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Teresa CASTO, Plaintiff, v. UNUM LIFE INSURANCE COMPANY OF AMERICA, and Unum Group Corp., Defendants.
MEMORANDUM OPINION AND ORDER
This case involves the denial of long-term disability benefits to Plaintiff Teresa Casto. Casto sued Defendants Unum Life Insurance Company of America and Unum Group Corporation (collectively “Unum”) for breach of contract and bad faith under Ohio common law in the Circuit Court for Hamilton County, Tennessee. (Doc. 1-3, 5–6.) Defendant timely removed this action to federal court. (Doc. 1.) Before the Court is Casto's motion to remand to state court. (Doc. 23.) For the following reasons, Casto's motion (Doc. 23) will be DENIED. Furthermore, the stay in this case (Doc. 34) will be LIFTED.
Casto worked as a nurse practitioner at Mount Carmel St. Ann's, a not-for-profit organization associated with Trinity Health and the Catholic Church. (Doc 1-3, at 2.) Trinity Health is a healthcare organization sponsored by Catholic Health Ministries, a public juridic person created by the Catholic Church to carry out the Church's healthcare initiatives. (Doc. 24, at 5.) Trinity Health provides service to 92 hospitals and hundreds of other such facilities in 22 states. (Doc. 29-1, at 1.)
Employees of Trinity Health are eligible for disability coverage through the Trinity Health Corporation Welfare Benefit Plan (“the Plan”). (Doc. 1-6.) Trinity Health administers the Plan. (Doc. 1-6.) Casto was eligible for long-term disability benefits under a policy from Unum through St. Ann's (“the Policy”). (Id. at 1.) Casto claims that Unum wrongly denied her long-term disability payments because she “has suffered and continues to suffer from a total disability as defined by the Policy.” (Doc 1-3, at 5.)
Casto sued Unum in the Circuit Court of Hamilton County, Tennessee, alleging claims for breach of contract and bad faith under Ohio common law. (Doc. 1-3.) Unum timely removed the case to this Court. (Doc. 1.) Casto then moved to remand this case to state court. (Doc. 23.)1
On a motion to remand, the defendant bears the burden of proving the Court has jurisdiction. Williamson v. Aetna Life Ins. Co., 481 F.3d 369, 375 (6th Cir. 2007). The only plausible ground for jurisdiction in this case is federal question jurisdiction. 28 U.S.C. § 1331. Generally, the Court can examine only the complaint, and even if the plaintiff's state-law claim may be preempted, a federal court cannot entertain jurisdiction. K.B. by and through Qassis v. Methodist Healthcare – Memphis Hosps., 929 F.3d 795, 799–800 (6th Cir. 2019). But ERISA provides an exemption to this rule: A claim regarding an ERISA plan may “completely preempt” state law which gives the federal courts jurisdiction over the state law claim. Id. For this Court to have jurisdiction, Unum has to show that Casto: (1) is complaining about a denial of benefits under the terms of an ERISA plan and (2) “does not allege the violation of any legal duty (state or federal) independent of ERISA or the plan terms.” Gardner v. Heartland Indus. Partners, LP, 715 F.3d 609, 613 (6th Cir. 2013) (quoting Aetna Health Inc. v. Davila, 542 U.S. 200, 210, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004)); see also Qassis, 929 F.3d at 800.
Casto claims that Unum owes her payments because she “has suffered and continues to suffer from a total disability as defined by the Policy.” (Doc. 1-3, at 5.) Her claim for breach of contract is, therefore, based on the (1) denial of benefits from Unum and (2) is “dependent on ․ the ERISA plan's terms.” Qassis, 929 F.3d at 800 (emphasis in original). As such, if the Plan is an ERISA plan, the Court can hear this claim. 28 U.S.C. §§ 1331, 1441.2
However, the parties dispute whether the Plan is an ERISA plan. (See Docs. 24, 29.) Casto argues that it is not an ERISA plan, because it is instead a “church plan,” and church plans are exempt from ERISA. 29 U.S.C. § 1003(b)(2).
ERISA defines a church plan as “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.” 29 U.S.C. § 1002(33). ERISA also states:
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.
Id. § 1002(33)(C)(i). That provision “is a mouthful, for lawyers and non-lawyers alike.” Advocate Health Care Network v. Stapleton, ––– U.S. ––––, 137 S. Ct. 1652, 1656, 198 L.Ed.2d 96 (2017). Luckily, the Supreme Court clarified the text that follows “organization” “is just a (long-winded) description of a particular kind of church-associated entity,” a “principal-purpose organization.” Id.
Unum argues that these two provisions are exhaustive. According to Unum, for a plan to be a church plan it must be maintained by: (1) a church or (2) a principal-purpose organization associated with a church. (Doc. 29, at 1.) Casto argues that a plan can be a church plan as long as an organization associated with a church maintains the plan. (Doc. 32, at 7.) They both acknowledge some conflicting authority on the point. Compare Medina v. Catholic Health Initiatives, 877 F.3d 1213, 1222 (10th Cir. 2017) (requiring the administrator to be a principal-purpose organization); with Rinehart v. Life Ins. Co. of N. Am., No. C08-5486, 2009 WL 995715, at *4 (W.D. Wash. Apr. 14, 2009) (stating the administrator just needs to be associated with a church).
Unum reads the statute correctly. The statute lays out in plain language that a “Church plan means a plan established and maintained ․ by a church,” and that definition “includes a plan maintained by a [principal-purpose organization.]” 29 U.S.C. § 1002; Stapleton, 137 S. Ct. at 1656. There is no other addition to the definition of church plan that would expand it to all entities merely associated with a church. Furthermore, when the Court in Stapleton addressed this provision, it consistently listed those two iterations as the only two possible definitions of a church plan. See Stapleton, 137 S. Ct. at 1656, 1658–59, 1163.
The Court's reading accords with the approach of the Tenth Circuit in Medina, 877 F.3d at 1221–22. The Court in Medina—which decided the issue after Stapleton—held that there is a three-step inquiry to determine if an organization, which is not a church, falls under the church plan exception:
1. Is the entity a tax-exempt nonprofit associated with a church?
2. If so, is the entity's retirement plan maintained by a principal-purpose organization? That is, is the plan maintained by an organization whose principal purpose is administering or funding a retirement plan for entity employees?
3. If so, is that principal-purpose organization itself associated with a church?
Id.3 This test squares with the plain text of ERISA and the Court's holding in Stapleton.
The courts that reach the opposite conclusion do so for two—ultimately unpersuasive—reasons. The first is that they omit the requirement of a principal-purpose organization when quoting 29 U.S.C. § 1002(33)(C)(i). For example, in Lown v. Cont'l Cas. Co., 238 F.3d 543, 547 (4th Cir. 2001), a case decided before Stapleton, the Fourth Circuit stated that “the statute defines church plans to include plans ‘maintained by an organization, whether civil law corporation or otherwise, ․ if such organization is controlled by or associated with a church ․.” Id. (quoting 29 U.S.C. § 1002(33)(C)(i)).4 Courts have since interpreted Lown to hold that an organization, which is not a principal-purpose organization, can administer a church plan. See Catholic Charities of Me., Inc. v. City of Portland, 304 F. Supp. 2d 77, 85 (D. Me. 2004).
However, Lown did not hold that an organization merely associated with a church could administer a church plan. The court in Lown decided that the organization that administered the plan at issue was not sufficiently associated with a church for the plan to be a church plan. 238 F.3d at 548.5 The court did not have to decide whether the organization was also required to be a principal-purpose organization. Id. Because the Fourth Circuit in Lown never reached that question, it did not hold that an organization associated with a church does not also have to be a principal-purpose organization to administer a church plan. Cooper Indus., Inc. v. Aviall Servs., Inc., 543 U.S. 157, 170, 125 S.Ct. 577, 160 L.Ed.2d 548 (2004) (“Questions which merely lurk in the record, neither brought to the attention of the court nor ruled upon, are not to be considered as having been so decided as to constitute precedents.”) (quoting Webster v. Fall, 266 U.S. 507, 511, 45 S.Ct. 148, 69 L.Ed. 411 (1925)) (internal quotation marks omitted).6
Even if Lown held that a plan administered by any organization associated with a church is a church plan, the Court would decline to follow the Fourth Circuit's pre-Stapleton approach. Its interpretation would render most of § 1002(33)(C)(i) useless, and that oversight would conflict with the “surplusage cannon” which instructs the Courts to presume every word in the statute has meaning. Stapleton, 137 S. Ct. at 1659 (citing Antonin Scalia & Bryan Garner, Reading Law: The Interpretation of Legal Texts 174–79 (2012)). A reading that renders almost the entire definition useless should be rejected in favor or one which gives each section meaning. The Tenth Circuit's approach in Medina gives each word an effect, and therefore it is more persuasive. Medina, 877 F.3d at 1222.
Other courts reason that ERISA's definition of “employee of a church” expands the definition of church plan beyond principal-purpose organizations. See Rinehart, 2009 WL 995715 at *4. ERISA states “[t]he term employee of a church ․ includes– ․ an employee of an organization, whether civil law corporation or otherwise, which is exempt from tax under section 501 of Title 26 and which is controlled or associated with a church ․.” 29 U.S.C. § 1002(C)(ii)(II). Courts have read this to mean that an employee who works with an organization associated with a church is a church employee and therefore his employer must administer a church plan. See Catholic Charities of Me., 304 F. Supp. 2d at 84–85.
This reading, however, is similarly unpersuasive. First, these courts read “include” too literally. Their reasoning relies on the fact that if the phrase “employee of a church” includes an employee of an organization merely associated with a church, the associated entity must be a church. But Congress routinely uses the word “includes” where it means “in addition to.” Stapleton, 137 S. Ct. at 1658 (citing 29 U.S.C. § 1002(10)) (“That use of the word ‘include’ is not literal—any more than when Congress says something like ‘a State “includes” Puerto Rico and the District of Columbia.’ ”). Indeed, the Supreme Court even specifically identified that the “include” used in § 1002(33)(C)(ii) did not literally mean include; in this instance, it is akin to the word “also.” Id. at 1658 n.4. Thus, the definition means a church plan can be extended to cover the employees of a church-associated entity. It does not mean that any plan maintained for an employee of a church-associated entity is a church plan. Because the definition does not give rise to the syllogism introduced above, it cannot directly change the meaning of “church” or “church plan.”
These courts also argue that “include” should not be read to limit the definition of church plan. Friend v. Ancilla Sys. Inc., 68 F. Supp. 2d 969, 973 (N.D. Ill. 1999). While the term “include” does not limit the definition to only a principal-purpose organization, it cannot expand the definition past the example it gives. For example, if your friend says, “the salad only includes vegetables including tomatoes,” you know that the salad includes tomatoes, a fruit (your friend uses “include” in the same way Congress occasionally uses it: as a synonym for additionally.) Yet, you are similarly sure that the salad does not include apples, oranges, or raspberries because they are not vegetables. While your friend carved out one exception, she did not expand the definition of vegetable: any remaining ingredient must be a vegetable. This statute says a church plan is only a plan administered by a church and that includes a plan administered by a principal-purpose organization. Thus, if the administrator of a plan is not a principal-purpose organization, for the plan to be a church plan, it would have to be administered by a church. That does not include a plan run by a hospital or a health care group, because they are not a church. See Goetz v. Greater Ga. Life Ins. Co., 554 F. Supp 2d 831, 836–37 (E.D. Tenn. 2008).
Second, this reading similarly renders § 1002(33)(C)(i) superfluous. If the definition of “employee of a church” expands the meaning of church plan, ERISA's definition of church plan reads as the following: A church plan includes (1) a plan administered by a church (2) a plan administered by a principal-purpose organization associated with a church, and (3) a plan administered by an organization associated with a church. See Rinehart, 2009 WL 995715 at *4. Such a reading would make the restriction placed by § 1002(33)(C)(i) superfluous.
Alternatively, § 1002(33)(C)(ii)(II) may just expand those who can benefit from a church plan. For example, § 1002(2)(C)(ii)(II) would make a plan administered by the Catholic Church for employees of an associated hospital a church plan. That plan would be administered by a church under § 1002(33)(C)(i) for the employees of a church-associated entity under § 1002(22)(C)(ii)(II). Thus, applying the statute as the Court does today gives every section meaning, and therefore the Court's reading is preferred. See Stapleton, 137 S. Ct. at 1659.
Finally, even if there was doubt as to the proper interpretation, ERISA has a broad remedial purpose, and its provisions should be read expansively. Rettig v. Pension Ben. Guar. Corp., 744 F.2d 133, 155 n.54 (D.C. Cir. 1984). Thus, the “church plan” exception should be construed narrowly to provide for broader ERISA coverage. Id. Therefore, the Court does not read the definition of “employee of a church” as expanding the definition of “church plan.”7
Casto makes a final argument that the Supreme Court held in Stapleton that a hospital's plan was a church plan because the hospital was associated with the Catholic Church. (Doc. 24, at 8.) The Supreme Court did no such thing. It explicitly withheld judgment as to whether the hospital's plans fell under the church-plan exception. Stapleton, 137 S. Ct. at 1657, nn. 2–3. Indeed, that remains an open question on remand. Kaplan v. Saint Peter's Healthcare Sys., No. 13-2941, 2019 WL 1923606, at *7–8 (D.N.J. Apr. 30, 2019).
Thus, for this plan to be a church plan, Trinity Health would need to be a principal-purpose organization. Both parties agree it is not. (Doc. 32, at 7 n.2.) Therefore, the plan at issue is not a church plan, it is covered by ERISA, and the Court has jurisdiction over this case.8 28 U.S.C. §§ 1331, 1441.
For the reasons set forth, Casto's motion to remand (Doc. 23) is DENIED. The stay in this case is (Doc. 34) LIFTED. An appropriate scheduling order will issue.
1. This case was stayed pending the resolution of Casto's motion to remand. (Doc. 34.)
2. The Court does not decide whether the Casto's second claim, Ohio Common Law Bad Faith, is preempted. It arises from the same “common nucleus of operative fact,” as the breach of contract claim. Watson v. Cartee, 817 F.3d 299, 303 (6th Cir. 2016). Thus, if the Court has jurisdiction over the breach-of-contract claim, it has jurisdiction over the bad-faith claim. 28 U.S.C. § 1367.
3. This test has been adopted by other District Courts. See, e.g., Rollins v. Dignity Health, 338 F. Supp. 3d 1025, 1035 (N.D. Cal. 2018); Boden v. St. Elizabeth Med. Ctr., Inc., 404 F. Supp. 3d 1076, 1082 (E.D. Ky. 2019); Cappello v. Franciscan All., Inc., No. 3:16-CV-290, 2019 WL 1382909, at *3 (N.D. Ind. Mar. 27, 2019).
4. The court in Lown omitted “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.” 29 U.S.C. § 1002(33)(C)(i).
5. Even if an organization is a principal-purpose organization, it needs to be associated with a church to qualify under the exception. See Medina, 877 F.3d at 1222.
6. Casto argues Chronister v. Baptist Health, 442 F.3d 648, 651–653 (8th Cir. 2006) also held that an organization can administer a church plan without having to be a principal-purpose organization. (Doc. 32, at 10.) But Chronister, like Lown, did not consider that question, and it did not need to because the hospital in that case was not sufficiently associated with a church. Chronister, 442 F.3d at 653.
7. Furthermore, the cases cited by Casto were decided before Stapleton. (See Doc. 32, at 9–11.) These courts lacked the guidance of the Supreme Court's decision. With this guidance, the Court is convinced it adopts the best available reading.
8. Because the Plan is not a Church Plan, the Court does not need to reach the question of whether Trinity Health otherwise opted into ERISA's requirements. 29 U.S.C. § 1003(b)(2)
TRAVIS R. MCDONOUGH, UNITED STATES DISTRICT JUDGE
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Docket No: Case No. 1:19-cv-162
Decided: December 21, 2020
Court: United States District Court, E.D. Tennessee, Southern Division,
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