Sheilar Smith v. OSF Healthcare System
933 F.3d 859
7th Cir.2019Background
- Plaintiff Sheilar Smith, a former participant in OSF HealthCare’s pension plans, sued alleging OSF’s plans are not ERISA-exempt church plans and that OSF mismanaged underfunded plans and breached fiduciary duties.
- OSF is a Catholic nonprofit health system founded by the Sisters of the Third Order of St. Francis; plans are administered by internal pension committees with identical memberships (the Committees).
- OSF asserts the Committees qualify as §1002(33)(C)(i) “principal-purpose organizations,” making the plans exempt from ERISA under the church-plan exemption; IRS private letter rulings also found the plans to be church plans.
- The district court granted summary judgment for defendants before discovery closed, concluding Advocate Health and Medina supported exemption and that additional discovery would be futile or plaintiff had not been diligent.
- The Seventh Circuit vacated and remanded, holding the district court abused its discretion in denying plaintiff’s Rule 56(d) motion because discovery was timely, diligently pursued, and potentially material to whether the Committees actually administered/maintained the plans.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether OSF’s pension plans qualify as ERISA-exempt church plans via the principal-purpose organization provision | The Committees cannot qualify because (1) internal committees are not distinct “organizations,” (2) mere naming/delegation without actual administration fails the “maintained” requirement, and (3) Committees rarely met so may not have administered plans | Committees are principal-purpose organizations under the statute; a church-associated sponsor may delegate administration to such committees and the plans are therefore exempt | Court did not decide merits; found factual disputes (e.g., whether Committees actually administered plans) and remanded for discovery to resolve them |
| Whether district court abused discretion by denying Rule 56(d) request to continue summary-judgment briefing pending discovery | Smith argued she had pending, diligently pursued discovery (documents, emails, depositions) necessary to oppose summary judgment and that defendants filed for summary judgment prematurely | OSF argued plaintiff was not diligent, failed to move to compel, and proposed overbroad electronic-search terms; thus denial was appropriate | Seventh Circuit held district court abused its discretion: discovery was sequenced sensibly, delays were partly court- and defendant-caused, and the requested discovery was material (not futile) |
| Whether additional discovery would be futile because Medina/Advocate Health foreclosed plaintiff’s claims | Plaintiff contends those precedents do not resolve disputed facts and statutory interpretation issues here | OSF relied on Medina and Advocate Health to argue discovery couldn’t change the legal outcome | Court held Medina was not controlling on the developed facts here; denying discovery based on contested legal views was error |
| Whether the church-plan exemption raises Establishment Clause problems warranting immediate decision | Plaintiff raised an as-applied Establishment Clause challenge tied to factual record | OSF argued exemption is constitutional and settled by precedent | Court declined to decide the constitutional question, finding the factual record underdeveloped and remanding for further factfinding |
Key Cases Cited
- LaRue v. DeWolff, Boberg & Assocs., Inc., 552 U.S. 248 (describing ERISA as a comprehensive statute with integrated enforcement provisions)
- Massachusetts Mutual Life Ins. Co. v. Russell, 473 U.S. 134 (context on ERISA’s remedial scheme and goals)
- Advocate Health Care Network v. Stapleton, 137 S. Ct. 1652 (interpreting the 1980 amendment and holding principal-purpose organizations can confer church-plan status regardless of who established the plan)
- Farmer v. Brennan, 81 F.3d 1444 (7th Cir.) (standards for Rule 56(d) and that district courts have substantial but not unlimited discretion)
- Medina v. Catholic Health Initiatives, 877 F.3d 1213 (10th Cir.) (applied a three-step test to uphold church-plan exemption for internal committees; relied on by district court)
- Arnold v. Villarreal, 853 F.3d 384 (7th Cir.) (noting summary judgment need not be delayed for obviously meritless claims)