Sanzone v. Mercy Health et al

Filing 207

MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that plaintiffs' claim that the church-plan exemption as applied to the Mercy Plan violates the Establishment Clause of the First Amendment of the Constitution is dismissed for lack of subject-matter ju risdiction. IT IS FURTHER ORDERED that plaintiffs' alternative state law claims remain dismissed without prejudice pursuant to 28 U.S.C. § 1367(c)(3). A separate Order of Dismissal is entered herewith. Signed by District Judge Catherine D. Perry on 11/4/2020. (KEK)

Case: 4:16-cv-00923-CDP Doc. #: 207 Filed: 11/04/20 Page: 1 of 14 PageID #: 2978

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
SALLY SANZONE, et al.,
Plaintiffs,
v.
MERCY HEALTH, et al.,
Defendants.

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Case No. 4:16 CV 923 CDP

MEMORANDUM AND ORDER
The Eighth Circuit affirmed my decision on defendants’ motion to dismiss
that the Mercy Health retirement and pension plan at issue in this case is a church
plan under the Employee Retirement Income Security Act of 1974 (ERISA) and
thus is exempt from ERISA coverage and requirements. See Sanzone v. Mercy
Health, 954 F.3d 1031 (8th Cir. 2020). The court remanded the matter, however,
for me to determine whether the deprivation of ERISA protections confers Article
III standing on plaintiffs for their alternative claim that applying the church-plan
exemption violates the Establishment Clause of the First Amendment. Id. at 1047.
Because plaintiffs’ claimed deprivations do not establish a concrete injury,
plaintiffs lack the requisite standing to pursue their constitutional claim. I will
therefore dismiss plaintiffs’ Establishment Clause claim for lack of jurisdiction and

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will not reinstate plaintiffs’ state law claims.
The background of this litigation and the nature of plaintiffs’ claims are
thoroughly set out in my Memorandum and Order entered August 27, 2018 (ECF
175) and will not be repeated here. In that Memorandum and Order, I concluded
that the Mercy Health MyRetirement Personal Pension Account Plan (the “Plan” or
“Mercy Plan”), under which plaintiffs Sally Sanzone and Gene Grasle currently
receive pension benefits, satisfied the statutory requirements for church-plan
exemption under ERISA and thus that the Plan was not an ERISA plan. With this
determination that the Mercy Plan was a church plan exempt from ERISA,
plaintiffs’ alternative claim that the church-plan exemption is unconstitutional as
applied to the Mercy Plan became ripe for consideration. I concluded, however,
that plaintiffs lacked standing to bring the claim given that their hypothesized
allegation that the Plan could potentially be underfunded in the future was
insufficient to constitute an injury in fact.1
The Eighth Circuit agreed and affirmed on both issues. See Sanzone, 954
F.3d at 1046 (“[T]he Plan, as alleged, is a church plan.”), and id.(“We agree with
the district court that the underfunding here does not meet [the] standard [for

1

Having dismissed plaintiffs’ federal claims, I determined to not exercise supplemental
jurisdiction over plaintiffs’ state law claims and dismissed those without prejudice.

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standing].”). However, the Eighth Circuit identified injuries in addition to
underfunding that plaintiffs asserted in their complaint that could possibly confer
standing on their Establishment Clause claim – “most importantly, the deprivation
of ERISA protections.” Id. at 1047. “Those protections include ERISA’s funding
requirements, Pension Benefit Guarantee Corporation insurance, and notice
requirements. But for the church-plan exemption, Sanzone would be able to sue
under ERISA to enforce those protections. The inquiry, therefore, is whether the
deprivation of the specified ERISA protections constitutes sufficient injury to
confer standing.” Id. For the following reasons, it does not.
Legal Standard
Article III standing “presents a question of justiciability; if it is lacking, a
federal court has no subject-matter jurisdiction over the claim.” Miller v. Redwood
Toxicology Lab., Inc., 688 F.3d 928, 934 (8th Cir. 2012) (citing Steel Co. v.
Citizens for a Better Env’t, 523 U.S. 83, 92-94 (1998)). Accordingly, “Article III
standing must be decided first by the court[.]” Id.; see also City of Clarkson Valley
v. Mineta, 495 F.3d 567, 569 (8th Cir. 2007).
For Article III standing, plaintiffs must show: (1) that they suffered an
“injury in fact”; (2) that a causal relationship exists between the injury and the
challenged conduct; and (3) that it is likely, as opposed to merely speculative, that

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the injury will be redressed by a favorable decision. Lujan v. Defenders of
Wildlife, 504 U.S. 555, 560-61 (1992); Friends of the Earth, Inc. v. Laidlaw Envtl.
Servs. (TOC), Inc., 528 U.S. 167, 180-81 (2000); Steger v. Franco, Inc., 228 F.3d
889, 892 (8th Cir. 2000). Abstract injury is not enough to demonstrate injury in
fact. Plaintiffs must allege that they have sustained or are in immediate danger of
sustaining some direct injury as a result of the challenged conduct. O’Shea v.
Littleton, 414 U.S. 488, 494 (1974) (citing Massachusetts v. Mellon, 262 U.S. 447,
488 (1923)). The injury or threat of injury must be concrete and particularized,
actual or imminent; not conjectural or hypothetical. Id. (citing Golden v. Zwickler,
394 U.S. 103, 109-10 (1969); Maryland Cas. Co. v. Pacific Coal & Oil Co., 312
U.S. 270, 273 (1941); United Pub. Workers v. Mitchell, 330 U.S. 75, 89-91
(1947)). See also Thole v. U.S. Bank N.A., 140 S. Ct. 1615, 1618 (2020); Friends
of the Earth, 528 U.S. at 180-81. If the injury is alleged to be imminent rather than
actual, plaintiffs must demonstrate that “the threatened injury is ‘certainly
impending,’ or there is a ‘substantial risk that the harm will occur.’” Susan B.
Anthony List v. Driehaus, 573 U.S. 149, 157 (2014) (quoting Clapper v. Amnesty
Int’l USA, 568 U.S. 398, 414 n.5 (2013)). “‘Allegations of possible future injury’
are not sufficient.” Clapper, 568 U.S. at 409 (quoting Whitmore v. Arkansas, 495
U.S. 149, 158 (1990)) (emphasis in Clapper).

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As the parties invoking federal jurisdiction, plaintiffs bear the burden to
establish standing. Lujan, 504 U.S. at 561.
Discussion
As an initial matter, I reject plaintiffs’ assertion that the Mercy Plan’s lack of
ERISA protections in general is sufficient in itself to confer Article III standing on
their constitutional challenge to the Plan. To hold otherwise would render
meaningless the exceptions to ERISA coverage Congress included in this
comprehensive legislation. See 29 U.S.C. § 1003(b). Accordingly, plaintiffs’
claim that they have standing to “seek the benefits of ERISA writ large” (ECF 204
at header p. 10) without establishing a particularized injury to themselves is
denied.
I turn now to the specific ERISA protections plaintiffs assert and that the
Eighth Circuit identified to determine whether plaintiffs’ complaint sufficiently
alleges that the Mercy Plan’s lack of such protections has caused them an injury in
fact.
A.

Funding Requirements
ERISA establishes minimum funding requirements for employee benefit

plans that are covered by its provisions. 29 U.S.C. § 1082. Plaintiffs claim that
but for the unconstitutional application of church-exempt status, the Mercy Plan

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would be subject to such minimum funding requirements. Plaintiffs contend that
the lack of ERISA’s funding requirements under § 1082 places the Plan at
substantial risk of being unable to pay Plan participants their accrued benefits.
A plan satisfies ERISA’s minimum funding standard for a plan year if “the
employers make contributions to or under the plan for any plan year which, in the
aggregate, are sufficient to ensure that the plan does not have an accumulated
funding deficiency . . . as of the end of the plan year.” 29 U.S.C. § 1082(A)(2)(c).
This requires, “in essence, that an employer’s annual contributions to a defined
benefit plan meet the current annual cost (determined under an approved actuarial
method) of future pension benefits and administrative expenses.” American
Commc’n Ass’n, Local 10 I.B.T. v. Retirement Plan for Emps. of RCA Corp. &
Subsidiary Co., RCA, 488 F. Supp. 479, 482 (S.D.N.Y. 1980). Plaintiffs
acknowledge in their complaint 2 that the Mercy Plan here has its own funding
requirements (see ECF 145 at ¶¶ 83, 119, 156B), but they argue that the lack of
ERISA’s minimum funding requirement to satisfy the current value of future
benefits places them at substantial risk of not being paid their pension benefits in
the future. This is a hypothetical injury.

2

The operative complaint here is plaintiffs’ Consolidated Second Amended Class Action
Complaint. (ECF 145.) Class certification was never sought or granted on this complaint.

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Because plaintiffs do not allege that the Mercy Plan has failed to pay them
benefits, they do not assert an actual injury. See Feather v. SSM Health, No.
4:16CV1669 HEA, 2018 WL 3536613, at *4 (E.D. Mo. July 23, 2018) (citing
Duncan v. Muzyn, 885 F.3d 422, 427 (6th Cir. 2018) (“So what is Plaintiffs’ injury
here? Start with what it is not: any actual loss or decrease in their benefits.”)).
And because the lack of ERISA’s minimum funding requirement in the
circumstances here does not create a “substantial risk” that plaintiffs’ benefits will
be affected in the future or that Plan default is “certainly impending,” there is no
imminent injury. Id. (citing In re SuperValu, Inc., 870 F.3d 763 (8th Cir. 2017);
Duncan, 885 F.3d at 428).
The Plan is sufficiently funded to pay benefits for nearly a decade even if
Mercy Health and the Participating Employers stop making the contributions
required under the Plan. See Sanzone, 954 F.3d at 1046. The ability to pay a
decade’s worth of actuarial pension benefits does not show a certainly-impending
default. See Feather, 2018 WL 3536613, at *4. Moreover, given the hypothetical
contingencies that must be met in order for plaintiffs’ benefits to be adversely
affected, there is no “substantial risk” that plaintiffs will be harmed if ERISA’s
minimum-funding standard is not in place: if there are insufficient levels of
contributions going forward, the Plan could default; and if Mercy Health

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terminates the Plan upon default, plaintiffs may not receive benefits. See id. And
this would all occur several years down the road. Standing cannot be based on a
“highly attenuated chain of possibilities.” Clapper, 568 U.S. at 410 (citing
Summers v. Earth Island Inst., 555 U.S. 488, 496 (2009); Whitmore, 495 U.S. at
157-60). See also Arpaio v. Obama, 797 F.3d 11, 21 (D.C. Cir. 2015) (“When
considering any chain of allegations for standing purposes, we may reject as overly
speculative those links which are predictions of future events[.]”). And, as Judge
Autrey noted in Feather, several circuit courts addressing participants’ claims of
possible harm through plan default “have rejected similar hypothetical risks.”
Feather, 2018 WL 3536613, at *4 (citing Duncan, 885 F.3d at 428-29 (“Plaintiffs
will only be harmed if the Plan runs out of money and if the TVA refuses to make
up the shortfall while Plaintiffs are still receiving benefits from the Plan.”); Lee v.
Verizon Commc’ns, Inc., 837 F.3d 523, 529-31 (5th Cir. 2016) (concluding that
“constitutional standing for defined-benefit plan participants requires imminent
risk of default by the plan, such that the participant’s benefits are adversely
affected”); Perelman v. Perelman, 793 F.3d 368, 375 (3d Cir. 2015) (finding a risk
of future adverse effects on benefits not an injury-in-fact); David v. Alphin, 704
F.3d 327, 338 (4th Cir. 2013) (“We find these risk-based theories of standing
unpersuasive, not least because they rest on a highly speculative foundation

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lacking any discernable limiting principle.”).
Plaintiffs’ allegation that they will be harmed in the future because the
Mercy Plan is not protected by ERISA’s minimum funding requirement is too
speculative to establish a concrete injury and is therefore insufficient to confer
standing.
B.

Pension Benefit Guarantee Corporation Insurance
Under ERISA, the Pension Benefit Guarantee Corporation (PBGC)

administers a plan-termination insurance program that pays the vested pension
benefits of retirees whose defined-benefit plans fail and become unable to pay
benefits themselves. 29 U.S.C. §§ 1302, et seq. See also Thole, 140 S. Ct. at 1621.
Plaintiffs contend that they are harmed here because, as an ERISA-exempt plan,
the Mercy Plan is not insured by the PBGC, which places their receipt of vested
pension benefits at risk.
PBGC insurance only provides a benefit if a plan terminates underfunded,
which, as discussed above, has not occurred here, is not certainly impending, and
does not have a substantial risk of occurring. Therefore, because plaintiffs’ theory
of harm caused by the lack of ERISA-required insurance is based on a series of
hypothetical contingencies too speculative to be considered “imminent,” there is no
injury in fact and plaintiffs lack standing to bring the claim. See Feather, 2018

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WL 3536613, at *5 (citing Krauter v. Siemens Corp., No. 17-1662, 2018 WL
921542, at *3 (3d Cir. Feb. 16, 2018) (finding claim regarding lack of insurance
for retirement benefit was speculative because plaintiff “would only be harmed by
[its] absence if there were to be a default.”)).
C.

Notice and Disclosure Requirements
Plaintiffs request that defendants pay civil monetary penalties for their

failure to provide to plaintiffs and Plan participants certain notices that are required
under ERISA. Plaintiffs also request that I order defendants to comply with
ERISA’s reporting and disclosure requirements.3 Notably, plaintiffs do not allege
that they sustained any injury from defendants’ alleged lack of ERISA-required
notices and disclosures, or that any injury is imminent. “[I]ntangible injuries must
still be connected to a risk of real harm.” Feather, 2018 WL 3536613, at *6 (citing
Spokeo, Inc. v. Robbins, 136 S. Ct. 1540, 1549 (2016)). “Article III standing
requires a concrete injury even in the context of a statutory violation.” Spokeo,
136 S. Ct. at 1549. “For that reason, [a plaintiff] could not, for example, allege a
bare procedural violation, divorced from any concrete harm, and satisfy the injury3

Specifically, plaintiffs seek ERISA’s civil monetary penalties for defendants’ alleged failure to
provide notices of failure to meet minimum funding, funding notices, and pension benefit
statements. Plaintiffs also request that defendants be ordered to provide ERISA-required
summary plan descriptions, annual reports, and summary annual reports. (ECF 145 at ¶¶ 217-30,
255-56.)

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in-fact requirement of Article III.” Id. Plaintiffs’ complaint here does not allege
any risk of real harm associated with the claimed procedural violations.
To the extent plaintiffs contend in their supplemental briefs on defendants’
motion to dismiss that the Plan’s lack of notice and disclosure deprives them of
information necessary to plan their future (see ECF 195 at header p. 10, ECF 204
at header p. 13), I note that plaintiffs did not assert this alleged injury in their
complaint. On a motion to dismiss, I must view standing in light of the factual
allegations of the complaint. Sanzone, 954 F.3d at 1046. I will therefore not
address whether a lack of information for purposes of long-term planning
constitutes a concrete injury sufficient to confer standing.
Accordingly, because plaintiffs’ complaint does not connect the Mercy
Plan’s lack of notice and/or disclosure to any concrete injury, plaintiffs lack Article
III standing to assert the claim here.
D.

Other Injury
Plaintiffs also allege in their complaint that the church-plan exemption gives

Mercy Health an unfair advantage over its competitors because it does not have to
pay premiums for PBGC insurance and is not required to make minimum
contributions to fund the Plan. But plaintiffs are not Mercy Health’s competitors.
Because plaintiffs themselves have no concrete stake in this aspect of their claim,

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they lack Article III standing to bring it. See Thole, 140 S. Ct. at 1619.
E.

“Able to Sue Under ERISA”
The Eighth Circuit stated that “but for the church-plan exemption,” plaintiffs

“would be able to sue under ERISA” to enforce the protections identified above.
Sanzone, 954 F.3d at 1047. The Supreme Court’s decision in Thole, however,
decided less than three months after the Eighth Circuit’s opinion here, casts doubt
on this statement.
In Thole, the Supreme Court determined that participants in an ERISAcovered defined-benefit pension plan did not have Article III standing to bring
claims under ERISA for alleged mismanagement that resulted in losses to the plan.
The Court reasoned that the plaintiff-participants did not have a concrete stake in
the lawsuit because, win or lose, they would continue to receive the same pension
benefits that they were already slated to receive, and for the rest of their lives. 140
S. Ct. at 1619. And the Court noted that the complaint “did not plausibly and
clearly claim that the alleged mismanagement of the plan substantially increased
the risk that the plan and the employer would fail and be unable to pay the
plaintiffs’ future pension benefits.” Id. at 1622. For the reasons set out above,
plaintiffs’ complaint here suffers the same infirmity.
The Court also held that the plaintiff-participants did not have standing to

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bring claims on behalf of the plan itself – that is, that the plan has been injured by
defendants’ alleged conduct – because “the litigants themselves still must have
suffered an injury in fact, thus giving them a sufficiently concrete interest in the
outcome of the issue in dispute.” Thole, 140 S. Ct. at 1620 (internal quotation
marks and citations omitted). See also Harley v. Minnesota Min. & Mfg. Co., 284
F.3d 901, 906 (8th Cir. 2002) (“limits on judicial power imposed by Article III
counsel against permitting participants or beneficiaries who have suffered no
injury in fact from suing to enforce ERISA fiduciary duties on behalf of the Plan.”)
(emphasis in Harley). For the reasons discussed above, the plaintiffs here have not
suffered an injury in fact on their claims of minimum funding, lack of insurance,
and lack of notice and disclosures and thus do not have a concrete stake in the
outcome of this lawsuit. If the Mercy Plan has been harmed by the deficiencies
alleged in plaintiffs’ complaint, it is the Plan’s claim to pursue, not the plaintiffparticipants here.
Therefore, even if the Mercy Plan was not a church plan and was covered by
ERISA, the plaintiffs here would nevertheless have no standing to bring their
claims to enforce the ERISA protections they seek in this litigation.
F.

State Law Claims
Because I will dismiss plaintiffs’ remaining constitutional claim for lack of

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Article III standing, I continue to decline to exercise supplemental jurisdiction over
plaintiffs’ alternative state law claims pursuant to 28 U.S.C. § 1367(c)(3) and will
not reinstate them to this action.
Accordingly,
IT IS HEREBY ORDERED that plaintiffs’ claim that the church-plan
exemption as applied to the Mercy Plan violates the Establishment Clause of the
First Amendment of the Constitution is dismissed for lack of subject-matter
jurisdiction.
IT IS FURTHER ORDERED that plaintiffs’ alternative state law claims
remain dismissed without prejudice pursuant to 28 U.S.C. § 1367(c)(3).
A separate Order of Dismissal is entered herewith.

CATHERINE D. PERRY
UNITED STATES DISTRICT JUDGE
Dated this 4th day of November, 2020.

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