Overall v. Ascension Health et al

Filing 73

Decision and Order Granting Defendants' 22 Motion to Dismiss and Denying Plaintiff's 29 53 Motion to Disregard Exhibits and Dismissing Case. Signed by District Judge Avern Cohn. (SCha)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

MARILYN OVERALL, on behalf of
herself, individually, and on behalf
of all others similarly situated,
Plaintiff,
vs.

Case No. 13-11396

ASCENSION, a non-profit corporation;
ASCENSION HEALTH ALLIANCE, a non-profit
corporation; CATHOLIC HEALTH
INVESTMENT MANAGEMENT COMPANY, a
non-profit corporation; DEREK BEECHER, an
individual; JEAN DEBLOIS, an individual; ERIC
FEINSTEIN, an individual; WILLIAM
FINLAYSON, an individual; TIMOTHY FLESCH,
an individual; TRENNIS JONES, an individual;
KATHLEEN KELLY, an individual; ELLEN
KRON, an individual; TOM LANGSTON, an
individual; LAURA LENTENBRINK, an
individual; PATRICK MCGUIRE, an individual;
JOSEPH O. MURDOCK, an individual; THERESA
PECK, an individual; BARBARA POTTS, an
individual; LARRY SMITH, an individual;
ANTHONY TERSIGNI, an individual; HERBERT
VALLIER, an individual; DOUGLAS WAITE, an
individual; FRANK WARNING, an individual;
CAROL WHITTINGTON, an individual; and
JOHN and JANE DOES 1-20,

HON. AVERN COHN

Defendants.
_____________________________________/
DECISION AND ORDER
GRANTING DEFENDANTS’ MOTION TO DISMISS (Doc. 22)
AND DENYING PLAINTIFF’S MOTION TO DISREGARD EXHIBITS
(Docs. 29, 53)
AND DISMISSING CASE

SUMMARY OF DECISION*
In this case under the Employment Retirement Income Security Act (ERISA), 29
U.S.C. § 1001, et seq., plaintiff is suing multiple defendants associated with pension
plans provided by Ascension Health Alliance. Ascension Health Alliance operates,
through subsidiaries, hospitals throughout the United States. Plaintiff, on behalf of
herself and others, claims that defendants have violated ERISA. The key issue is
whether the pension plans qualify as church plans under 29 U.S.C. § 1003(b)(2) which
are specifically exempted from ERISA’s coverage. The Court holds a plan need not be
established by a church in order to qualify as a church plan. The Court also hold that
the plans, as a consequence of the management structure of Ascension Health
Alliance, are church plans. This is so because Ascension Health Alliance is controlled
by and associated with the Roman Catholic Church. Therefore, plaintiff’s ERISA claims
must be dismissed. The Court also holds that the complaint does not sufficiently set
forth facts to allege a specific injury suffered by plaintiff so as to enable her to bring a
constitutional challenge to ERISA’s church plan exemption.

*

This summary is provided for informational purposes only.

TABLE OF CONTENTS

I.

Introduction

1

II.

The Class Action Complaint (CAC)
A.
The Parties
B.
The Claims

2
2
3

III.

General Background
A.
The Church Plan Exemption
B.
The Parties’ Positions
1.
Statutory Argument
2.
Non-Statutory Argument
3.
Constitutional Argument

4
4
5
5
6
6

IV.

Motion to Dismiss - Legal Standards

7

V.

Motions to Disregard Exhibits

9

VI.

Analysis
A.
Background
1.
The Legislative History
2.
IRS Rulings
3.
Case law
B.
Decision
1.
A Church Plan Need Not Be Established by a Church
2.
The Plans are Church Plans
a.
Ascension is Controlled by the
Roman Catholic Church
b.
Ascension is Associated with the
Roman Catholic Church
3.
Plaintiff’s Constitutional Claim

12
12
12
14
16
17
17
20

Conclusion

27

VII.
CODA

20
23
26

28

I. Introduction
This is a case brought under the Employment Retirement Income Security Act
(ERISA), 29 U.S.C. § 1001, et seq. against multiple defendants associated with defined
pension plans provided by Ascension Health Alliance. As will be explained, Ascension
Health Alliance operates, through subsidiaries, a hospital conglomerate in 21 states and
the District of Columbia. Plaintiff Marilyn Overall is suing on behalf of herself and all
those similarly situated,1 claiming that defendants have violated their obligations under
ERISA relative to the pension plans. At its core, this case is about whether the plans at
issue are church plans under 29 U.S.C. § 1003(b)(2) such that they are exempt from
various ERISA requirements, including funding and reporting requirements. Defendants
argue that the plans are church plans because they are both controlled by and
associated with the Roman Catholic Church. Plaintiff says that while the plans been
operating under the church plan exemption under ERISA, they should not be
considered church plans but rather pension plans subject to ERISA. As plans subject to
ERISA, plaintiff says that defendants have violated ERISA’s requirements in multiple
ways. Plaintiff also says that if the plans are church plans, then they violate the
Establishment Clause.
Before the Court is defendants motion to dismiss under Fed. R. Civ. P. 12(b)(1)
and Fed. R. Civ. P. 12(b)(6). Also before the Court are plaintiffs’ motion to disregard the
exhibits to defendants’ motion to dismiss.
For the reasons that follow, defendants’ motion to dismiss will be granted and
1

Plaintiff requests class action status; however, no motion for class certification is
pending.
1

plaintiff’s motion to disregard the exhibits will be denied. As will be explained, the plans
at issue are church plans as defined under ERISA. This conclusion is consistent with
ERISA’s statutory language, legislative history and relevant agency interpretations.
Because they are church plans and exempt from ERISA, plaintiff’s ERISA claims fail to
state a viable claim for relief. Because plaintiff has not sufficiently set forth an injury
with respect to her Establishment Clause challenge, her constitutional claim must be
dismissed.
II. The Class Action Complaint (CAC)
The CAC is 70 pages, including caption and table of contents. It runs 206
paragraphs and contains a detailed multi-paragraph prayer for relief.
A. The Parties
Marilyn Overall is a resident of Detroit, Michigan. She is a former employee of
St. John Health System d/b/a St. John Health Providence Health System ("St. John”).
St. John owns and operates 5 hospitals and more than 125 medical facilities in the state
of Michigan. St. John is a $2 billion health system and the largest single component of
Ascension Health. One of the largest employers in metro Detroit, St. John employs
over 18,000 people. Plaintiff was first hired at St. John in 1991, and worked at St.
John’s Detroit Riverview Medical Center, a division of St. John’s Riverview Hospital.
Plaintiff is not a member of the Roman Catholic Church.
Plaintiff is a participant in the St. John Health Pension Plan administered by the
Ascension Health Pension Committee. Doc. 1, CAC at ¶18; Doc. 47-3, Exh. W, St.
John Pension Health Plan §§ 2.50 & 9.1. While plaintiff is a participant in only one

2

plan–the St. John Health Pension Plan–she is challenging all of the plans under
Ascension Health Alliance.
Ascension Health Alliance is a Missouri non-profit corporation and the parent
company of the other corporate defendants. Doc. 22-8, Exh. G, Bylaws of Ascension
Health Alliance, Art. III, § 3.2. Ascension Health Alliance is the sole member of
defendant Ascension Health, which is also a Missouri non-profit corporation and
operates health care ministries, including hospitals and other related health care
providers. Doc. 22-3, Exh. B, Articles of Incorporation of Ascension Health, Art. II, §
2.1.1. Ascension Health is the sole member of Plaintiff's former employer, St. John,
which is an entity within the Ascension Health system. Doc. 47-1, Exh. U, Articles of
Incorporation of St. John Health, Art. III.E.
Catholic Health Investment Management Company ("CHIMCO") is part of the
Ascension system under the control of Ascension Health Alliance, and is a participating
employer in the Ascension Health Pension Plan. Doc. 23-1, Exh. K, Ascension Health
Pension Plan, Addendum, CHIMCO. Going forward, the corporate defendants will be
referred to collectively as "Ascension."
The other individual defendants are present or former employees, board
members, or board committee members of the corporate defendants. Plaintiff alleges
that these individuals are fiduciaries under ERISA.
B. The Claims
The CAC asserts nine (9) causes of action, all of which are found under Section
VII. of the CAC. They are as follows:

3

Count I

Claim for equitable relief under ERISA Section 502(a)(3) against
Ascension Health

Count II

Claim for failure to provide notice of reduction in benefit accruals
under ERISA section 204(h) against Ascension Health

Count III

Claim for violation of reporting and disclosure provisions under
ERISA against Ascension Health

Count IV

Claim for failure to provide minimum funding under ERISA against
Ascension Health

Count V

Claim for failure to establish the Plans pursuant to a written
instrument meeting the requirements of ERISA section 402 against
Ascension Health

Count VI

Claim for failure to establish a trust meeting the requirements of
ERISA section 403 against Ascension Health

Count VII

Claim for a civil money penalty under ERISA section 502(a)(1)(A)
against Ascension Health

Count VIII

Claim for breach of fiduciary duty against all defendants

Count IX

Claim for declaratory relief that the church plan exemption, as
claimed by Ascension Health, violates the Establishment Clause of
the First Amendment of the Constitution and is therefore void and
ineffective

Count IX is a contingent claim. Plaintiff alleges that if the Ascension plans are
church plans exempt for ERISA, then the church plan exemption is unconstitutional as
applied to the Ascension plans.
III. General Background
A. The Church Plan Exemption
ERISA’s coverage, which provides a comprehensive set of duties and
requirements on plans, plan administrators, and fiduciaries to a plan, does not extend to
“church plans.” This is known as the church exemption. It is found under 29 U.S.C.§
4

1003(b)(2), which states:
(b) The provisions of this subchapter shall not apply to any employee benefit plan
if-(2) such plan is a church plan (as defined in section 1002(33) of this title)
with respect to which no election has been made under section 410(d) of Title 26.
(Emphasis added). The parties dispute the proper interpretation of section 1002(33)
and whether the Ascension plans meet the definition of a church plan.
B. The Parties’ Positions
1. Statutory Argument
Plaintiff makes two statutory arguments challenging the application of the "church
plan" exemption to Ascension's pension plans. First, she argues that ERISA's "church
plan" exemption does not include plans established and maintained by organizations
that are not "churches," i.e., that are not places of worship, even if these organizations
are controlled by or associated with a church. Second, she argues that the "plan
committee" exemption in ERISA § 3(33)(I) is limited to what are called "pension boards,"
incorporated organizations that historically oversaw pension plans for congregational
church organizations. Thus, Plaintiff contends that plans administered by committees,
such as the Ascension Health Pension Committee here, do not qualify a plan for the
"church plan" exemption.
Ascension contends that these statutory arguments are contrary to the statutory
language and the long-standing construction of the statute by the Internal Revenue
Service ("IRS") and the courts. Ascension argues that plans established by hospitals or
schools may qualify for "church plan" status if the hospital or school that sponsors the
plan is controlled by or associated with a church. The statutory language and the IRS
5

do not impose any pension board requirement. Instead, the statute permits "church
plans" to be administered by a plan administrative committee that is appointed by an
organization, here Ascension Health, that is controlled by or associated with a church.
2. Non-Statutory Argument
Plaintiff argues that putting aside the statutory language, the Ascension pension
plans still do not qualify for the "church plan" exemption because she says Ascension is
not controlled by or associated with the Roman Catholic Church.
Ascension argues that under both ERISA and the Internal Revenue Code, a
non-church entity can establish a "church plan" if the organization is either controlled by
or associated with a church. Regarding control, defendants say that the corporate
documents of Ascension and its subsidiaries establish that (1) Ascension and its
subsidiaries are obligated to operate Roman Catholic health ministries in conformity with
Roman Catholic doctrine, and (2) the Roman Catholic Church, through its religious
orders, appoints the members that control Ascension and its subsidiaries.
Regarding association, Ascension says that plaintiff's association challenge is
proscribed by the First Amendment. The First Amendment creates a protected zone of
church autonomy for churches to decide free from government interference their canon
law, doctrine, mission, administration, polity, and who is within their religious
community. These are issues of faith, not fact, allocated under the First Amendment to
the Roman Catholic Church to decide, not the Court.
3. Constitutional Argument
Plaintiff argues that if the "church plan" exemption includes church-affiliated
organizations, such as hospitals or schools, then Congress violated the Establishment
6

Clause of the First Amendment in drafting this exemption.
Ascension says plaintiff lacks standing to pursue a constitutional claim and that
even if she alleged standing, the exemption meets the requirements under Lemon v.
Kurtzman, 402 U.S. 602 (1971).
IV. Motion to Dismiss - Legal Standards
A motion to dismiss for lack of standing is properly brought under Rule 12(b)(1).
Leffew v. Kugler, 220 B.R. 598, 601 (E.D.Tenn. 1998). A Rule 12(b)(1) motion to
dismiss based on lack of subject matter jurisdiction falls into two general categories:
facial attacks and factual attacks. United States v. Ritchie, 15 F.3d 592, 598 (6th
Cir.1994). “A facial attack is a challenge to the sufficiency of the pleading itself. On
such a motion, the court must take the material allegations of the petition as true and
construed in the light most favorable to the nonmoving party.” Id. (citing Scheuer v.
Rhodes, 416 U.S. 232, 235–37 (1974)). On the other hand, a factual attack “is not a
challenge to the sufficiency of the pleading's allegations, but a challenge to the factual
existence of subject matter jurisdiction. On such a motion, no presumptive truthfulness
applies to the factual allegations.” Id. (citing Ohio Nat'l Life Ins. Co. v. United States,
922 F.2d 320, 325 (6th Cir.1990)). Therefore, “the court is free to weigh the evidence
and satisfy itself as to the existence of its power to hear the case.” Id.
A motion to dismiss under Rule 2(b)(6) tests the sufficiency of a complaint. To
survive a Rule 12(b)(6) motion to dismiss, the complaint’s “factual allegations must be
enough to raise a right to relief above the speculative level on the assumption that all of
the allegations in the complaint are true.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544,
555 (2007) (internal citations and emphasis omitted). See also Ass’n of Cleveland Fire
7

Fighters v. City of Cleveland, Ohio, 502 F.3d 545, 548 (6th Cir. 2007). “[T]hat a court
must accept as true all of the allegations contained in a complaint is inapplicable to legal
conclusions. Threadbare recitals of all the elements of a cause of action, supported by
mere conclusory statements do not suffice.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
The court is “not bound to accept as true a legal conclusion couched as a factual
allegation.” Id. at 679 (internal quotation marks and citation omitted).
Moreover, “[o]nly a complaint that states a plausible claim for relief survives a
motion to dismiss.” Id. “Determining whether a complaint states a plausible claim for
relief will . . . be a context-specific task that requires the reviewing court to draw on its
judicial experience and common sense. But where the well-pleaded facts do not permit
the court to infer more than the mere possibility of misconduct, the complaint has
alleged – but it has not shown – that the pleader is entitled to relief.” Id. (internal
quotation marks and citation omitted). Thus, “a court considering a motion to dismiss
can choose to begin by identifying pleadings that, because they are no more than
conclusions, are not entitled to the assumption of truth. While legal conclusions can
provide the framework of a complaint, they must be supported by factual allegations.
When there are well-pleaded factual allegations, a court should assume their veracity
and then determine whether they plausibly give rise to an entitlement to relief.” Id. In
sum, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to state a claim for relief that is plausible on its face.” Id. at 678
(internal quotation marks and citation omitted).

In ruling on a motion to dismiss, the Court may consider the complaint as well as
8

(1) documents referenced in the pleadings and central to plaintiff's claims, (2) matters of
which a court may properly take notice, (3) public documents, and (4) letter decisions of
government agencies may be appended to a motion to dismiss. Tellabs, Inc. v. Makor
Issues & Rights, Ltd., 551 U.S. 308, 127 S.Ct. 2499, 2509 (2007). Additionally, extrinsic
materials may be considered by a court if they "filled in the contours and details" of a
complaint. Yeary v. Goodwill Indus.-Knoxville, Inc., 107 F.3d 443, 445 (6th Cir. 1997).
V. Motions to Disregard Exhibits
Both parties have submitted various exhibits with their papers. Plaintiff has twice
moved the Court to disregard all of defendants’ exhibits. The motions will be denied.
As an initial matter, plaintiff’s counsel conceded at oral argument that plaintiff
does not challenge the authenticity of the documents. Hearing on Defendants' Motion
to Dismiss Transcript - Volume 2, page 4, lines 13-21. For the reasons outlined below,
the documents may properly be considered by the Court.
Defendants have submitted exhibits demonstrating that Ascension is controlled
by and associated with the Roman Catholic Church. The exhibits generally fall into two
categories: (1) documents that are central to, referenced in, or relied upon in the
Complaint; and (2) government documents, public documents, or publications. In
addition, Defendants have included the Official Catholic Directory among these exhibits.
See Doc. 22-9, Defs.' Ex. H. The Official Catholic Directory is a published book, widely
disseminated, publicly available, and generally known. See Marshall v. Sisters of Holy
Family of Nazareth, 399 F. Supp. 2d 597, 606 (E.D. Penn. 2005) (relying on, inter alia,
the Official Catholic Directory to demonstrate that defendant was a religious
organization).
9

The directory meets the requirements of Fed. R. Evid. 201. Therefore, the Court
may take judicial notice of the fact that Ascension Health, Ascension Health Alliance,
CHIMCO, and St. John Health are listed within it. See, e.g., Catholic Charities of Maine
v. City of Portland, 304 F. Supp. 2d 77, 85-86 (D. Me. 2004) (referring to, inter alia, the
Official Catholic Directory as evidence that Catholic Charities' health benefit plans
qualify for ERISA church-plan status); Hartwig v. Albertus Magnus Coll., 93 F. Supp. 2d
200, 202-203 (D. Conn. 2000) (explaining that "the Official Catholic Directory . . . is the
definitive compilation of Roman Catholic institutions in the United States").
As noted above, the Court may consider documents that are central to,
referenced in, or relied upon in the complaint. In the CAC, plaintiff either explicitly or
implicitly references: (1) The Ascension Health (Defs.' Ex. K) and St. John Health
(Defs.'Ex. W) Pension Plans (see CAC at ¶ 3, 79-90, 96-104, 108-110, Section VII,
Causes of Action); (2) Ascension's 2012 Financial Statements (Defs.' Ex. I) (see CAC at
¶ 3, 8, 76, 78, 205A); and (3) the Ascension Health (Defs.' Ex. B), Ascension Health
Alliance (Defs.' Ex. F), and St. John Health (Defs.' Ex. U) Articles of Incorporation (see
CAC at ¶ 19, 20, 58, 61); and the Bylaws of Ascension Health Alliance (Defs.' Ex. G)
(see CAC at ¶ 19, 20, 58, 61). These documents are central to the complaint and
therefore properly before the Court.
Defendants’ exhibits also include public documents, government documents, and
publications. The Court may take judicial notice of public documents and government
documents because their sources "cannot reasonably be questioned." Fed. R. Evid.
201(b); see also Colvin v. Veterans Admin. Med. Ctr., 390 F. App'x 454, 456 (6th Cir.
2010) (taking judicial notice of "finding by Ohio Department of Job and Family Services
10

that [plaintiff's] termination was not justified"); City of Monroe Emps. Ret. Sys. v.
Bridgestone Corp., 399 F.3d 651, 655 n.1 (6th Cir. 2005) (taking judicial notice of
information posted on NASD website); United States v. Bioport Corp., 270 F. Supp. 2d
968, 972 (W.D. Mich. 2003).
As such, the Court may take judicial notice of the Articles of Incorporation of
Ascension Health, Ascension Health Alliance, and St. John Health, which are public
documents filed with the Missouri and/or Michigan Secretary of State and are available
on the states' websites. Similarly, the Court may take judicial notice of Ascension's
Financial Statements, because they are also public documents, as plaintiff agrees.
Doc. 1, CAC at ¶ 76.
The Court may also take judicial notice of the IRS Private Letter Rulings (Defs.'
Exs. L, Y) and Determination Letters (Defs.' Exs. M, X), because they are letters from a
government agency. See In re UnumProvident Corp. Sec. Litig., 396 F. Supp. 2d 858,
876-77 (E.D. Tenn. 2005) (taking judicial notice of letter decisions of a government
agency); see also Bradfield v. Corr. Med. Servs., 2008 WL 5685586, at *4 (W.D. Mich.
2008) ("'[J]udicial notice of historical documents, documents contained in the public
record and reports of administrative bodies is proper' and the court may consider such
documents without converting a motion to dismiss into a motion for summary
judgment[.]" (quoting Menominee Tribe v. Thompson, 161 F.3d 449, 456 (7th Cir.
1998))).

As to the Canonical Statutes of Ascension Health Ministries (Defs.' Ex. C) and
the Canonical Bylaws of Ascension Health Ministries (Defs.' Ex. E), the Court may take
11

judicial notice of these documents because they are government documents within the
category of "sources whose accuracy cannot reasonably be questioned." Fed. R. Evid.
201(b). The same is true of the Ascension Health Ministries annual reports to the
Vatican (Defs.' Ex. D & Ex. AA). The Holy See is the government of the Roman
Catholic Church, and the Vatican City State is a sovereign, independent territory.
Finally, the Court may take judicial notice of the Ethical and Religious Directives
for Catholic Health Care Services. (Defs.' Ex. P). This is a publication promulgated by
the United States Council Conference of Bishops. The Ethical and Religious Directives
are widely disseminated and must be followed by all Catholic Health Organizations. As
the Ethical and Religious Directives are from a source whose accuracy cannot
reasonably be questioned, the Court may take judicial notice of this document. The
Ethical and Religious Directives may also be considered as plaintiff refers to and relies
on them in the CAC. See Doc. 1 at ¶ 107.
In sum, all of the documents in the record are documents which are either
referenced in the CAC, essential to plaintiff’s claims, or contain subject matter of which
the Court may take judicial notice.
VI. Analysis
A. Background
1. The Legislative History
Important to the Court’s decision is an understanding of the legislative history of
the church plan exemption. As originally enacted in 1974, ERISA exempted only
churches and church agencies from ERISA's coverage. The IRS read this original

12

exemption narrowly to include only church organizations if they were focused on
worshipful or priestly activities. See I.R.S. Gen. Couns. Memo 37266, 1977 WL 46200
(Sept. 22, 1977). With the support of a broad-based coalition of religious organizations,
Congress retroactively amended and expanded the church plan exemption in § 407 of
the Multiemployer Pension Plan Amendments Act of 1980 ("MPPAA"). See Pub. L. No.
96-364, § 407, 94 Stat. 1208 (1980).
The amended "church plan" exemption is codified at ERISA § 3(33), 29 U.S.C. §
1002(33). As set forth above, § 3(33) provides that "[t]he term "church plan" means a
plan established and maintained . . . for its employees (or their beneficiaries) by a
church." ERISA (33)(C)(I) further provides that a "church plan" as defined in
subparagraph (A) "includes a plan maintained by an organization, whether a civil law
corporation or otherwise, the principal purpose or function of which is the administration
or funding of a plan or program for the provision of retirement benefits or welfare
benefits, or both, for the employees of a church . . . if such organization is controlled by
or associated with a church . . .." ERISA § 3(33)(C)(I) (emphasis added).

The change in the statutory language in 1980 broadened the exemption to
include organizations that were affiliated with churches, such as hospitals or schools. In
other words, it moved beyond just permitting a church to establish a church plan. See,
e.g., 125 Cong. Rec. 10052 (May 7, 1979) (co-sponsor Senator Talmadge) (noting
organizations that care for the sick and needy or provide instruction can be essential to
a church's mission and should fall under the exemption) and 126 Cong. Rec. 20180
(July 29, 1980) (Senator Javits) (noting exemption is being expanded to schools and
13

other church-related institutions) (cited and relied on in IRS General Counsel Memo
39007, 1983 WL 197946 at *6 n.1 (Nov. 2, 1983)). Moreover, Congress has amended
ERISA many times over the last 30 years without changing seeking to change this
construction.
2. IRS Rulings
Also important is that the "church plan" exemption is codified in parallel form in
the Internal Revenue Code (“IRC”) at § 414(e), 26 U.S.C. § 414(e). The IRS construed
and applied the "church plan" exemption shortly after the 1980 revision. In IRS General
Counsel Memo 39007, 1983 WL 197946 (Nov. 2, 1983), the IRS recognized that its
"worshipful activity" requirement had been legislatively overruled and that the "church
plan" exemption now includes plans sponsored by non-profit organizations that are
"controlled by or associated with a church," which the IRS memorandum applied to
include hospitals operated by Roman Catholic religious orders. Id. at *4 to *6.
The IRS has followed this rule for more than 30 years. The IRS memorandum
imposes two requirements for a plan to qualify for the exemption. First, the organization
sponsoring the plan must be controlled by or associated with a church. Under the
statutory language, this control or association results in the organization's employees
being deemed employees of the church. Id. at *4. Second, the plan must be
administered by an organization (I) whose primary function is to administer the plan and
(ii) that is controlled by or associated with the church. The IRS specifically notes that an
administrative committee of the plan satisfies this requirement. Id. at *5.
The IRS has concluded that both the Ascension Health Pension Plan (f/k/a the
Daughters of Charity Pension Plan) and the St. John Health Pension Plan are "church
14

plans" exempt from ERISA. See Doc 23-2, Exh. L. IRS Private Letter Ruling (July 8,
1993) (Ascension Health); Doc. 47-5, Exh. Y, IRS Private Letter Ruling (March 16,
1991) (St. John Health).
Following briefing on the motions, Ascension submitted a notice of supplemental
authority (Doc. 68), attached to which is the IRS’s February 18, 2014 letter favorably
determining that the Ascension Health Pension Plan meets the tax qualification
requirements of the Internal Revenue Code applicable to “church plans.” See Exhibit A
to Doc. 68, IRS Determination Letter, dated February 18, 2014. The letter states that it
“is based solely on [Ascension’s] assertion that the plan is entitled to be treated as a
church plan under section 414(e) of the Internal Revenue Code[,].”
In addition to the Private Letter Rulings, the IRS has approved the form of the
plans as meeting the tax qualification requirements of the IRC applicable to "church
plans." See Doc. 23-3, Exh. M, IRS Determination Letter (Sept. 25, 2009) (Ascension
Health); Doc. # 47-4, Exh. X, IRS Determination Letter (Sept. 12, 2012) (St. John
Health).
IRS private letter rulings, while not binding, are entitled to deference. United
States v. Cleveland Indians Baseball Co., 532 U.S. 200, 220 (2001) (noting IRS ruling
reflecting agency's longstanding interpretation that is reasonable "attracts substantial
judicial deference"); Constantino v. TRW, Inc., 13 F.3d 969, 981 (6th Cir. 1994) (noting
IRS rulings can be "persuasive authority."); see also, e.g., Humphrey v. Sisters of St.
Francis Health Services, 979 F. Supp. 781, 786 (N.D. Ind. 1997) (relying on IRS
determination letter as evidence of church plan status). This is particularly so where the
IRS rulings, in the Court’s view, are consistent with the text of the statute.
15

3. Case law
Several courts have agreed that plans sponsored by non-church organizations,
such as hospitals, can qualify for the "church plan" exemption but have followed a
simpler rule. Specifically, courts require only that the non-profit organization sponsoring
the plan be controlled by or associated with a church. E.g., Lown v. Cont'l Cas. Co.,
238 F.3d 543, 547 (4th Cir. 2001) (concluding that "a plan established by a corporation
associated with a church can still qualify as a church plan"); Catholic Charities of Maine
v. City of Portland, 304 F. Supp. 2d 77, 84-85 (D. Maine 2004) (same); Welsh v.
Ascension Health, 3:08CV348/MCR/EMT, 2009 WL 1444431, at *7 (N.D. Fla. May 21,
2009) (finding administration of the plan by a separate committee is not required);
Thorkelson v. Publ'g House of the Evangelical Lutheran Church, 764 F. Supp. 2d 1119,
1125-29 (D. Minn. 2011).
However, there is recent case law to the contrary. In Rollins v. Dignity Health,
No. 13-01450 (N.D. Cal. Dec. 12, 2013), the district court concluded that only a church
can establish a “church plan” under ERISA § 3(33), 29 U.S.C. § 1002(33). The district
court determined that IRS and the prior cases cited above erred in reading that text of
the statute. Similarly, in Kaplan v. Saint Peter’s Healthcare, No. 13-2941 (D.N.J. March
31, 2014), the district court held that only a church may establish a church plan.
As explained below, the Court does not find either case persuasive.

B. Decision

16

1. A Church Plan Need Not be Established by a Church
The church plan exemption is found under 29 U.S.C. § 1002(33). That section is
divided into four parts, A-D. In section (A), a church plan is defined as follows:
(33)(A) The term “church plan” means a plan established and maintained (to the
extent required in clause (ii) of subparagraph (B)) for its employees (or their
beneficiaries) by a church or by a convention or association of churches which is
exempt from tax under section 501 of Title 26.
Section B excludes certain plans from the definition of church plan:
(B) The term “church plan” does not include a plan–
(I) which is established and maintained primarily for the benefit of employees (or
their beneficiaries) of such church or convention or association of churches who
are employed in connection with one or more unrelated trades or businesses
(within the meaning of section 513 of Title 26), or
(ii) if less than substantially all of the individuals included in the plan are
individuals described in subparagraph (A) or in clause (ii) of subparagraph (C) (or
their beneficiaries).
Section C provides that an organization other than a church can maintain a church plan:
(C) For purposes of this paragraph–
(I) A plan established and maintained for its employees (or their beneficiaries) by
a church or by a convention or association of churches includes a plan
maintained by an organization, whether a civil law corporation or otherwise,
the principal purpose or function of which is the administration or funding of a
plan or program for the provision of retirement benefits or welfare benefits, or
both, for the employees of a church or a convention or association of churches, if
such organization is controlled by or associated with a church or a
convention or association of churches.
(Emphasis added). The term “associated with a church or convention or association of
churches” means an organization that “shares common religious bonds and convictions
with that church or convention or association of churches.” 29 U.S.C. § 1002(33)(C)(iv).
Section D provides the church an opportunity to cure any failure to meet the above
requirements.

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The rub in this, and similar cases, is the interplay between section (A) and
section (C). Under section (A): “The term “church plan” means a plan established and
maintained . . . for its employees (or their beneficiaries) by a church or by a convention
or association of churches which is exempt from tax under section 501 of title 26.” This
section clearly provides that a plan established and maintained by a church is a church
plan. However, the statute says more than is just in section (A). Section (C) exempts
plans that are maintained by an organization controlled by or associated with a church
and whose primary purpose is funding or administering the plan.
In Dignity Health and Saint Peters, the district courts interpreted section (A) as a
gatekeeper of section (C). That is, these courts concluded that section (A) sets the
standard–only a church can establish a church plan– and section (C) only describes
how a plan under section (A) can be maintained. The problem with this interpretation is
that section (C) uses the word “includes” not “subject to.” Section (C) says that “A plan
established and maintained . . . by a church includes a plan [meeting the requirements
of section (C)(I]. As Ascension puts it “under the rules of grammar and logic, A is not a
‘gatekeeper’ to C; rather if A is exempt and A includes C, then C is also exempt.” (Doc.
71 at p. 2). This is how the Court interprets section (C). In other words, a church plan
may include a plan that meets the requirements of section (C). Section (C) requires that
the plan maintained by an organization that is either (1) controlled by or (2) associated
with a church or convention of churches. To find otherwise would render section (C)
meaningless.
Important to this conclusion is the legislative history. Congress added section
(C) in 1980 which plainly broadened the exemption to include organizations controlled
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by or associated with churches. In the section, Congress provided that “church plans”
include the plans that qualify under Section (A) and those that qualify under Section
(C)(I). Thus, a plan of the Archdiocese of Detroit can be a “church plan” under section
(A) since it is established by the Roman Catholic Church. So too can a plan established
by another organization provided that organization is “controlled by or associated with a
church.” Each section is required for each type of plan. This construction has been
consistently followed by the IRS and gives effect to both of the sections.
In section (A) Congress provided that “[t]he term “church plan” means a plan
established and maintained . . . for its employees (or their beneficiaries) by a church . . .
.” In section (C)(I) Congress repeats this precise same language—that “a plan
established and maintained for its employees (or their beneficiaries) by a church”—to
explain that such a plan “includes a plan” that meets the remaining requirements of
Section (C)(I). Under the plain language the plan “is established and maintained by a
church” if it meets the other requirements of Section (C)(I).
Thus, as amended in 1980, the church plan exemption includes plans sponsored
by church-affiliated organizations, such as hospitals or schools, if these plans are
administered by plan committees (1) whose principal function is to administer the plan,
(2) if the plan committee is controlled by or associated with a church. As will be
explained, the plans meet these requirements.

2. The Plans are Church Plans
Both the Ascension Health Pension Plan and the St. John Health Pension Plan

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are church plans. Both plans are administered by the Ascension Health Pension
Committee. See Doc. 23 & 23-1, Exh. K, Ascension Health Pension Plan §§ 2.6, 10.1 &
10.3; Doc. 47-3, Exh. W, St. John Health Pension Plan, §§ 2.5, 9.1 & 9.3. The
Ascension Health Pension Committee is appointed by the Chair of the Board of
Trustees of Ascension Health with the approval of the Board of Trustees. See Doc. 23,
Exh. K, Ascension Health Pension Plan, § 2.63. The issue is whether Ascension is
controlled by and/or associated with the Roman Catholic Church.
a. Ascension is Controlled By the Roman Catholic Church
A plan qualifies for the "church plan" exemption if the organization maintaining it
is either controlled by or associated with a church. Both the IRS regulations and the
courts have used the common sense definition of organizational control: the ability of
church officials to appoint the majority of the trustees or directors of an organization.
See 26 C.F.R. § 1.414(c)-5; see also, e.g., Lown v. Cont'l Cas. Co., 238 F.3d 543,
547-48 (4th Cir. 2001) (citing and applying IRS regulation); Catholic Charities of Maine
v. City of Portland, 304 F. Supp. 2d 77, 85 (D. Maine 2004) (church control over the
appointment of the majority of the non-church organization's officers or Board of
Directors).
Here, the control of the Roman Catholic Church flows downward through
Ascension Health Ministries, an entity created within the Roman Catholic Church, to
Ascension and its system entities, including St. John Health, as described below.
First, Ascension Health Ministries is an organization within the Roman Catholic
Church, created by the Roman Catholic Church's canon law as a "Public Juridic
Person." See Doc. 22-2, Exh. A, Vatican Decree. A "Public Juridic Person" is an
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organization afforded the right to own and operate real and personal property under the
auspices of the Church. Singer, Lawrence E., Realigning Catholic Health Care:
Bridging Legal and Church Control in a Consolidating Market, 72, TUL. L. REV. 159,
218-19 (1997) (citing canon law). Currently five Catholic Religious Orders - Daughters
of Charity, Congregation of St. Joseph, Sisters of St. Joseph of Carondelet, Alexian
Brothers, and Sisters of the Sorrowful Mother - are the "Participating Entities" that
appoint the members of Ascension Health Ministries. See Doc. 22-6, Exh. E, Ministries'
Canonical Bylaws, Article IV. Seven of the 10 individual members are members of the
five religious orders (i.e. brothers and sisters). Doc. 50-2, Exh. AA, 2013 Ascension
Health Ministries Annual Report, pp. 12-13, 23. These members have religious
obligations imposed by the canonical statutes to maintain the Roman Catholic Church's
control over Ascension and its System Entities, so that Ascension and the System
Entities may remain a healing ministry carrying out the apostolic works of the Roman
Catholic Church. See Doc. 22-4, Exh. C. Ministries Canonical Statutes, id., Article IV,
parts 2 & 4.
As to Ascension Health Alliance, it is the civil law organization created under
Missouri non-profit corporate law to oversee Ascension Health and its System Entities
so that the canonical responsibilities of Ascension Health Ministries may be carried out.
Control between Ascension Health Ministries and Ascension Health Alliance is
maintained through the canonical members of Ascension Health Ministries who also
serve as the civil law members of Ascension Health Alliance. See Doc. 22-8, Exh. G.,
Ascension Health Alliance Bylaws, § 2.3 & 2.8. Ascension Health Ministries has
organizational control over Ascension Health Alliance, including the power (1) to appoint
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and remove Ascension Health Alliance's directors, board chair, and CEO; (2) to approve
the corporate documents, the bylaws and articles of incorporation of Ascension Health
Alliance; (3) to approve and ensure compliance with Ascension Health Alliance's
philosophy, purpose, and mission to be a health ministry of the Roman Catholic Church;
and (4) to approve the sale or alienation of assets and the incurrence of debt by
Ascension Health Alliance, all subject to the Roman Catholic Church's canon law
requirements. See id., §§ 2.8, 4.2.
As to Ascension Health. Ascension Health Alliance is the sole member of
Ascension Health and has the following powers over Ascension Health: (I) to approve,
assure compliance with, change and interpret its philosophy, mission and values; (ii) to
approve the articles and bylaws; (ii) to appoint or remove members of board of trustees
and its chair; (iii) to approve alienation of assets as required by canon law; and (iv) to
approve sale of assets and the strategic, financial and operating plan. Doc. 22-3, Exh.
B, Ascension Health's Articles of Incorporation, Art. V, §§ 4.1, 5.2. Ascension Health
Ministries, acting through its members, also has the following direct powers over
Ascension Health: (I) to ratify appointment or removal of trustees and its chair; and (ii) to
approve alienation of assets as required by the Roman Catholic Church's canon law. Id.
Regarding, St. John Health, it is a subsidiary of Ascension Health. Ascension
Health is the sole member of St. John Health. See Doc. 47-1, Exh. U, Articles of
Incorporation of St. John Health, Art. III.E. Ascension Health has the following powers
over St. John Health: (I) to approve acquisition of entities and subject to the Roman
Catholic Church's canonical requirements, approve the sale or divesture of assets; (ii) to
approve governing documents of St. John Health or any subsidiary; (iii) to appoint or
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remove members of board of trustees and its chair, in consultation with its canonical
sponsor, now Ascension Health Ministries; and (iv) to approve incurrence of debt and
the transfer of assets. Id. Art. VI.
Finally, the articles of incorporation and bylaws of each entity affirm its obligation
to act in conformity with the teachings of the Roman Catholic Church, including the
Ethical and Religious Directives for Catholic Health Care Services. In short, through
Ascension Health Ministries, a Public Juridic Person, the Roman Catholic Church
maintains control over Ascension and St. John Health.
b. Ascension is Associated with the Roman Catholic Church
The record shows multiple ways in which the Ascension is associated with the
Roman Catholic Church. First, Ascension is listed in the Official Catholic Directory.
See Doc. 22-9, Exh. H (listing the three named entity Defendants, Ascension Health
Alliance, Ascension Health, and Catholic Health Investment Management Company
("CHIMCO")). The same applies to Ascension Health's System Entity, St. John Health.
See Doc.47-2, Supp. Exh. V.
An entity is listed in the directory only if a bishop of the Roman Catholic Church
determines the entity is "operated, supervised, or controlled by or in connection with the
Roman Catholic Church." See Doc. 28-9, Pl.'s Opp., Ex. 8 (U.S. Catholic Bishops'
Guidelines) p. 17. Courts view the Official Catholic Directory listing as a public
declaration by the Roman Catholic Church that an organization is associated with the
Church. See, e.g., Catholic Charities of Maine v. City of Portland, 304 F. Supp. 2d 77,
85-86 (D. Me. 2004) (referring to, inter alia, the Official Catholic Directory as evidence
that Catholic Charities' health benefit plans qualify for ERISA church-plan status);
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Hartwig v. Albertus Magnus Coll., 93 F. Supp. 2d 200, 202-203 (D. Conn. 2000)
(explaining that "the Official Catholic Directory . . . is the definitive compilation of Roman
Catholic institutions in the United States"). The IRS has also relied on the Official
Catholic Directory to determine whether a plan sponsor is associated with the Roman
Catholic Church. See e.g., IRS General Counsel Memo 39007, 1983 WL 197946 at *4
(Nov. 2, 1983). In short, the Roman Catholic Church has publicly declared Ascension to
be a Catholic organization in the Official Catholic Directory.
Additionally, there are several public documents and public actions that indicate
that the Roman Catholic Church has included Ascension and its system entities,
including St. John, within the Church's religious community. First, the health systems
and property that have been joined together into Ascension Health were originally
health systems of religious orders of the Roman Catholic Church. See, e.g., Doc. 49-2
(demonstrative exhibit of organizational history of Ascension Health); Doc. 22-5, Exh. D,
2011 Ascension Health Ministries Annual Report, pp. 5-6, 15-18. Members of these
Religious Orders are members of and sit on boards of the organizations within
Ascension Health's system. See, e.g., Doc. 50-2, Exh. AA, 2013 Ascension Health
Ministries Annual Report, pp. 12-13, 23.
Second, the bishops of the Roman Catholic Church oversee Ascension's facilities
operating within their diocese on compliance with Roman Catholic teachings, worship
and pastoral care. See Doc. 22-4, Exh. C, Ascension Health Ministries Canonical
Statutes, Article VI; Doc.50-2, Exh. AA, 2013 Ascension Health Ministries Annual
Report, p. 29.
Third, Ascension Health Ministries annually reports to the Vatican on how
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Ascension Health and its subsidiaries are meeting Ascension's religious obligations to
be a healing ministry of the Roman Catholic Church. See Doc. 22-4, Exh. C, Ascension
Health Ministries Canonical Statutes, Article V.1.a; Doc. 50-2, Exh. AA, 2013 Ascension
Health Ministries Annual Report; Dkt. # 22-5, Exh. D, 2011 Ascension Health Ministries
Annual Report.
Plaintiff casts doubt on whether Ascension is controlled by the Roman Catholic
Church, alleging in the CAC that although Ascension shares "some religious
convictions" with the Roman Catholic Church but claims that the Roman Catholic
Church and Ascension do not share sufficient "common religious bonds and
convictions." Doc. 1, CAC at ¶ 106-07. Plaintiff alleges that the following are violations
of the Roman Catholic Church's religious doctrine and therefore indicate Ascension is
not controlled by the church: (1) hiring and treatment of non-Catholics; (2) pastoral
support for non-Catholic patients; (3) investment in alleged high-risk venture capital
projects; and (4) performing contraceptive sterilization procedures. Id. at ¶107.
Even assuming these allegations are true, this argument regarding religious
orthodoxy is prohibited by the Constitution. The First Amendment creates a protected
zone for churches to decide these issues of religious doctrine free from government
intrusion. This protected zone includes: (1) a church's law and doctrine, Serbian
Eastern Orthodox Diocese v. Milivojevich, 426 U.S. 696, 713 (1976); (2) a church's
religious mission, Hernandez v. Comm’r Inter. Rev., 490 U.S. 680, 699 (1989); Corp. of
the Presiding Bishop of the Church of Jesus Christ of Latter-Day Saints v. Amos, 483
U.S. 327, 336 & n.14 (1987); and (3) a church's polity, administration, and community.
Milivojevich, 426 U.S. at 709-714.
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Plaintiff’s allegations are grounded in theology. The First Amendment "plainly
forbids" courts from inquiring into this departure-from-doctrine claim. See Presbyterian
Church v. Mary Elizabeth Blue Hull Memorial Presbyterian Church, 393 U.S. 440,
606-07 (1969); NLRB v. Catholic Bishops, 440 U.S. 490, 502 (1979) (inquiry into
whether a high school was "completely religious" infringed First Amendment); University
of Great Falls v. NLRB, 278 F.3d 1335, 1341-43 (D.C. Cir. 2002) (same for inquiry into
whether college had a "substantial religious character").
3. Plaintiff’s Constitutional Claim
As to plaintiff’s “contingent” constitutional claim, she alleges that to the extent the
statute is interpreted to permit organizations associated with a church to claim church
plan status, it violates the First Amendment's Establishment Clause. Plaintiff says that
this interpretation will require religiously intrusive inquiries to determine association.
Ascension says that plaintiff has failed to allege that she suffered any
injury-in-fact as to her constitutional claim and therefore does not have standing to
pursue it. Ascension also argues that the plans pass constitutional muster.
Ascension’s standing argument has merit. To show Article III standing, a party
must alleged she (1) suffered an “injury in fact” (2) that is causally connected to the
conduct complained of (3) that will be redressed by a favorable decision. Lujan v.
Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). See also Smith v. Jefferson Cnty.
Bd. Of Sch. Commr's, 641 F.3d 197, 206-10 (6th Cir. 2011) (applying test to an
Establishment Clause challenge).
Here, there are no specific allegations in the CAC to suggest plaintiff would have
a better funded pension if the Court were to strike down the church plan exemption
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provisions of ERISA, or the exemption as applied to Ascension. Thus, as asserted, the
CAC fails to show plaintiff has suffered a concrete harm, or that the relief she seeks
would redress an alleged injury. The allegations related to plaintiff’s constitutional claim
are found in paragraphs 204-206. A review of these allegations reveals that they are
simply generic recitations of perceived harms. The CAC does not allege any specific or
concrete injury suffered by plaintiff as a consequence of being a participant in a church
plan. The ERISA allegations, which are incorporated by reference, are of the same
order. The allegations are not specific as to harms allegedly suffered by plaintiff as a
result of the alleged ERISA violations. See, e.g., Hollingsworth v. Perry, 2013 WL
3196927 at *7 (U.S. June 26, 2013) (standing requires plaintiff to suffer injury in a
“personal and individual way”). As such, the CAC are currently plead does not
sufficiently allege standing to enable plaintiff to bring a constitutional challenge. This
claim must be dismissed.
VII. Conclusion
As the Court said at oral argument, the term church plan should be in quotations
as the statutory exemption is broader than to over just churches. A church plan is a
plan that is (1) established by a church or (2) established by an organization that is
controlled by or associated with a church. The St. Johns and Ascension Health pension
plans are the latter. As such, the plans are properly exempt from ERISA’s
requirements. Plaintiff’s ERISA based claims therefore fail to state viable claims for
relief. Plaintiff’s contingent constitutional claim fails for lack of standing.
Accordingly, for the reasons stated above, defendants’ motion to dismiss is
GRANTED. Plaintiff’s motions to disregard exhibits are DENIED. The CAC is
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dismissed. This case is CLOSED.
SO ORDERED.

CODA
The Court recognizes the considerable number of people, like plaintiff, are
employed in the health care industry and not in religious related or directed duties.
However, the pension plans in which they are participants are church managed plans.
As such, they are exempt from ERISA’s coverage and protections. This is so because
the health care entity with whom they are employed is in fact controlled by and
associated with a church. In this case, Ascension Health’s managerial system has a
direct line to the Roman Catholic Church in the Vatican.
While plaintiff may not have the benefit of ERISA’s protections, the pension plans
are wholly unregulated. They are governed by state law. See Cassidy v. Akzo Nobel
Salt, Inc., 308 F.3d 613, 615 (6th Cir. 2002) (“Interpreting a non-ERISA contract claim
requires federal courts to look only to state law principles . . .” (citing Erie R.R. v.
Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938))).
The church exemption is a congressional choice of historic proportion. And while
it may appear to be an irrational distinction, it is a distinction mandated by law.

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As noted above, the record is simply insufficient to allow for a constitutional challenge.
That such a challenge may have merit is for another day and another lawsuit.

S/Avern Cohn
UNITED STATES DISTRICT JUDGE
Dated: May 9, 2014
Detroit, Michigan

I hereby certify that a copy of the foregoing document was mailed to the attorneys of
record on this date, May 9, 2014, by electronic and/or ordinary mail.

S/Sakne Chami
Case Manager, [phone]

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