United States District Court, D. New Jersey
August 2, 2005.
HESTER TYNES and MARY PETTI, individually and as representatives of the CLASS of participants in the Employees' Improved Retirement Plan of the Hospital Center at Orange, Plaintiffs,
PENSION BENEFIT GUARANTY CORPORATION, COMMISSIONER OF INTERNAL REVENUE, THE HOSPITAL CENTER AT ORANGE, ORANGE MOUNTAIN HEALTHCARE, INC., CATHEDRAL AFFILIATED GROUP OF ORANGE, INC., CATHEDRAL HEALTHCARE SYSTEM, INC., THE ARCHDIOCESE OF NEWARK, and THE EMPLOYEES' IMPROVED RETIREMENT PLAN OF THE HOSPITAL CENTER AT ORANGE, Defendants.
The opinion of the court was delivered by: JOEL PISANO, District Judge
Plaintiffs Hester Tynes and Mary Petti, seeking to proceed
individually and as representatives of a class of participants in
the Employees' Improved Retirement Plan of the Hospital Center at
Orange, filed a Complaint on June 14, 2004 against the Pension
Benefit Guaranty Corporation, the Commissioner of Internal
Revenue, the Hospital Center at Orange, Orange Mountain
Healthcare, Inc., the Cathedral Affiliated Group of Orange, Inc.,
Cathedral Healthcare System, Inc., the Archdiocese of Newark, and
the Employees' Improved Retirement Plan of the Hospital Center at
Orange (collectively, "Defendants"). Plaintiffs' challenge the
legality of the classification of the Employees' Improved
Retirement Plan of the Hospital Center at Orange as a "church
plan" for purposes of the Employee Retirement Income Security Act
("ERISA") as well as treatment of the plan in light of such
classification. Because, inter alia, the Commissioner of
Internal Revenue is reevaluating the classification determination
at the core of this action and no denial of benefits has
occurred, the Court finds that this matter is not yet ripe for
adjudication. Because this matter does not satisfy a fundamental
requirement of justiciability, the Court is compelled to sua
sponte dismiss Plaintiffs' Complaint without prejudice.
Plaintiffs were employees of The Hospital Center at Orange (the
"Hospital"). While employed at the Hospital, named plaintiffs and
others similarly situated earned vested pensions from Employees'
Improved Retirement Plan of the Hospital Center at Orange (the
"Plan"). Compl. ¶¶ 1, 12. The Hospital was a secular not-for-profit
hospital until, according to Plaintiffs, it was taken over by the
Archdiocese of Newark (the "Archdiocese") and/or its healthcare
holding companies in 1998. Compl. ¶ 4. While the Hospital was a
secular not-for-profit hospital, the Plan was insured against
insolvency under ERISA by the Pension Benefit Guaranty
Corporation (the "PBGC"). Following the take-over of the Hospital
by, as alleged by Plaintiffs, the Archdiocese and/or its
health-care holding companies, the Commissioner of Internal
Revenue (the "Commissioner") issued a letter ruling in January
2003 determining that the Plan was a "church plan" exempt from
ERISA. Compl. ¶¶ 8-11. Pension insurance was terminated.*fn2
Compl. ¶ 10. A year later, the Archdiocese closed the Hospital
with a $20 million to $30 million pension shortfall. (Robert
Westreich letter (Oct. 12, 2004)). However, as the Court was
informed during a June 13, 2005 hearing in this matter, neither
the named Plaintiffs nor anyone similarly situated has requested
pension benefits from the Plan to which that person was entitled
and been denied any such benefits. Moreover, counsel for the
Commissioner has represented that adminsitrative proceedings
concerning the classification the Plan as a "church plan" are
on-going. (See, e.g., Transcript of Hearing (Nov. 17, 2004);
Lawrence P. Blaskopf letter (Feb. 11, 2005)). During the June 13,
2005 hearing, the Court also was informed of previously-filed,
related state court litigation, which is stayed, in which
Plaintiffs assert a breach of contract claim for damages.
Plaintiffs' Complaint alleges that (1) the exemption of "church
plans" from ERISA violates the First Amendment's Establishment
Clause; (2) the Plan does not meet the requirements of
26 U.S.C. § 414(e) and the Commissioner's exemption decision must be
vacated; and (3) due to express promises in the Plan documents,
the failure to elect continuing coverage under 26 U.S.C. 410(d)
is a breach of duty actionable under ERISA or New Jersey law.
Compl. ¶¶ 17-19. Plaintiffs seek: "class certification; a
declaration that ERISA's church exemption is unconstitutional; an
Order declaring that the Commissioner's determination that the
defendant Plan is a church plan is void; an Order directing
defendants to take all measures necessary to insure plaintiffs'
pensions through the PBGC; and award of damages, costs, interest
and counsel fees' and such other relief as the Court deems ju
[sic.]." Compl. at 3. Plaintiffs clarified by letter to the
Court that they seek from the Commissioner "only injunctive
relief." (Robert Westreich letter (Oct. 12)). Plaintiffs
emphasized that, with respect to the Commissioner, they
"challenge 29 U.S.C. 1321(b)(3) as a violation of the
Establishment Clause" and that they "ask only the return of our
insurance." (Robert Westreich letter (Oct. 12)).
In August and September 2004, all of the Defendants other than
the Commissioner answered the Complaint. In October 2004, the
Commissioner moved to dismiss the Complaint pursuant to
Fed.R.Civ.P. 12(b)(1) and 12(b)(6), alleging inter alia that the
Commissioner is entitled to sovereign immunity. Plaintiffs have
opposed the Commissioner's motion. This matter was stayed on
January 4, 2005 upon the representation that the Commissioner
would be reconsidering the classification of the Plan as a
"church plan"; the stay ultimately was terminated on April 15,
2005. II. DISCUSSION
The Third Circuit "has recognized that considerations of
ripeness are sufficiently important that the court is required to
raise the issue sua sponte even though the parties do not."
Peachlum v. City of York, Pennsylvania, 333 F.3d 429, 433 (3d
Cir. 2003). The court presumes that it lacks jurisdiction "unless
the contrary appears affirmatively from the record."
Philadelphia Fed'n of Teachers v. Ridge, 150 F.3d 319, 323 (3d
Cir. 1998) (citation omitted).
The ripeness doctrine functions "to determine whether a party
has brought an action prematurely . . . and counsels abstention
until such time as a dispute is sufficiently concrete to satisfy
the constitutional and prudential requirements of the
doctrine."*fn3 Peachlum, 333 F.3d at 433 (citation
omitted). In the context of agency action, "the requirement of
ripeness is designed to prevent the courts, through avoidance of
premature adjudication, from entangling themselves in abstract
disagreements over administrative policies, and also to protect
agencies from judicial interference until an administrative
decision has been formalized and its effects felt in a concrete
way by the challenging parties." New Jersey Hosp. Assoc. v.
United States, 23 F. Supp. 2d 497, 502 (D.N.J. 1998) (internal
quotation and citation omitted).
In analyzing ripeness, a court should look to (1) "the fitness
of the issues for judicial decision" and (2) "the hardship to the
parties of withholding court consideration."*fn4 Abbott
Labs. v. Gardner, 387 U.S. 136, 149 (1967), overruled on other
grounds, Califano v. Sanders, 430 U.S. 99 (1977). In the context
of a challenge to adminsitrative action, "[w]hether a question is
fit for judicial review depends upon factors such as whether the
agency action is final; whether the issue presented for decision
is one of law which requires no additional factual development;
and whether further administrative action is needed to clarify
the agency's position. . . ." Nextel Communications of the
Mid-Atlantic, Inc. v. City of Margate, 305 F.3d 188, 193 (3d
Cir. 2002) (quotation and citation omitted); see also
Philadelphia Fed'n of Teachers, 150 F.3d at 323 (indicating that
factors for a court's consideration under the fitness inquiry
include: "whether the issues presented are purely legal, as
opposed to factual[;] the degree to which the challenged action
is final[;] . . . whether the claim involves uncertain and
contingent events that may not occur as anticipated or at all;
the extent to which a claim is bound up in the facts; and whether
the parties to the action are sufficiently adverse"). In
evaluating the hardship to the parties of a denial of judicial
review, the court should consider whether "the challenged action
creates a `direct and immediate' dilemma for the parties."
Philadelphia Fed'n of Teachers, 150 F.3d at 323 (quoting
Abbott Labs., 387 U.S. at 152). Prudential factors for a court's
consideration, particularly in a post-enforcement context,
include the extent to which postponing federal judicial action would have the advantage of permitting a state court or an
administrative agency additional opportunities to construe a
challenged provision, to finalize a decision, or to clarify a
position on a challenged, discretionary prescription. Peachlum,
333 F.3d at 436.
A. The Fitness of the Issues
Each of Plaintiffs' claims is grounded in the designation of
the Plan as a "church plan" by the Commissioner and the
consequent exemption of the Plan from ERISA, the effects of which
include most pertinently the termination of insurance formerly
provided by PBGC. Applying the factors used by courts to evaluate
ripeness to the case at bar, this Court concludes that
Plaintiffs' claims are not fit for adjudication at this time and
thus will dismiss Plaintiffs' Complaint without prejudice.
First, the process that Plaintiffs challenge is not yet
"final." In the context of ripeness review, "[t]he finality
requirement is concerned with whether the initial decisionmaker
has arrived at a definitive position on the issue that inflicts
an actual, concrete injury." Nextel, 305 F.3d at 193
(quotations and citations omitted). Where adminsitrative agency
action is at issue, a court "must weigh heavily the need to
protect agencies from judicial interference until they have
completed their work and the concrete effect upon plaintiffs can
be determined." New Jersey Hosp. Assoc., 23 F. Supp. 2d at 503;
see also Peachlum, 333 F.3d at 436. Here, no Plaintiff or
similarly situated individual who is entitled to benefits under
the Plan has been denied any such benefits. While it is true that
the Commissioner determined that the Plan is a "church plan" for
purposes of ERISA, the Commissioner has represented to this Court
that it is presently reevaluating that determination. (Lawrence
P. Blaskopf letter (Feb. 11, 2005)); cf. Nextel, 305 F.3d at 193. The possibility thus remains that the Commissioner
will withdraw its earlier determination that the Plan is a
"church plan" following this reevaluation, which negates its
finality. Cf. Nextel, 305 F.3d at 193. Accordingly,
"intervention by this Court at this juncture of the proceedings
between plaintiff and [the Commissioner] would inappropriately
interfere with any further adminsitrative action that might be
taken by [the Commissioner]." New Jersey Hosp.,
23 F. Supp. 2d at 503; see also Peachlum, 333 F.3d at 436.
Moreover, further adminsitrative action is necessary to clarify
the Commissioner's position. The Commissioner's classification of
the Plan as a "church plan" is the foundation for each of
Plaintiffs' claims. A withdrawal of that classification by the
Commissioner would plainly impact Plaintiffs' Complaint as pled.
Indeed, if the Commissioner reclassified the Plan, Plaintiffs may
well have new and different claims to address and deferral thus
may inure to the benefit of Plaintiffs as well. (See, e.g.,
Richard D. Brown letter (February 11, 2005)). What, if any,
viable claims Plaintiffs may ultimately have can only be
determined after the Commissioner renders a final determination.
Accordingly, the Commissioner should be "given the opportunity to
clarify its position in this case." Nextel, 305 F.3d at 193
(quotations and citation omitted); see also New Jersey Hosp.,
23 F. Supp. 2d at 502 (noting that ripeness serves in part "to
protect agencies from judicial interference until an
administrative decision has been formalized and its effects felt
in a concrete way by the challenging parties").
The foregoing factors in the fitness analysis weigh strongly in
favor of allowing the adminsitrative process to go forward. In
addition, consideration of the pending state court litigation
referenced above likewise supports the conclusion that the action
before this Court is not yet ripe for review because the outcome
of that state court litigation could "alter? or dissolve?" questions before this Court. Cf. Crestar Mortgage
Corp. v. Peoples Mortgage Co., Inc., 818 F. Supp. 816, 820 n. 5
(E.D. Pa. 1993) (holding that mortgage buyer's indemnity claim
was not ripe prior to foreclosure sale clarifying, inter alia,
amount of any deficiency, and stating: "Federal ripeness doctrine
also counsels against adjudication of questions that might be
altered or dissolved by further action in state court").
Accordingly, the Court concludes that the issues presented are
not yet fit for decision by this Court.
Other factors for the Court's consideration are not sufficient
to alter this result. For example, while certain of Plaintiffs
claims may be predominantly legal, it cannot be said that the
issues are "purely legal" or that the "issue presented for
decision is one of law which requires no additional factual
developments." See Nextel, 305 F.3d at 193; Philadelphia Fed'n
of Teachers, 150 F.3d at 323. Moreover, "even the presence of a
purely legal question is not enough, of itself, to render a case
ripe for judicial review, not even as to that issue."
Philadelphia Fed'n of Teachers, 150 F.3d at 325. Rather,
plaintiffs also must demonstrate that they will suffer a direct
and immediate hardship from withholding of judicial review. Cf.
id. at 325 (applying principle in the pre-enforcement context).
The only fitness factor that appears to weigh solidly in favor of
a finding of fitness is the adversity of the parties' interests.
Because considerations of the finality of the Commissioner's
action and the necessity of further action to clarify the
Commissioner's position counsel so strongly in favor of deferral
and are not clearly outweighed by other factors the Court may
consider, the Court concludes that Plaintiffs' claims are unfit
for judicial review at this time. B. The Hardship to the Parties
As to the hardship to the parties of withholding judicial
consideration, the Third Circuit has "stated that in order for
the parties' hardship to be sufficient to overcome prudential
interests in deferral, that hardship must be both immediate and
significant." Nextel, 305 F.3d at 194 (quotations and citation
omitted). Here, as noted above, while the Plan is no longer
insured by PBGC, no Plaintiff or similarly situated individual
eligible to receive benefits under the Plan has been denied any
such benefits. At best, Plaintiffs could assert that the
uncertainty as to the insurance status of the Plan exposes them
to hardship in the form of being unable to anticipatorily and
prudently arrange their fiscal affairs. However, the Third
Circuit has cast doubt on whether such uncertainty constitutes a
cognizable hardship for purposes of ripeness review.
Philadelphia Fed'n of Teachers, 150 F.3d at 326 (finding that
no plaintiff suffered a sufficiently "direct and immediate"
injury to satisfy ripeness). Furthermore, the Third Circuit has
also found allegations of hardship in the form of "time and
expense, as well as the possibility of further litigation" to be
insufficient to overcome a determination of unfitness. Nextel,
305 F.3d at 194. Consequently, this Court finds that the hardship
to the parties of postponing judicial consideration of this
matter is slight. Cf. Binker v. Commonwealth of Pennsylvania,
977 F.2d 738, 753 (3d Cir. 1992) (finding hardship to be "slight"
where a threat of hardship was "largely abstract" because there
was "no indication that the funds would be denied in the manner
predicted"). Finally, as noted above, Plaintiffs initiated
litigation in state court prior to the commencement of the action
in this Court and Plaintiffs remain free to prosecute that state
court litigation. Thus it appears that no hardship that is
sufficiently direct, immediate, and significant to surmount the
prudential interests in deferral will be sustained by Plaintiffs
or others similarly situated if judicial intervention is withheld at this time.
After evaluation of the fitness of the issues for judicial
decision and the hardship to the parties of withholding judicial
review, this Court has determined that the claims asserted in
Plaintiffs' Complaint are not ripe. Accordingly, Plaintiffs'
Complaint is hereby dismissed without prejudice.