofit corporation.”74
Furthermore, Defendant contends that OGHS is not administered by individuals who are
responsible to public officials or to the general public.75 Defendant contends that HSD is the
beneficiary of, but does not administer, the trust.76 Defendant also cites NLRB v. Highview, Inc.,
where the Fifth Circuit held that the political subdivision exemption of the National Labor
Relations Act did not apply to a nonprofit hospital corporation which operated a nursing home
located on county land.77 Here, because OGHS operates as a distinct entity that is completely
independent from HSD and is not administered by individuals who are responsible to public
officials or the general electorate, Defendant contend that OGHS is not a political subdivision of
the State.78
2.
Plaintiff’s Arguments in Opposition to Defendant’s Motion
Plaintiff notes that she also filed a motion for summary judgment on the issue of whether
the plan is exempt from ERISA coverage, but she asserts “there are some issues raised by
Defendant’s motion which warrant special attention.”79 Specifically, Plaintiff contends that
Defendant’s argument focuses solely on whether OGHS is a political subdivision of the State,
74
Id. at 18–19 (quoting 965 F.2d 542, 546 (7th Cir. 1992)).
75
Id. at 19.
76
Id.
77
Id. at 20 (citing 590 F.2d 174, 176 (5th Cir. 1979)).
78
Id. at 23.
79
Rec. Doc. 23 at 2.
12
without addressing whether OGHS is an agency or instrumentality of the State or of a political
subdivision of the State.80 For the reasons set forth in support of her motion for summary judgment,
Plaintiff contends that OGHS is a political subdivision of the State.81 Alternatively, even if OGHS
is not a political subdivision of the State, Plaintiff contends that OGHS is an agency or
instrumentality of HSD, which is undisputedly a political subdivision of the State.82
First, Plaintiff contends that OGHS is a political subdivision of the State because it was
created directly by the State so as to constitute a department or administrative arm of the State.83
Plaintiff asserts that because the hospital was created by the State, and later converted to a public
trust to raise funds for expansion, it was established by the State, regardless of whether the public
trust maintains it now.84 Plaintiff notes that in Bertrand the Louisiana Supreme Court did not
address whether the public trust was created by the State, so as to constitute a political subdivision
of the State.85 Plaintiff also contends that there are the following key distinctions between the facts
of this case and Shannon v. Shannon, the Seventh Circuit Case cited by Defendant: (1) OGHS was
created as a public trust and refers to itself as an instrumentality of the State; (2) all of OGHS’s
meetings and records are open to the public; (3) all of the trustees are selected by, and subject to
80
Id.
81
Id.
82
Id. at 3.
83
Id. at 5.
84
Id. at 6.
85
Id. at 7–8 (citing 255 So. 2d at 763).
13
removal by, the HSD commissioners.86
Second, Plaintiff contends that OGHS is a political subdivision of the State because it is
administered by individuals who are responsible to public officials or to the general electorate.87
Plaintiff contends that the trustees are public officials who are required to take an oath of office.88
Moreover, Plaintiff asserts that neither OGHS’s bylaws nor its trust indenture may be changed
without consent of the HSD commission.89 Therefore, Plaintiff argues that there is no question that
OGHS is administered by individuals responsible to public officials, i.e. the Commissioners of
HSD.90 Plaintiff asserts that this case is similar to StarTran, Inc. v. Occupational Safety & Health
Commission, where the Fifth Circuit held that a private corporation was a political subdivision
because it was administered by individuals who are responsible to public officials.91
Alternatively, even if OGHS is not a political subdivision of the State, Plaintiff contends
that OGHS is an agency or instrumentality of HSD, which is undisputedly a political subdivision
of the State.92 Plaintiff contends that OGHS meets the six factors test set forth by the Fifth Circuit
for determining whether an entity is an agency or instrumentality of a governmental entity because:
(1) it serves a governmental purpose and performs a governmental function by operating a hospital;
86
Id. at 8–9 (citing 965 F.2d at 542).
87
Id. at 9.
88
Id. (citing La. Rec. Stat. § 9:2343(A)(1)).
89
Id. at 11.
90
Id.
91
Id. at 13 (citing 608 F.3d 312, 324 (5th Cir. 2010)).
92
Id. at 15.
14
(2) it performs its function on behalf of HSD pursuant to the trust indenture; (3) although there are
private interests involved because the members of the Board of Trustees serve in their capacities
as citizens, HSD has the powers and interests of an owner; (4) the Board of Trustees is appointed
by HSD and five of the nine trustees are commissioners of HSD, evidencing that HSD controls
OGHS; (5) the use of OGHS to manage, operate, and administer a hospital is legislatively
authorized; and (6) OGHS has little financial autonomy because in reality it is managed by the
Commissioners of HSD.93 Accordingly, Plaintiff contends that OGHS is an agent or
instrumentality of HSD, which is a political subdivision of the State.94
3.
Defendant’s Arguments in Further Support of the Motion
In the reply brief, Defendant first argues that Plaintiff is improperly attempting to introduce
a new “claim” through the opposition to Defendant’s motion for summary judgment.95 Defendant
notes that in the complaint Plaintiff alleged that OGHS was exempt from coverage under ERISA
because it was a political subdivision, but Plaintiff did not allege that OGHS was an agency or
instrumentality of the State.96 Instead, Defendant asserts that Plaintiff raised this “claim” for the
first time in opposition to the motion for summary judgment.97 Defendant avers that it is well
established in the Fifth Circuit that “a claim that is not raised in the complaint, but which is raised
93
Id. at 15–19 (citing Smith v. Regional Transit Authority, 827 F. 3d 412 (5th Cir. 2017).
94
Id. at 19.
95
Rec. Doc. 34 at 6.
96
Id.
97
Id. at 7.
15
only in response to a motion for summary judgment is not properly before the Court.”98 Therefore,
Defendant argues that the Court should “disregard the new claim.”99
Alternatively, Defendant argues that OGHS does not meet the six-factor test set forth by
the Fifth Circuit for determining whether an entity is an agency or instrumentality of a
governmental entity because: (1) while OGHS benefits the public, it does not perform a traditional
governmental function as the government is not required to provide hospital services; (2) OGHS
does not operate the hospital on behalf of the HSD or the State as the district does not have any
control over the operation of the hospital and no claim to OGHS’s revenues; (3) neither the Police
Jury nor HSD have the powers or interests of an owner; (4) HSD has no control or supervision
over the day-to-day operations of OGHS; (5) a state statute authorizes the creation of public trusts
but did not mandate the creation of OGHS; and (6) OGHS has complete financial autonomy from
the Parish and State.100
“While HSD may have some involvement in the removal of a trustee for cause,” Defendant
contends that “there is absolutely no evidence that HSD has any control whatsoever over OGHS’s
day-to-day operation of the hospital or the provision of employee benefit plans for its
employees.”101 Defendant asserts that OGHS operates the hospital independent from any
governmental entity by paying its own employees, posting its own job openings, and providing its
98
Id. (quoting Cutrera v. Board of Supervisors, 429 F.3d 108, 113 (5th Cir. 2005)).
99
Id.
100
Id. at 8–9.
101
Id. at 9.
16
own benefits.102 Defendant contends that OGHS does not receive any funding from a governmental
entity, and has complete financial autonomy from HSD and the State.103 Furthermore, while
members of HSD sit on the Board of Trustees of OGHS, Defendant contends that “it is clearly not
in their capacity as public officials because the HSD has no control over hospital operations.”104
Therefore, Defendant asserts that “[t]he balance of factors here, including the lack of State or
Parish control over OGHS’s operations, the lack of governmental funding, and the lack of indicia
of governmental employment, all establish that OGHS is not an agency or instrumentality of the
state or one of its political subdivisions.”105
Defendant argues that OGHS was not created directly by the State, and instead was created
by a written trust instrument.106 Defendant concedes, as argued by Plaintiff, that OGHS’s meetings
and records are open to the public, the trust indenture and its bylaws must be approved by the
HSD, OGHS does not file an annual Form 5500, and OGHS is subject to monitoring by a
governmental agency.107 However, Defendant asserts that these factors are not determinative of
whether ERISA governs OGHS’s employee benefit plan.108 Furthermore, Defendant argues that
“OGHS’s tax-exempt status does not establish that it is a governmental entity as that status is
102
Id.
103
Id. at 9–10.
104
Id. at 10.
105
Id. at 11.
106
Id.
107
Id. at 13.
108
Id.
17
granted to many non-profit organizations.”109
Finally, Defendant argues that “OGHS is not administered by individuals who are
responsible to public officials or the general electorate, as claimed by plaintiff, simply because the
board of directors must include elected or appointed public officials.”110 Defendant asserts that
“HSD and OGHS are distinct legal entities and this distinction cannot be disregarded because the
class of members of each happens to be coextensive.”111 Specifically, Defendant notes that HSD
does not manage OGHS’s operations, OGHS has unfettered discretion in carrying on its day-today operations, and OGHS’s finances are completely separate from HSD.112 Defendant contends
that one of Congress’s primary reasons for exempting governmental plans from the funding
requirements of ERISA was “the ability of the governmental entities to fulfill their obligations to
employees through their taxing powers” as a substitute for minimum funding standards and plan
termination insurance.113 Because OGHS has no authority to levy taxes, Defendant avers that
finding that the plan is exempt from ERISA would relieve “OGHS’s privately funded employee
benefit plan from the mandatory protections that Congress requires ERISA plans to provide,
effectively leaving employees with no remedy should OGHS ever encounter financial
difficulties.”114
109
Id.
110
Id. at 14.
111
Id.
112
Id.
113
Id. (quoting Rose vs. Long Island R.R. Pension Plan, 828 F.2d 910 (2nd Cir. 1987)).
114
Id. at 15.
18
III. Legal Standard
A.
Legal Standard on a Motion for Summary Judgment
Summary judgment is appropriate when the pleadings, the discovery, and any affidavits
show that “there is no genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law.”115 When assessing whether a dispute as to any material fact exists, a court
considers “all of the evidence in the record but refrains from making credibility determinations or
weighing the evidence.”116 All reasonable inferences are drawn in favor of the nonmoving party,
but “unsupported allegations or affidavits setting forth ‘ultimate or conclusory facts and
conclusions of law’ are insufficient to either support or defeat a motion for summary judgment.”117
If the record, as a whole, could not lead a rational trier of fact to find for the nonmoving party,
then no genuine issue of fact exists and the moving party is entitled to judgment as a matter of
law.118
On a motion for summary judgment, the moving party bears the initial burden of
identifying those portions of the record that it believes demonstrate the absence of a genuine issue
of material fact.119 “To satisfy this burden, the movant may either (1) submit evidentiary
documents that negate the existence of some material element of the opponent’s claim or defense,
115
Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322B23 (1986); Little v. Liquid Air
Corp., 37 F.3d 1069, 1075 (5th Cir. 1994).
116
Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398B99 (5th Cir. 2008).
117
Galindo v. Precision Am. Corp., 754 F.2d 1212, 1216 (5th Cir. 1985); Little, 37 F.3d at 1075.
118
Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 586 (1986).
119
Celotex, 477 U.S. at 323.
19
or (2) if the crucial issue is one on which the opponent will bear the ultimate burden of proof at
trial, demonstrate that the evidence in the record insufficiently supports an essential element of the
opponent’s claim or defense.”120 If the moving party satisfies its initial burden, the burden shifts
to the nonmoving party to “identify specific evidence in the record, and articulate” precisely how
that evidence supports his claims.121 In doing so, the nonmoving party may not rest upon mere
allegations or denials in its pleadings, but rather must set forth “specific facts showing the existence
of a ‘genuine’ issue concerning every essential component of its case.”122 The nonmovant=s burden
of demonstrating a genuine issue of material fact is not satisfied merely by creating “some
metaphysical doubt as to the material facts,” “by conclusory allegations,” by “unsubstantiated
assertions,” or “by only a scintilla of evidence.”123 There is no genuine issue for trial “unless there
is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party.”124
Furthermore, it is well-established that “[u]nauthenticated documents are improper as summary
judgment evidence.”125
120
Duplantis v. Shell Offshore, Inc., 948 F.2d 187, 190 (5th Cir. 1991) (citing Little v. Liquid Air Corp., 939
F.2d 1293, 1299 (5th Cir. 1991)).
121
Forsyth v. Barr, 19 F.3d 1527, 1537 (5th Cir. 1994), cert. denied, 513 U.S. 871 (1994); see also Morris
v. Covan World Wide Moving, Inc., 144 F.3d 377, 380 (5th Cir. 1998).
122
Morris, 144 F.3d at 380 (citing Thomas v. Price, 975 F.2d 231, 235 (5th Cir. 1992); see also Bellard v.
Gautreaux, 675 F.3d 454, 460 (5th Cir. 2012).
123
Little, 37 F.3d at 1075.
124
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986) (citing First Nat. Bank of Ariz. v. Cities Serv.
Co., 391 U.S. 253, 288B89 (1968)).
125
King v. Dogan, 31 F.3d 344, 346 (5th Cir. 1994).
20
B.
Legal Standard on ERISA Coverage and Exemptions
“The purpose of ERISA is to provide a uniform regulatory regime over employee benefit
plans.”126 Section 514(a) of ERISA states that ERISA “shall supersede any and all State laws
insofar as they may now or hereafter relate to any employee benefit plan. . . .”127 Section 502(a) of
ERISA sets forth the exclusive grounds for relief under ERISA.128 “Hence, ‘causes of action within
the scope of the civil enforcement provisions of § 502(a) [are] removable to federal court.’”129
Nevertheless, although ERISA’s scope is expansive, certain types of employee benefit plans are
excluded from coverage.
29 U.S.C. §1003(b)(1) provides that ERISA “shall not” apply to any employee benefit plan
if such plan is a “governmental plan.” ERISA defines a “governmental plan” as follows:
A plan established or maintained for its employees by the Government of the United
States, by the government of any State or political subdivision thereof, or by any
agency or instrumentality of the foregoing.130
Accordingly, the governmental plan exemption applies to a plan that was either established or
maintained by an entity that falls within the statutory language.131
126
McAteer v. Silverleaf Resorts, Inc., 514 F.3d 411, 417 (5th Cir. 2008) (quoting Aetna Health Inc. v. Davila,
542 U.S. 200, 208 (2004)).
127
29 U.S.C. § 1144(a).
128
29 U.S.C. § 1132(a).
129
Davila, 542 U.S. at 209.
130
29 U.S.C. § 1002(32). There is no statutory language in ERISA that defines the terms “political
subdivision,” “agency” or “instrumentality.”
131
Hightower v. Texas Hospital Assoc., 65 F.3d 443, 451 (5th Cir. 1995).
21
IV. Analysis
The parties do not dispute that OGHS obtained the group long-term disability policy for its
eligible employees from Defendant and that Plaintiff was insured under the policy. The material
facts surrounding the creation of OGHS also are undisputed.132
The parties dispute whether the plan is exempt from coverage under the governmental plan
exemption. As noted above, the governmental plan exemption applies to a political subdivision of
the state or by any agency or instrumentality of a political subdivision.133 In the petition and in
Plaintiff’s motion for summary judgment, she only argued that OGHS is a political subdivision of
the State.134 However, in opposition to Defendant’s motion for summary judgment, Plaintiff raises
an alternative argument that OGHS is an agency or instrumentality of a political subdivision.135 In
its reply brief, Defendant contends that the Court should not consider Plaintiff’s argument that
OGHS is an agency or instrumentality, contending it is a new “claim” not raised in the petition136
It is well established in the Fifth Circuit that “a claim that is not raised in the complaint,
but which is raised only in response to a motion for summary judgment is not properly before the
court.”137 In Fisher v. Metropolitan Life Insurance Co., the Fifth Circuit found that the plaintiff’s
132
In the opening brief, Plaintiff suggested that HSD later became OGHS. However, in subsequent briefs,
Plaintiff does not dispute that HSD and OGHS are distinct legal entities.
133
29 U.S.C. § 1002(32).
134
See Rec. Docs. 1-1, 11.
135
See Rec. Doc. 23.
136
Rec. Doc. 34 at 6.
137
Cutrera v. Board of Supervisors, 429 F.3d 108, 113 (5th Cir. 2005) (Fisher v. Metropolitan Life Ins. Co.,
895 F.2d 1073, 1078 (5th Cir. 1990)).
22
claim that his insurer improperly calculated the benefits he received under ERISA was not properly
before the court because it was raised in response to a motion for summary judgment rather than
in the complaint.138
Federal Rule of Civil Procedure 8(a)(2) requires that a plaintiff provide “a short and plain
statement of the claim showing that the pleader is entitled to relief,” in order to “give the defendant
fair notice of what the . . . claim is and the grounds upon which it rests.”139 Although a complaint
need not contain detailed factual allegations it is “a plaintiff’s obligation to provide the grounds of
his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of
the elements of a cause of action will not do.”140
In the petition, which Plaintiff originally filed in state court, Plaintiff claims that Defendant
violated Louisiana law by unreasonably “terminating Plaintiff’s benefits without just cause” and
arbitrarily and capriciously failing to timely pay benefits to Plaintiff under the terms of the
policy.141 The petition also alleges that OGHS “operates as a political subdivision” and the plan is
therefore exempt from coverage under ERISA.142 Plaintiff’s claims, i.e. causes of action, are for
the alleged violations of state law arising out of Defendant allegedly terminating Plaintiff’s
benefits without just cause and failing to timely pay benefits under the terms of the policy.
138
Fisher, 895 F.2d at 1078.
139
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Fed. R. Civ. P. 8(a)(2); Conley v.
Gibson, 355 U.S. 41, 47 (1957)).
140
Id. (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986) (internal quotation marks and brackets omitted)).
141
Rec. Doc. 1-1 at 1–2.
142
Id. at 3.
23
Plaintiff’s argument that the plan is not covered by ERISA because OGHS is a “political
subdivision” is not a “claim” for relief. Therefore, Defendant’s assertion that the Court should not
consider Plaintiff’s alternative argument is unavailing because this alternative argument is not a
“claim” that must be plead under Rule 8(a)(2). Accordingly, the Court will consider both Plaintiff’s
argument that OGHS is a political subdivision of the State and her alternative argument that OGHS
is an agency or instrumentality of a political subdivision.
A.
Whether OGHS is a Political Subdivision of the State
Plaintiff argues that OGHS is a political subdivision of the State of Louisiana.143 Plaintiff
contends that OGHS was created directly by the State so as to constitute a department or
administrative arm of the State.144 Plaintiff also asserts that OGHS is a political subdivision of the
State because it is administered by individuals who are responsible to public officials or to the
general electorate.145 Defendant does not dispute that HSD is a political subdivision of the State
of Louisiana.146 However, Defendant contends that Plaintiff’s employer, OGHS, is a trust
established for a public purpose and is not a political subdivision of the State of Louisiana.147
The Fifth Circuit has adopted the test set forth by the United States Supreme Court in NLRB
v. Natural Gas Utility District of Hawkins County for the purpose of discerning whether an entity
143
Rec. Doc. 11-1 at 4.
144
Rec. Doc. 23 at 5.
145
Id. at 9.
146
Rec. Doc. 22 at 2.
147
Id.
24
is a political subdivision under ERISA.148 Under the Hawkins test, an entity is a political
subdivision if it is either “(1) created directly by the state, so as to constitute departments or
administrative arms of the government, or (2) administered by individuals who are responsible to
public officials or to the general electorate.”149 This is a disjunctive test, and therefore, Plaintiff
may establish that OGHS fits the definition of a political subdivision under either prong.150
To determine whether OGHS is a political subdivision of the State, the Court must examine
the facts surrounding the creation of OGHS and its governance structure, which are undisputed.151
On July 6, 1953, the St. Landry Parish Police Jury, the governing body of St. Landry Parish that
later became known as the St. Landry Parish Council, created HSD.152 HSD is statutorily
authorized to enter into an agreement with a third party for the third party to manage and operate
a hospital for the benefit of the district.153 On September 21, 1954, HSD proposed, and voters
approved, a bond issue for $350,000 to be financed by a one-mill ad valorem tax.154 With these
funds, some donations, and a small allotment from State severance taxes, grounds were acquired
and the hospital building was erected.155 HSD then entered into a lease agreement with the Hospital
148
Smith v. Reg’l Transit Auth., 827 F.3d 412, 417 (5th Cir. 2016) (citing 402 U.S. 600 (1971)).
149
Id.
150
Id.
151
In the opening brief, Plaintiff suggested that HSD later became OGHS. However, in subsequent briefs,
Plaintiff does not dispute that HSD and OGHS are distinct legal entities.
152
Bertrand v. Sandoz, 255 So. 2d 754, 756 (La. 1971).
153
La. Rev. Stat. § 46:1055.
154
Bertrand, 255 So. 2d at 756.
155
Id.
25
Corporation of the Sisters of Marianites of the Holy Cross for it to operate the newly constructed
hospital.156 Due to the hospital’s success, “plans were formulated by the district in 1970 to provide
for modernization and expansion, including a new building or wing adjoining the existing
facility.”157 “The bond proposal was submitted to the voters of the district on January 12, 1971,
and it was soundly defeated.”158
In response, members of the Board of Commissioners of HSD created a public trust called
the Opelousas General Hospital Authority, which later began to operate under the trade name
OGHS.159 The trust was created “for the use and benefit” of HSD “to finance, operate, construct,
lease, rent, manage and administer hospital facilities.”160 Through the trust, “revenue bonds
supported entirely by self-generated Hospital revenues [were] used to finance the needed
renovation and expansion project.”161 The Trust Indenture further provides that the trust is “a
public instrumentality of the state or a subdivision or agency thereof.”162 On September 25, 1986,
the Trust Indenture was amended to include Article IV, section 4.1, which states, “The purpose of
the Trust shall constitute authorized public functions or purposes held to be an essential public
156
Id.
157
Id. at 757.
158
Id.
159
Id. On January 22, 2004, OGHA filed a “Certificate of Registration of Assumed Business Name”
providing that OGHA would do business as “Opelousas General Health System.” Billeaudeau v. Opelousas General
Hospital Authority, 17-735 (La. App. 3 Cir. 2/7/18); 239 So. 3d 306, 311.
160
Rec. Doc. 11-4 at 1.
161
Bertrand, 255 So. 2d at 757.
162
Rec. Doc. 11-4 at 1.
26
function conducted in the public interest. . . .”163
The five Commissioners of HSD, appointed to that position by the Parish Council, became
the five original members of the Board of Trustees of OGHS.164 An Amended Trust Indenture later
increased the number of Trustees of OGHS to nine, but the five Commissioners of HSD remained
Trustees and the additional Trustees are appointed by the Commissioners.165 The Trust Indenture
provides that officers of the Commission of HSD and the Board of Directors of OGHS are
identical.166
The Commission of HSD, as the governing authority of the beneficiary of the Trust, has
the power to remove a Trustee of OGHS for cause.167 The Board of Trustees of OGHS is required
to adopt bylaws, but the bylaws may be vetoed by the Commission.168 Under Louisiana law,
meetings of the OGHS Board of Trustees must be open to the public.169 Louisiana law also required
that the Trust Indenture be approved by the Commission of HSD and by the Louisiana State Bond
163
Billeaudeau, 239 So. 3d at 317 (quoting La. Rev. Stat. § 9:2341(D)).
164
Bertrand, 255 So. 2d at 758. The original Trust Indenture states “the Trustees of this Trust shall be . . . the
persons presently constituting the members of the governing Commission of [HSD].” Rec. Doc. 11-4 at 4.
165
Rec. Doc. 11-13 at 3.
166
Rec. Doc. 11-4 at 4–5 (“The person who shall be the Chairman of the governing body (Commission) of
the Hospital Service District No. 2, shall become automatically the Chairman of the Trustees and shall preside at all
meetings and perform other duties designated by the Trustees. The person who shall be the Vice Chairman of the
Hospital Service District No. 2 shall be automatically the Vice Chairman of the Trustees. . . . The person who shall be
the Secretary of the Hospital Service District No. 2 shall act as Secretary of the Trustees.”).
167
La. Rev. Stat. § 9:2343(F)(3) (“In the case of persons appointed by the governing authority of the
beneficiary or by the governor, as the case may be, such persons shall be appointed for a term not in excess of six
years, and shall be subject to removal for cause, as aforesaid, by or at the will of the beneficiary.”)
168
La. Rev. Stat. § 9:2341(C) (“[T]he governing authority of the beneficiary shall have the power to veto all
or part of the proposed bylaws.”)
169
La. Rev. Stat. § 9:2343(D) (“Meetings of the trustees of all public trusts shall be open to the public and
the records of all public trusts shall be public records to the same extent as is required by law for the beneficiary.”)
27
Commission.170
Considering these same facts and the same plan at issue here, in Andrus v. Unum Life
Insurance Company of America a district judge in the Eastern District of Louisiana found that
“OGHS is administered by individuals who are responsible to public officials, namely the
Commissioners of the Hospital Service District No. 2, which is a political subdivision.”171
Accordingly, that court concluded that OGHS is a political subdivision of the State of Louisiana
for the purposes of ERISA because it is “administered by individuals who are responsible to public
officials or the general electorate.”172
Defendant contends that this Court should not consider Andrus even as persuasive authority
because Defendant asserts that the Louisiana Supreme Court has decided the question presented.173
In Bertrand v. Sandoz, the Louisiana Supreme Court reviewed a state trial court’s order dismissing
a class action lawsuit seeking to have the trust through which OGHS was formed declared invalid;
and, alternatively, that the trust be prohibited from issuing revenue bonds without an election by a
majority of the taxpayers of the district.174 The Louisiana Supreme Court found that HSD was a
“subdivision of the state within the meaning of the constitution, the Public Trust Act and the police
170
La. Rev. Stat. § 9:2341(A) (A public trust may be created with the “(1) express approval of the governor
and two-thirds of the elected members of each house of the legislature if the state of Louisiana or any state agency is
the beneficiary; (2) express approval of a majority of the membership of the governing authority of the beneficiary
and the State Bond Commission or its successor if a parish or municipality or a political or governmental subdivision
thereof is the beneficiary; and (3) express approval of a majority of the membership of the governing authority of the
beneficiary and the State Bond Commission or its successor, in all other cases.” (emphasis added)).
171
2017 WL 2364247, at *5 (E.D. La. May 31, 2017)).
172
Id.
173
Rec. Doc. 22 at 6.
174
Bertrand, 255 So. 2d at 758.
28
jury ordinance.”175 Therefore, the Louisiana Supreme Court held that HSD was capable of being
designated as beneficiary of a public trust.176 Furthermore, the Louisiana Supreme Court held
OGHS was not a political subdivision of the State but instead was a valid public trust that could
“issue revenue bonds without an election by a majority of the taxpayers of the district.”177
Although Defendant acknowledges that federal law controls the issue of whether OGHS is
a political subdivision for purpose of ERISA preemption, Defendant contends that the Court
should rely on Bertrand because it “definitively established” that OGHS is not a political
subdivision and there is no governing federal authority that is determinative of the issue.178
However, even if Louisiana law were determinative of this issue, Louisiana courts have recognized
that a subsequent amendment to the Public Trust Act calls the Bertrand court’s holding that OGHS
is not a political subdivision into question.
In Billeaudeau v. Opelousas General Hospital Authority the Louisiana Third Circuit Court
of Appeal noted that the Public Trust Act was amended in 1978, after the Louisiana Supreme Court
decided Bertrand, to provide that “[a]ll public trusts hereafter created or amended under this
Chapter shall constitute public corporations of the beneficiary.”179 The Louisiana Third Circuit
held that “the 1986 and 1991 amendments to the Hospital Service District No. 2 of St. Landry’s
Trust Indenture brought the OGH[A] within the scope of the legislative amendments throughout
175
Id. at 758–59.
176
Id. at 759.
177
Id. at 763–64.
178
Rec. Doc. 22 at 6.
179
239 So. 3d at 317.
29
the years,” making OGHA, which operates under the trade name OGHS, a “public corporation”
and political subdivision under the Louisiana Governmental Claims Act.180
As discussed above, neither OGHS’s bylaws nor its Trust Indenture may be changed
without the consent of the Commission of HSD, which is appointed by the Parish Council.
Furthermore, five of the members of the Board of Trustees for OGHS are also Commissioners of
HSD, the four additional Trustees are appointed by the Commission, and officers of the
Commission of HSD and the Board of Directors of OGHS are identical. Therefore, the Court finds
that OGHS is a political subdivision of the State of Louisiana for the purposes of ERISA because
it is “administered by individuals who are responsible to public officials or the general electorate.”
Because the Court finds OGHS is a political subdivision of the State of Louisiana, the employee
benefit plan established and maintained by OGHS is a “governmental plan,” which is exempt from
ERISA coverage pursuant to 29 U.S.C. § 1003(b)(1).181
B.
Whether OGHS is an Agency or Instrumentality of a Political Subdivision of the State
Alternatively, even if OGHS is not a political subdivision of the State, Plaintiff contends
that OGHS is an agency or instrumentality of HSD, which the parties agree is a political
subdivision of the State.182 In opposition, Defendant argues that OGHS does not meet the sixfactor test set forth by the Fifth Circuit for determining whether an entity is an agency or
180
Id.
181
Because the Court finds that OGHS is administered by individuals who are responsible to public officials
or to the general electorate, it will not consider Plaintiff’s argument that OGHS was created directly by the State.
182
Rec. Doc. 23 at 15.
30
instrumentality of a governmental entity.183
ERISA does not define “agency or instrumentality” for the purposes of determining
whether a plan is exempt as a governmental plan.184 The Fifth Circuit has adopted the six-factor
test provided in Internal Revenue Service Revenue Ruling 57-128, as refined by Internal Revenue
Service Revenue Ruling 89-49, as the appropriate test for determining whether an entity is an
agency or instrumentality of a governmental entity.185 In Revenue Ruling 57-128, the IRS set forth
the following six factors to be considered in determining whether a particular entity is an agency
or instrumentality of a state or political subdivision:
(1) whether it is used for a governmental purpose and performs a governmental
function; (2) whether performance of its function is on behalf of one or more states
or political subdivisions; (3) whether there are any private interests involved, or
whether the states or political subdivisions involved have the powers and interests
of an owner; (4) whether control and supervision of the organization is vested in
public authority or authorities; (5) if express or implied statutory or other authority
is necessary for the creation and/or use of such an instrumentality, and whether such
authority exists; and (6) the degree of financial autonomy and the source of its
operating expenses.186
Revenue Ruling 89-49 refined Revenue Rule 57-128, stating:
One of the most important factors to be considered in determining whether an
organization is an agency or instrumentality of the United States or any state or
political subdivision is the degree of control that the federal or state government
has over the organization’s everyday operations. Other factors include: (1) whether
there is specific legislation creating the organization; (2) the source of funds for the
organization; (3) the manner in which the organization’s trustees or operating board
are selected; and (4) whether the applicable governmental unit considers the
employees of the organization to be employees of the applicable governmental unit.
183
Rec. Doc. 34 at 8–9.
184
Smith, 827 F.3d at 417–18.
185
Id. at 420.
186
Id. at 418 (quoting Rev. Rul. 57–128, 1957–1 C.B. 311).
31
Although all of the above factors are considered in determining whether an
organization is an agency of a government, the mere satisfaction of one or all of the
factors is not necessarily determinative.187
While the Court must consider all six factors, no single factor is determinative.188 The court must
determine whether the factors, as a whole, weigh in favor or against a finding that a specific entity
is an agency or instrument of a state or political subdivision.189 Therefore, the Court considers the
factors provided in these Revenue Rulings to determine whether OGHS is either an agency or
instrumentality of HSD.
First, the Court considers whether OGHS is used for a governmental purpose and performs
a governmental function. The Trust Indenture provides that the trust was created for a “public
purpose . . . as a public instrumentality of the state or a subdivision or agency thereof.”190 On
September 25, 1986, the Trust Indenture was amended to include Article IV, section 4.1, which
states, “The purpose of the Trust shall constitute authorized public functions or purposes held to
be an essential public function conducted in the public interest. . . .”191 Furthermore, Louisiana’s
Public Trust Act states that a public trust may be created “to issue obligations and to provide funds
for the furtherance and accomplishment of any authorized public functions,”192 such as “hospital,
medical, health, nursery care, nursing care, clinical, ambulance, laboratory and related services
187
Id. at 419 (quoting Rev. Rul. 89–49, 1989–1 C.B. 117).
188
Id.
189
Id.
190
Rec. Doc. 11-4 at 1.
191
Billeaudeau, 239 So. 3d at 317 (quoting La. Rev. Stat. § 9:2341(D)).
192
La. Rev. Stat. § 9:2341(A).
32
and entities.” 193 Defendant argues that providing hospital services is not a “traditional government
function.”194 However, the Public Trust Act expressly provides that a public trust may be created
for the “public function” of administering hospital and medical services. Accordingly, the Court
finds this factor weighs in favor of finding OGHS is an agency or instrumentality of HSD.
Second, the Court considers whether performance of OGHS’s function is on behalf of a
political subdivision of the State. It is clear that OGHS performs its functions on behalf of HSD.
HSD is the beneficiary of the trust, which was created “for the use and benefit” of HSD “to finance,
operate, construct, lease, rent, manage and administer hospital facilities.”195 Defendant’s argument
that OGHS does not operate the hospital on behalf of the HSD because HSD does not have any
control over the operation of the hospital is contradicted by the very language of the Trust
Indenture, which provides that HSD is the beneficiary of the trust.196 Therefore, this factor weighs
in favor of finding that OGHS is an agency or instrumentality of HSD.
Third, the Court examines whether there are any private interests involved, or whether
HSD has the powers and interests of an owner. Plaintiff acknowledges that there are private
interests involved because the members of the Board of Trustees serve in their capacities as
citizens, but contends that HSD has the interest of an owner.197 The January 25, 1972 Resolution
of HSD transferred “the management and supervision of the Opelousas General Hospital” to “the
193
La. Rev. Stat. § 9:2341(B)(1)(a).
194
Rec. Doc. 34 at 8.
195
Rec. Doc. 11-4 at 1.
196
Rec. Doc. 34 at 8.
197
Rec. Doc. 23 at 17.
33
Opelousas General Hospital Authority, a Public Trust, effective the 25th day of February, 1972,
pursuant to the terms and conditions of a Management Contract executed by and between the
Hospital Service District No. 2 of St. Landry Parish, Louisiana, as Owner and the Opelousas
General Hospital Authority, a Public Trust, as Manager.”198 Furthermore, HSD appoints and
removes members of the OGHS Board of Trustees, a majority of whom are Commissioners of
HSD. Accordingly, this factor weighs in favor of finding OGHS is an agency or instrumentality of
HSD.
Fourth, the Court considers whether control and supervision of the organization is vested
in public authority. Defendant contends that HSD has no control or supervision over the day-today operations of OGHS.199 Plaintiff does not dispute that OGHS generates its own funding, hires
its own employees, and provides its own benefits. The Trust Indenture provides HSD has no
“authority, power or right, whatsoever, to do or transact any business for, or on behalf of, or
binding upon the Trustees or upon the Trust Estate.”200 Conversely, as discussed above, the Board
of Trustees is appointed by HSD, and five of the nine Trustees are Commissioners of HSD.
Therefore, although the OGHS and HSD are distinct legal entities and HSD has no authority to do
business on behalf of OGHS, control of OGHS is in fact vested with HSD as the Commission
controls the Board of Trustees of OGHS. Therefore, the Court concludes that this factor weighs in
favor of finding OGHS is an agency or instrumentality of HSD.
198
Rec. Doc. 11-5 at 1 (emphasis added).
199
Rec. Doc. 34 at 8–9.
200
Rec. Doc. 11-4 at 11.
34
Fifth, the Court must consider if express or implied statutory or other authority is necessary
for the creation and/or use of such an instrumentality.201 Defendant acknowledges that a state
statute authorizes the creation of public trusts, but no state law mandated the creation of OGHS.202
The statute governing HSD authorizes it “to enter into lease agreements with recognized and duly
constituted nonprofit associations which are primarily engaged in the operation of hospitals.”203
An act of the legislature did not specifically bring OGHS into existence, but Louisiana law
authorizes the creation of public trusts, such as OGHS, “for the furtherance and accomplishment
of any authorized public functions”204 such as hospitals.205 Accordingly, this factor weighs in favor
of finding OGHS is an agency or instrumentality of HSD.
Sixth, the Court must consider the degree of financial autonomy. Under the terms of the
Trust Indenture, all debts of OGHS are payable solely from the Trust Estate.206 The Trust Indenture
provides HSD, as beneficiary, “shall have no liability for any bonds, notes, or indebtedness of any
type whatsoever of the Trust” and will have no “liability for costs incurred in the operation of the
Trust, or for any actions or omission of the Trustees or others representing the Trust.”207 Further,
HSD has “no legal title, claim or right to the Trust Estate, its income, or to any part thereof, or to
201
Rec. Doc. 34 at 9.
202
Id.
203
La. Rev. Stat. § 46:1055(A)(9).
204
La. Rev. Stat. § 9:2341(A).
205
La. Rev. Stat. § 9:2341(B)(1)(a).
206
Rec. Doc. 11-4 at 11.
207
Id.
35
demand or require any partition or distribution thereof.”208 Therefore, OGHS is financially
autonomous from HSD, and this factor weighs against finding OGHS is an agency or
instrumentality of a political subdivision.
Considering that five of the six factors weigh in favor of finding that OGHS is an agent or
instrumentality of HSD, the Court concludes that OGHS is an agency or instrumentality of HSD,
which is undisputedly a political subdivision of the State of Louisiana. Therefore, the Court finds
the employee benefit plan is a governmental plan exempt from ERISA’s coverage pursuant to 29
U.S.C. § 1003(b)(1).
V. Conclusion
Based on the foregoing, the Court finds that the employee benefit plan is a governmental
plan exempt from ERISA’s coverage pursuant to 29 U.S.C. § 1003(b)(1) because OGHS is a
political subdivision of the State of Louisiana or, alternatively, because OGHS is an agency or
instrumentality of the HSD, which is a political subdivision of the State of Louisiana. Therefore,
the Court lacks federal question subject matter jurisdiction because ERISA does not preempt the
state law claims raised by Plaintiff.
In the Notice of Removal, Defendant asserted that this Court has federal question
jurisdiction over this matter under 28 U.S.C. § 1331 because Defendant argued that ERISA
completely preempted Plaintiff’s state law claims.209 Defendant did not raise whether the Court
has federal diversity jurisdiction over Plaintiff’s claims pursuant to 28 U.S.C. § 1331. “Federal
208
Id.
209
Id. at 2.
36
courts are duty-bound to examine the basis of subject matter jurisdiction sua sponte.”210
Accordingly, the Court will require the parties to submit briefing regarding whether subject matter
jurisdiction exists over the case on another basis within fourteen days of this Order. Accordingly,
IT IS HEREBY ORDERED that Plaintiff’s “Motion for Summary Judgment”211 on the
issue of whether the plan is governed by ERISA is GRANTED.
IT IS FURTHER ORDERED Defendant’s “Motion for Summary Judgment”212 on the
issue of whether the plan is governed by ERISA is DENIED.
IT IS FURTHER ORDERED that the parties must submit briefing regarding whether
subject matter jurisdiction exists over the case, on a ground not yet presented to the Court, within
fourteen (14) days of this Order.
21st
NEW ORLEANS, LOUISIANA, this ______ day of August, 2018.
________________________________
NANNETTE JOLIVETTE BROWN
CHIEF JUDGE
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
210
Union Planters Bank Nat. Ass’n v. Salih, 369 F.3d 457, 460 (5th Cir. 2004).
211
Rec. Doc. 11.
212
Rec. Doc. 14.
37
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