Longstanding, agency-approved exemption of religious hospitals from federal pension law had been overturned, threatening Dignity Health chain of U.S. hospitals with ruinous penalties

Contact: Tom Ciesielka, 312-422-1333, tc@tcpr.net

SAN FRANCISCO, Calif., July 14, 2015 /Christian Newswire/ -- Thomas More Society has filed an amicus curiae (friend of the court) brief with the United States Court of Appeals for the Ninth Circuit, urging the Court to reverse a lower court ruling against Dignity Health, a nonprofit hospital system founded by the Sisters of Mercy, that decided Catholic and other religious hospitals' longstanding exemption from federal pension law requirements, mandated by the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), was invalid and void, because those hospitals were not operated by the Church itself but rather by church-associated religious groups.

Dignity Health, whose founding nuns were "committed to furthering the healing ministry of Jesus," now operates some two dozen hospitals throughout the western United States. In January, 1989, after providing pension benefits through seven different retirement plans, all those plans were merged into a new and generous defined benefit pension plan to cover hospitals and their employees as well as women religious working in the hospitals as part of their vocation. Both the Internal Revenue Service (IRS) and the federal Pension Benefit Guaranty Corp. (PRGC) confirmed repeatedly that the new Dignity plan was deemed a "church plan" exempt from the federal pension law, ERISA, because of its "association" with a church – an explicit exemption set forth in the text of the ERISA law itself.

But over twenty years later, in 2013 lawyers brought a class action lawsuit against Dignity Health (as similar lawsuits had been brought against other Catholic hospitals), claiming those hospitals' pension plans were not entitled to exemption under ERISA, and that in any event such an exemption would violate the Establishment Clause of the U.S. Constitution, as it would constitute an establishment of religion in violation of the separation of church and state. Worse, the lawyers argued that Dignity (and other hospitals) should be liable for statutory penalties of up to $110 per class member, per day of non-compliance with ERISA requirements, retroactive to the new pension plan's inception, plus injunctive relief and attorneys' fees. The federal trial court upheld these claims, holding that "only a church or a convention of association of churches may establish a[n] [exempt] church plan." The lower court also held there was no statute of limitations, so that ruinous, bankruptcy-inducing penalties might be payable for many years' alleged non-compliance, if the class action lawyers' claims were upheld on appeal.

Thomas More Society's amicus brief argues the Dignity Health's pension plan is indeed a "church plan" because a church-associated organization maintains the plan – as federal oversight agencies (IRS, PBGC) have concluded, on which Dignity other faith-based hospitals relied. Moreover, a broad reading of the ERISA statutory exemption is supported by the free exercise clause of the First Amendment, assuring that Catholic and other religious hospitals are free to make decisions according to their religious principles, protected from excessive government entanglement. Thus the "avoidance canon" counsels against an unduly expansive federal control over the operations of religious institutions – including hospitals.

Tom Brejcha, president & chief counsel of Thomas More Society, commented: "This and other attacks on the principled independence and fiscal viability of Catholic hospitals represents yet another assault on the citadel of religious liberty in our country. We owe it to our predecessors and our posterity alike to repulse these attacks. What once we took for granted – that 'free exercise of faith' includes not only preaching the faith but also the right to practice it outside the four walls of churches – must now be defended with vigor and resolve, even at great cost."

Brejcha added, "If this appeal should fail, given multiple lawsuits on this issue, there is a likelihood that it too will soon come before the U.S. Supreme Court in another major test for religious liberty."

The Society's brief was authored by Shay Dvoretzky and Emily J. Kennedy of Jones Day, with input from Alan Untereiner, of the Washington, D.C. law firm, Robbins, Russell, Orseck, Englert & Untereiner, retained as special counsel for the Thomas More Society.

View Thomas More Society's amicus brief here.

About the Thomas More Society
Thomas More Society is a national not-for-profit law firm dedicated to restoring respect in law for life, family, and religious liberty. Headquartered in Chicago, the Society fosters support for these causes by providing high quality pro bono legal services from local trial courts all the way up to the United States Supreme Court. www.thomasmoresociety.org