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Rollins v. Dignity Health

United States District Court, N.D. California

December 12, 2013

STARLA ROLLINS, Plaintiff,
v.
DIGNITY HEALTH, et al., Defendants

For Starla Rollins, on behalf of herself, individually, and on behalf of all others similarly situated, Plaintiff: Bruce Frank Rinaldi, LEAD ATTORNEY, Karen L Handorf, Matthew Alexander Smith, Michelle C. Yau, Monya M Bunch, PRO HAC VICE, Cohen Milstein Sellers & Toll PLLC, Washington, DC; Juli E. Farris, LEAD ATTORNEY, Havila C. Unrein, Keller Rohrback LLP, Seattle, WA; Lynn Lincoln Sarko, Matthew M. Gerend, PRO HAC VICE, Keller Rohrback L.L.P., Seattle, WA; Ron Kilgard, PRO HAC VICE, Keller Rohrback, P.L.C., Phoenix, AZ.

For Dignity Health, Defendant: A California Non-profit Corporation, LEAD ATTORNEY, Nicole A. Diller, San Francisco, CA; Allyson N. Ho, PRO HAC VICE, Morgan Lewis & Bockius LLP, Dallas, TX; Charles C. Jackson, PRO HAC VICE, Morgan Lewis LLP, Chicago, IL; Roberta H. Vespremi, Morgan Lewis & Bockius LLP, San Francisco, CA.

For Herbert J. Vallier, an individual, Members of the Dignity Health Retirement Committee, Defendants: Nicole A. Diller, LEAD ATTORNEY; Allyson N. Ho, PRO HAC VICE, Morgan Lewis & Bockius LLP, Dallas, TX; Charles C. Jackson, PRO HAC VICE, Morgan Lewis LLP, Chicago, IL; Roberta H. Vespremi, Morgan Lewis & Bockius LLP, San Francisco, CA.

For Members of the Dignity Health Retirement Plans Sub-Committee, Defendant: Nicole A. Diller, LEAD ATTORNEY; Roberta H. Vespremi, Morgan Lewis & Bockius LLP, San Francisco, CA.

For United States of America, Movant: Michael Charles Pollack, LEAD ATTORNEY, United States Department of Justice, Civil Division, Federal Programs Branch, Washington, DC.

Page 910

ORDER DENYING DEFENDANTS' MOTION TO DISMISS

THELTON E. HENDERSON, UNITED STATES DISTRICT JUDGE.

Defendants' motion to dismiss came before the Court on November 4, 2013. Having considered the parties' arguments and the papers submitted, the Court now DENIES Defendants' motion for the reasons set forth below.

BACKGROUND

Defendant Dignity Health (" Dignity" ) [1] is a non-profit healthcare provider with facilities in sixteen states. Compl. ¶ 1. From 1986 to 2012, Plaintiff Starla Rollins (" Rollins" ) was employed as a billing coordinator at a Dignity-operated hospital. Id. ¶ 18. Based on her employment, Rollins will be eligible for pension benefits from Dignity's benefits plan (the " Plan" ) when she reaches retirement age. Id.

Rollins alleges that Dignity's Plan violates the Employee Retirement Income Security Act (" ERISA" ), 29 U.S.C. § § 1001 et seq. Dignity contends that its Plan need not comply with ERISA because it is a " church plan," which the statute explicitly exempts from its requirements. Rollins maintains that the Plan does not qualify as a church plan as defined by ERISA and in the alternative, if the Plan is exempt, such an exemption violates the Establishment Clause of the First Amendment and is therefore void. Id. ¶ ¶ 162-164.

On behalf of herself and others similarly situated, Rollins seeks declaratory relief

Page 911

that Dignity's Plan is not a church plan exempt from ERISA, as well as injunctive relief requiring Dignity to conform the Plan to ERISA's requirements. She also requests that Dignity make Plan participants whole for any losses they suffered as a result of its ERISA non-compliance and that Dignity pay any other statutory penalties and fees. Dignity moves to dismiss, contending that the Plan is a church plan, exempt from ERISA as a matter of law, and therefore, that Rollins's allegations regarding ERISA violations fail to state a claim for relief.

LEGAL STANDARD

Dismissal is appropriate under Federal Rule of Civil Procedure 12(b)(6) when a complaint's allegations fail " to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). In ruling on a motion to dismiss, a court must " accept all material allegations of fact as true and construe the complaint in a light most favorable to the non-moving party." Vasquez v. Los Angeles County, 487 F.3d 1246, 1249 (9th Cir. 2007). To survive a motion to dismiss, a plaintiff must plead " enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). " A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

DISCUSSION

Enacted in 1974, ERISA was designed to ensure that employees actually receive the benefits they are promised by establishing, among other requirements, minimum funding standards and disclosure obligations for employee benefits plans. Pub. L. No. 94-406, 88 Stat. 829 (1974), codified at 29 U.S.C. § § 1001 et seq. ERISA explicitly exempted " church plans" from its requirements and explained " the term 'church plan' means [] a plan established and maintained for its employees by a church or by a convention or association of churches." 29 U.S.C. § 1002(33)(A) (1976). The statute permitted a church plan to also cover employees of church agencies, but the permission was to sunset in 1982. Id.

In 1980, ERISA was amended to eliminate the 1982 deadline and to include other clarifications. The relevant statutory section, 29 U.S.C. § 1002(33), now reads as follows:

(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.
(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 ...

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