Lown v. Continental Casualty Company, 238 F.3d 543 (4th Cir. 2001) – decided February 2, 2001 - United States Court of Appeals for the Fourth Circuit – Robert E. Hoskins

I represented Lown. Lown was an important case when it came out and it remains so. The key holding in Lown establishes how courts will determine what is a “church plan” for the purpose of ERISA. Although ERISA applies to most employee benefit plans, it does not apply to all. Specifically excepted from ERISA’s applicability are “governmental plans” and “church plans”. (See 29 U.S.C. § 1003.) Although the term “church plan” is defined by ERISA (see 29 U.S.C. § 1002(33)), there is no clear test, in the statute, to determine what constitutes a “church plan”. Such was the state of affairs when I filed Lown.

At first blush, Lown appears to involve a very straightforward ERISA governed long term disability claim. However, Lown worked for the Baptist Medical Center which was a hospital located in Columbia, South Carolina. (Baptist Medical Center no longer exists as a separate entity and is now a part of the Palmetto Richland Memorial Hospital.) Realizing that ERISA excepts “church plans” from its applicability, and keying on the word “Baptist” in Lown’s employer’s name, I pled the case as if it were non-ERISA asserting that Baptist Medical Center’s plans were “church plans” within the meaning of 29 U.S.C. § 1003. The district court disagreed and ruled against me. (Click here to view the district court order) I appealed to the United States Court of Appeals for the Fourth Circuit. The case was argued in Richmond and resulted in a published opinion of the court. The court used the opportunity to establish the definitive test for determining what constitutes a “church plan”. The court held:

“ERISA is a “‘comprehensive statute designed to promote the interests of employees and their beneficiaries in employee benefit plans.’” Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 137, 112 L.Ed.2d 474, 111 S. Ct. 478 (1990) quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90, 77 L.Ed.2d 490, 103 S. Ct. 2890 (1983). ERISA applies to employee benefit plans established or maintained by any employer engaged in commerce. 29 U.S.C. § 1003(a). Federal courts have jurisdiction to hear an action brought to recover benefits due under an ERISA plan. 29 U.S.C. § 1132(a), 1132(e).

Church plans are not ERISA plans, however. 29 U.S.C. § 1003(b)(2). A church plan means a plan established and maintained “for its employees (or their beneficiaries) by a church or by a convention or association of churches.” Id. § 1002(33)(A). A church plan does not include all plans maintained by a church. The statute specifically excludes plans established and maintained primarily for the benefit of those “who are employed in connection with one or more unrelated trades or businesses.” Id. § 1002(33)(B)(i).

Despite this exception to the definition of a church plan, a plan established by a corporation associated with a church can still qualify as a church plan. The statute defines church plans to include plans “maintained by an organization, whether a civil law corporation or otherwise, . . . if such organization is controlled by or associated with a church or a convention or association of churches.” Id. § 1002(33)(C)(i). An organization is controlled by a church when, for example, a religious institute appoints a majority of the organization’s officers or directors. 26 C.F.R. § 1.414(e)-1(d)(2) (2000). To be “associated with a church,” the corporation must share “common religious bonds and convictions with that church or convention or association of churches.” 29 U.S.C. § 1002(33)(C)(iv).

Our jurisdiction in this case thus turns on whether, at the expiration of Lown’s coverage under the plan in 1997, the disability plan was an ERISA plan or a church plan. By 1997, the South Carolina Baptist Convention did not control Baptist Healthcare. The Convention did not appoint or approve a majority of Baptist Healthcare’s Board or officers, and Lown points to no other factors indicating that the Convention controlled the hospital. See 26 C.F.R. § 1.414(e)-1(d)(2).

Lown can still demonstrate, however, that Baptist Healthcare was associated with the South Carolina Baptist Convention by showing that the two shared sufficient “common religious bonds and convictions.” In deciding whether an organization shares such common bonds and convictions with a church, three factors bear primary consideration: 1) whether the religious institution plays an official role in the governance of the organization; 2) whether the organization receives assistance from the religious institute; and 3) whether a denominational requirement exists for any employee or patient/customer of the organization.

Baptist Healthcare does not meet any of these criteria.” (Click here to view the Fourth Circuit’s opinion)