Sheilar Smith v. OSF Healthcare System

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 18-3325
SHEILAR SMITH, et al., on behalf of themselves and all others
similarly situated and on behalf of the OSF plans,
Plaintiffs-Appellants,
v.
OSF HEALTHCARE SYSTEM, et al.,
Defendants-Appellees,
and
UNITED STATES OF AMERICA,
Intervening-Appellee.
____________________
Appeal from the United States District Court for the
Southern District of Illinois.
No. 3:16-cv-00467-SMY-RJD — Staci M. Yandle, Judge.
____________________
ARGUED MAY 15, 2019 — DECIDED AUGUST 13, 2019
____________________
Before WOOD, Chief Judge, and EASTERBROOK and
HAMILTON, Circuit Judges.
HAMILTON, Circuit Judge. The decisive issue in this appeal
is whether the district court abused its discretion in granting
2 No. 18-3325
summary judgment for defendants despite plaintiff’s motion
under Federal Rule of Civil Procedure 56(d) to postpone a
summary judgment decision so that she could complete fur-
ther discovery. District courts have considerable discretion in
such case-management decisions, but that discretion is not
unlimited. The record here shows, unfortunately, that the
court’s denial of plaintiff’s Rule 56(d) motion was an abuse of
that discretion. The summary judgment motion was filed long
before discovery was to close; plaintiff was pursuing discov-
ery in a diligent, sensible, and sequenced manner; and the
pending discovery was material to the summary judgment is-
sues. The district court’s explanation for denying a postpone-
ment overlooked the court’s earlier case-management and
scheduling decisions and took an unduly narrow view of facts
relevant to the case.
We therefore vacate the grant of summary judgment and
remand for further proceedings consistent with this opinion.
We explain in Part I the role and definition of the ERISA ex-
emption for “church plans.” In Part II, we summarize the lim-
ited facts available to us about these parties and the merits of
their dispute. In Part III, we address the standards for Rule
56(d) motions and potential reasons for denying them. We do
not decide the merits of the parties’ dispute, though we must
discuss the merits along the way to provide context for the
Rule 56(d) issue.
I. ERISA and the Exemption for Church Plans
The underlying issue in the case is whether the Employee
Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C.
§ 1001 et seq., applies at all to the pension plans offered by
defendant OSF HealthCare System, a religious nonprofit
No. 18-3325 3
organization that operates eleven hospitals in Illinois and
Michigan.
ERISA sets minimum standards for the pension and wel-
fare benefit plans offered by private employers. 29 U.S.C.
§§ 1001(a), 1002(1)–(2). Congress enacted ERISA in response
to a “rapid and substantial” increase in employee benefit
plans that were lacking in “adequate safeguards”—with of-
ten-catastrophic results for employees and their families—as
employees and their beneficiaries lost anticipated benefits be-
cause of unsound and unstable plans, unfair vesting provi-
sions, and termination of plans before benefits had been
funded. 29 U.S.C. § 1001(a).
The Supreme Court has described ERISA as a “‘compre-
hensive and reticulated statute’ with ‘carefully integrated
civil enforcement provisions.’” LaRue v. DeWolff, Boberg & As-
socs., Inc., 552 U.S. 248, 258 (2008), quoting Massachusetts Mu-
tual Life Ins. Co. v. Russell, 473 U.S. 134, 146 (1985). At bottom,
the goal of ERISA is to ensure the delivery of promised bene-
fits. To achieve that goal, ERISA imposes minimum standards
for benefit funding and vesting, grievance and appeals pro-
cesses, and fiduciary duties. 29 U.S.C. §§ 1053, 1083, 1104,
1132. Participants of benefit plans that are governed by ERISA
have the right to sue for benefits and breaches of fiduciary
duty. 29 U.S.C. §§ 1132, 1109. If ERISA plans are terminated
without adequate funding, some payments of benefits can be
available through the Pension Benefit Guaranty Corporation.
29 U.S.C. § 1302.
Congress, however, exempted certain categories of em-
ployee benefit plans from ERISA. One is the “church plan”
exemption at issue here. 29 U.S.C. § 1003(b)(2). Since enact-
ment in 1974, ERISA has provided that it “shall not apply to
4 No. 18-3325
any employee benefit plan if…such plan is a church plan (as
defined in section 1002(33) of this title).” Id. The definition in
§ 1002(33) originally applied only to plans “established and
maintained” for the employees of churches or associations of
churches, so that it would not have applied, for example, to
hospitals affiliated with churches. Advocate Health Care Net-
work v. Stapleton, 137 S. Ct. 1652, 1656 (2017); 29 U.S.C.
§ 1002(33)(A). In 1980, Congress amended the church plan ex-
emption. Under the amended version, the exemption extends
not only to plans for employees of churches but also to plans
for employees of church-affiliated organizations. 29 U.S.C.
§ 1002(33)(C)(ii)(II).
Central to this case, the amendment added the following
language:
A plan established and maintained for its em-
ployees (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 princi-
pal purpose or function of which is the admin-
istration or funding of a plan or program for the
provision of retirement benefits or welfare ben-
efits, 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.
29 U.S.C. § 1002(33)(C)(i). That’s “a mouthful,” as the Su-
preme Court said, but “to digest it more easily, note that eve-
rything after the word ‘organization’ in the third line is just a
(long-winded) description of a particular kind of church-
No. 18-3325 5
associated entity.” Advocate Health, 137 S. Ct. at 1656. The
Court referred to the church-associated entity as a “principal-
purpose organization,” id., and for clarity’s sake, so do we.
In Advocate Health, the issue was whether the church plan
exemption depends on who first established the plan. The Su-
preme Court held: “Under the best reading of the statute, a
plan maintained by a principal-purpose organization … qual-
ifies as a ‘church plan,’ regardless of who established it.” Id.
at 1663. The language in § 1002(33)(A) and (C)(i) thus makes
the church plan exemption available to pension plans and
other employee benefit plans established by church-associ-
ated entities, such as church-associated hospitals, where the
plans are maintained by principal-purpose organizations. Id.
We now turn to the facts of this case, where the central issues
on the merits are who qualifies as a principal-purpose organ-
ization and what it means to “maintain” or “administer” an
employee benefit plan.
II. The Parties, Their Pension Plans, and Their Dispute
The Sisters of the Third Order of Saint Francis, a Roman
Catholic organization, founded the OSF HealthCare System
in 1880. OSF is a nonprofit Catholic healthcare system that
provides free or discounted care to indigent patients. The Sis-
ters of the Third Order of Saint Francis is the only member of
OSF. The Order maintains authority over the system through
OSF’s governing documents and the canonical and civil
guidelines pertaining to church property. In 2014, OSF
merged with another Catholic hospital, St. Anthony’s Health
Center, with the permission of the Holy See. Prior to the mer-
ger, St. Anthony’s was run by the Sisters of St. Francis of the
Martyr of St. George. We refer to these organizations collec-
tively as “OSF.”
6 No. 18-3325
The parties agree that OSF is associated with a church.
OSF’s operation is intertwined with the Roman Catholic
Church. For example, among several other religious require-
ments not relevant here, OSF must seek approval from the
Church for loan and debt financing, is subject to oversight by
the bishops of the dioceses in which it operates, and is recog-
nized by the Official Catholic Directory as a Catholic Institu-
tion.
OSF and St. Anthony offered pension plans to their em-
ployees before the merger. After the merger, the OSF and St.
Anthony’s pension plans remained distinct. The Plans have
approximately 19,285 participants between them. The Plans
are now closed to new participants and have stopped accru-
ing further benefits. The OSF plan has 17,946 participants and
the St. Anthony’s plan has 1,339. Both plans are now admin-
istered as ERISA-exempt church plans.1
OSF contends that the St. Francis Plan and the St. An-
thony’s Plan are administered by the Sisters of the Third Or-
der of St. Francis Employees’ Pension Plan Administrative
Committee and the Saint Anthony’s Health Center Retire-
ment Committee, respectively, though the two have identical
1 Both plans received private letter rulings from the IRS finding that
they are church plans under 26 U.S.C. § 414(e). Upon taxpayers’ requests,
the IRS may issue private letter rulings interpreting and applying tax laws
to the specific facts of a taxpayer’s situation. 26 C.F.R. § 601.201(a)(2). They
are not issued after formal adjudication or notice-and-comment proce-
dures that may warrant substantial deference from courts. See Christensen
v. Harris County, 529 U.S. 576, 587 (2000) (less formal agency determina-
tions deserve less deference from courts). IRS regulations provide that pri-
vate letter rulings are not precedential. See 26 C.F.R. § 301.6110–7(b); Bank-
ers Life and Casualty Co. v. United States, 142 F.3d 973, 978 (7th Cir. 1998).
No. 18-3325 7
memberships. (We refer to them as the “Committees.”) OSF
contends that each Committee qualifies as a principal-pur-
pose organization within the meaning of § 1002(33)(C)(i), so
that the Plans need not comply with ERISA at all.
Plaintiff Sheilar Smith, a former employee and participant
of one of the OSF pension plans, sued on behalf of herself and
other similarly situated plaintiffs in the Southern District of
Illinois. She alleged that the Plans are not eligible for the
church plan exemption because (a) the Committees are not
“principal-purpose organizations” within the meaning of
ERISA, and (b) even if they were, the church plan exemption
itself is unconstitutional. She alleged that OSF has violated
ERISA by allowing the Plans to become severely under-
funded, with the OSF Plan holding assets sufficient to fund
only 56% of accrued benefits and the St. Anthony’s plan only
54%. She alleged that OSF also failed to follow the proper no-
tice, disclosure, and managerial requirements, and breached
its fiduciary duties.
The heart of the merits debate is whether the Committees
can qualify as principal-purpose organizations at all. Smith
offers several layers of argument. She contends that an inter-
nal committee of a church-associated organization cannot
qualify at all as such an organization. She also contends that
mere “administration” of a plan does not necessarily equate
to “maintaining” the plan, as required by statute, which she
believes requires the authority to terminate or modify the
plan. And she argues that the Committees in this case may not
even actually administer these Plans, pointing to evidence
that the Committees meet only rarely and briefly. Finally, she
contends that even if these Plans qualify for the church plan
exemption, the exemption itself violates the Establishment
8 No. 18-3325
Clause of the First Amendment. OSF counters that the plain
language of the statute, relevant case law, legislative history,
and common sense all permit it, as a church-associated organ-
ization, to delegate administration of the Plans to the Com-
mittees, and that the exemption fits comfortably within First
Amendment law.
III. The Rule 56(d) Issue
A. Rule 56(d)
Federal Rule of Civil Procedure 56(b) provides that, unless
local court rules or a case-specific order provide otherwise, a
party may file a motion for summary judgment at any time
until 30 days after the close of all discovery. Rule 56(d) pro-
vides that, after a party moves for summary judgment:
If a nonmovant shows by affidavit or declara-
tion that, for specified reasons, it cannot present
facts essential to justify its opposition, the court
may:
(1) defer considering the motion or deny
it;
(2) allow time to obtain affidavits or dec-
larations or to take discovery; or
(3) issue any other appropriate order.
The mere fact that discovery is incomplete is not enough
to prevent summary judgment. Farmer v. Brennan, 81 F.3d
1444, 1450 (7th Cir. 1996), citing Resolution Trust Corp. v. North
Bridge Associates, 22 F.3d 1198 (1st Cir. 1994). A party seeking
relief under Rule 56(d) must show by affidavit or declaration
specific reasons discovery should be extended, which re-
quires more than a fond hope that more fishing might net
No. 18-3325 9
some good evidence. Davis v. G.N. Mortgage Corp. 396 F.3d
869, 885 (7th Cir. 2005) (affirming denial of 56(d) motion when
plaintiffs’ request was “based on nothing more than mere
speculation”); Kallal v. CIBA Vision Corp., 779 F.3d 443, 446
(7th Cir. 2015) (affirming denial of Rule 56(d) request for ad-
ditional discovery where party did not submit affidavit as re-
quired). In addition, a court need not delay decision on a sum-
mary judgment motion to allow time for discovery on an ob-
viously meritless claim or defense. Arnold v. Villarreal, 853
F.3d 384, 389 (7th Cir. 2017).2
Motions for summary judgment have become so common
in modern federal civil practice that case-management plans
often assume that one or even more motions will be filed. Par-
ties and district courts ordinarily set schedules not only for
trial dates but also for discovery and motion practice that al-
low time for summary judgment motions and the discovery
needed to file or oppose them. See Fed. R. Civ. P. 16(c)(2)(E)
& (F) (topics for pretrial conference). Accordingly, decisions
on Rule 56(d) motions—whether granted or denied—can be a
critical tool in fair case management.
Appellate courts review decisions on Rule 56(d) motions
for abuse of discretion. Sterk v. Redbox Automated Retail, LLC,
770 F.3d 618, 622–23 (7th Cir. 2014). “As is true for most mat-
ters relating to discovery, the district court has substantial dis-
cretion in ruling on a [Rule 56(d)] motion.” Farmer, 81 F.3d at
2 Before the 2010 amendments to the Federal Rules of Civil Procedure,
Rule 56(d) was 56(f). Because no substantive changes were made to this
portion of the rule, cases that analyzed the old Rule 56(f) remain applica-
ble, but we describe them using the current designation of 56(d).
10 No. 18-3325
1449. This latitude has its limits, however. Id. at 1450–51 (va-
cating summary judgment).
Appellate courts often remand a denial of additional time
for discovery when the motion for summary judgment is filed
before the close of discovery, especially if there are pending
discovery disputes. Farmer, 81 F.3d at 1450–51 (district court
abused discretion by denying Rule 56(d) motion that sought
opportunity to conduct discovery under new legal standard
after remand from Supreme Court); see also CenTra, Inc. v. Es-
trin, 538 F.3d 402, 420 (6th Cir. 2008) (vacating summary judg-
ment as premature when plaintiff was denied any oppor-
tunity for discovery on material issues); Burlington Northern
Santa Fe Railroad Co. v. Assiniboine & Sioux Tribes of Fort Peck
Reservation, 323 F.3d 767, 773–74 (9th Cir. 2003) (denial of Rule
56(d) motion was abuse of discretion: when “a summary
judgment motion is filed so early in the litigation, before a
party has had any realistic opportunity to pursue discovery
relating to its theory of the case, district courts should grant
any Rule [56(d)] motion fairly freely”); Wichita Falls v. Banc
One, 978 F.2d 915, 920 (5th Cir. 1992) (reversing denial of Rule
56(d) motion: “When a party is seeking discovery that is ger-
mane to the pending summary judgment motion it is inequi-
table to pull out the rug from under them by denying such
discovery.”).
For example, in the D.C. Circuit, summary judgment is
considered premature unless all parties have had a full op-
portunity to conduct discovery, and the court has written that
Rule 56(d) motions “requesting time for additional discovery
should be granted ‘almost as a matter of course unless the
non-moving party has not diligently pursued discovery of the
evidence.’” Convertino v. United States Dep’t of Justice, 684 F.3d
No. 18-3325 11
93, 99 (D.C. Cir. 2012), quoting Berkeley v. Home Ins. Co., 68
F.3d 1409, 1414 (D.C. Cir. 1995). This approach is not unique.
See In re PHC, Inc. Shareholder Litigation, 762 F.3d 138, 145 (1st
Cir. 2014) (premature for district court to consider summary
judgment in light of plaintiffs’ Rule 56(d) motion when pend-
ing discovery requests were not yet answered); Jones v. Blanas,
393 F.3d 918, 930 (9th Cir. 2004) (noting that summary judg-
ment is disfavored if discovery is incomplete: “summary
judgment in the face of requests for additional discovery is
appropriate only where such discovery would be ‘fruitless’
with respect to the proof of a viable claim”); International
Shortstop, Inc. v. Rallyʹs, Inc., 939 F.2d 1257, 1267 (5th Cir. 1991)
(request for additional time to conduct discovery should be
granted “almost as a matter of course” when court learns the
“diligent efforts to obtain evidence from the moving party
have been unsuccessful”). We need not go as far as “almost as
a matter of course,” but these precedents emphasize the im-
portance of allowing a party the opportunity to take meaning-
ful discovery before granting summary judgment against her.
Rule 56(d) itself requires an affidavit or declaration giving
specific reasons why the party cannot present facts essential
to opposing a motion for summary judgment. Plaintiff satis-
fied that requirement here. The cases discussed above show
that the sound reasons for denying a properly supported Rule
56(d) motion most often are either (1) the moving party’s fail-
ure to pursue discovery diligently before the summary judg-
ment motion, or (2) the apparent futility of the requested dis-
covery.
In this case, the district court’s brief explanation for deny-
ing plaintiff’s Rule 56(d) motion invokes both reasons. Here
12 No. 18-3325
was the explanation, which was included in the court’s ruling
on the merits of summary judgment:
As an initial matter, Plaintiffs argue that De-
fendants’ motion for summary judgment was
filed prematurely. F.R.C.P. 56(d) permits, but
does not require, the Court to defer considera-
tion of a summary judgment motion or to allow
additional time for discovery, among other op-
tions. While there are numerous areas of inquiry
that Plaintiffs state they would have explored
prior to the filing of summary judgment mo-
tions, those pertinent to the instant motion have
been at issue from the outset of this case. Al-
though Defendants filed for summary judgment
well before the extended discovery deadline,
Plaintiffs had ample time and opportunity to
conduct discovery relevant to the issues raised
in Defendants’ motion. As such, the Motion is
not premature.
Smith v. OSF Healthcare System, 349 F. Supp. 3d 733, 739–40
(S.D. Ill. 2018). In a later footnote, the court briefly discussed
Smith’s assertion that discovery could show the Committees
were not actually the ones administering the plans. The court
seemed to view such discovery as futile, saying that “the
question is not whether the Plan Committees are doing their
jobs well or excessively delegating their authority, but rather
whether the structure satisfies the requirements of the church
plan definition.” Id. at 743 n.4. In our view, however, plaintiff
established a strong record of diligence, and at least some of
the additional discovery sought in her Rule 56(d) motion
would not have been futile.
No. 18-3325 13
B. Diligence
The district court’s primary reason for denying the plain-
tiff’s Rule 56(d) motion was its view that plaintiff had failed
to act diligently to conduct the discovery she said she needed
to respond to the motion for summary judgment. The district
court pointed out correctly that the need for the discovery she
sought, such as details of plan administration, had been ap-
parent from the early stages of the case. The court’s explana-
tion overlooked, however, the earlier delays imposed on
plaintiff by the court itself and by the defendants. The expla-
nation also overlooked the plaintiff’s sensible approach to
staging discovery so that, for example, document discovery
would be essentially complete before plaintiff took deposi-
tions of key witnesses (thus minimizing the risk that second
depositions would be needed if important documents sur-
faced after the depositions).
To explain our resolution of this issue, we need to review
the proceedings in the district court in some detail. Smith filed
her complaint on April 27, 2016. Defendants sought a change
of venue, which was denied. The parties then agreed, as is
common, to a sequenced discovery schedule for document
production, interrogatories, electronically stored information,
and depositions. See Fed. R. Civ. P. 16(c), 26(f). The magistrate
judge issued a scheduling order on September 26, 2016 with a
discovery cut-off of November 2017 and a trial date in March
2018.
Yet just three days after the court issued that agreed sched-
uling order, defendants moved to stay all discovery pending
ruling on a petition for a writ of certiorari in one of the cases
that the Supreme Court eventually heard as Advocate Health.
The district court denied that stay, and discovery began, as
14 No. 18-3325
indicated by the court’s docket entry setting a discovery dis-
pute conference for January 5, 2017. See Dkt. 111, at 11, 21–22
(court discussing pending discovery requests and disputes).
In the meantime, however, the Supreme Court had granted
certiorari in the Advocate Health cases on December 2, 2016. On
January 6, 2017, defendants moved to stay discovery and all
court proceedings. Plaintiffs objected to a complete stay. The
court concluded that it made sense to continue with docu-
ment discovery but to delay expensive depositions until the
Supreme Court could rule in Advocate Health. Dkt. 111 at 38–
41.
The Supreme Court decided Advocate Health on June 5,
2017. The district court then stayed all discovery until July 25,
2017, and ordered the parties to submit a revised scheduling
order. The new, agreed scheduling order was issued August
10, 2017, with discovery to be completed by September 6,
2018, dispositive motions due by September 21, 2018, and a
bench trial set for January 7, 2019.
The parties resumed discovery, but not everything was
done at once. OSF produced additional documents between
the end of August and November 10, 2017, but the parties had
substantial disagreements about OSF’s compliance with
pending requests. See Dkt. 162-1 ¶¶ 7, 10. In November and
December, plaintiff’s counsel sent OSF two letters on discov-
ery issues, including the production of electronically stored
information, with an emphasis on emails related to plan ad-
ministration. Dkt. 162-1 ¶11; Dkt. 162-3. During this period,
counsel also held a telephone conference to discuss their dis-
agreements over the pending requests for production of doc-
uments and the search terms to be used for the electronic rec-
ords. Dkt. 162-1 ¶12.
No. 18-3325 15
On December 22, 2017, plaintiff’s counsel sent three depo-
sition notices to OSF with a letter explaining the requested
discovery she still had not received. Dkt. 162-5. She said in the
letter that if the parties did not reach a resolution by January
4, 2018, she would seek a resolution before the magistrate
judge. OSF made additional production of documents five
days later but did not address the issues raised in the Decem-
ber 22 letter.
Then, on December 29, 2017, a week after plaintiff’s coun-
sel sent that letter, OSF filed its motion for summary judg-
ment. The motion was filed almost nine months before the
scheduled close of discovery, and despite the pending depo-
sition notices and unresolved issues surrounding production
of electronically stored information. OSF’s motion argued
that further discovery would be pointless in light of the Su-
preme Court’s decision in Advocate Health and the Tenth Cir-
cuit’s then-recent decision in Medina v. Catholic Health Initia-
tives, 877 F.3d 1213 (10th Cir. 2017).
In response, plaintiff quickly moved under Rule 56(d) to
defer briefing on the motion for summary judgment. Her mo-
tion was supported by counsel’s affidavit providing specific
reasons and needs for additional discovery. She told the court
that the parties had pending discovery disputes, that she had
yet to obtain documents and emails within the defendants’
control, and that she had served notices for several deposi-
tions. She also identified the types of the information she
needed to discover, including information from emails and
depositions that could show the Committees were not the
ones administering the plans at all. Plaintiff also pointed out
that defendants had offered affidavits in their motion for sum-
mary judgment from expert witnesses who, before the motion
16 No. 18-3325
for summary judgment was filed, had not yet even been dis-
closed to plaintiff’s counsel, let alone subject to depositions.
Given this history, we do not see a basis for saying that
plaintiff had failed to pursue discovery diligently. We assume
plaintiff’s counsel knew from the outset that they would prob-
ably need to take the depositions that they noticed in Decem-
ber 2017 and that were the subject of her Rule 56(d) motion.
Counsel and their client should not be penalized with dismis-
sal, however, for not having taken those depositions earlier.
Depositions are expensive, as the district court acknowledged
when it stayed depositions in early 2017. Lawyers in paper-
heavy cases like this one know that it generally makes sense
not to take a witness’s deposition until they have the relevant
documents in hand. That’s why the parties staged discovery
as they did in this case, of course, and why it would have been
premature to take the depositions before the plaintiff’s dead-
line for responding to defendants’ very early summary judg-
ment motion.3
C. Relevant or Futile?
Another sound reason for denying a Rule 56(d) motion
may be that the additional discovery being sought would be
futile. As this appeal shows, however, it can be risky to deny
3 In the interests of fairness and economy, we encourage district courts
to act promptly on pending motions under Rule 56(d) because of their ef-
fects on briefing schedules for summary judgment motions. In this case,
the court did not actually deny plaintiff’s motion until it also ruled on the
summary judgment motion. As a result, plaintiff had to brief the summary
judgment motion without knowing the court’s view of the Rule 56(d) mo-
tion. A belated grant of a Rule 56(d) motion or a reversal of a denial of
such a motion can waste time and money as counsel must in essence brief
the summary judgment motion twice.
No. 18-3325 17
discovery based on a theory that the law makes the discovery
irrelevant, especially where that legal proposition is contested
and the area of law is evolving quickly. If a district court de-
nies a Rule 56(d) motion based on an erroneous view of the
applicable substantive law, and thus of the relevance of the
additional discovery sought, an abuse of discretion is likely.
See Farmer v. Brennan, 511 U.S. 825, 849 & n.10 (1994) (noting
that district court had denied Rule 56(d) motion based on er-
roneous view of law), cited in Farmer, 81 F.3d at 1448 (appeal
after remand).
The question of futility requires us to dip into the merits,
at least tentatively. Plaintiff Smith herself makes an argument
on the merits that would eliminate any need for further dis-
covery. She argues that OSF’s Plan Committees cannot qualify
as principal-purpose organizations because they are not jurid-
ical entities legally distinct from OSF itself. We disagree with
that point and believe that internal benefits committees like
OSF’s can qualify as “organizations” that could, assuming the
other statutory requirements were met, serve as principal-
purpose organizations under § 1002(33)(C)(i). The statute
notes parenthetically that such an “organization” may be “a
civil law corporation or otherwise.” Id. That last word is capa-
cious. It does not require that the organization in question be
any particular type of non-corporate legal entity nor, indeed,
an entity legally separate from the plan sponsor at all.
On a related note, under any reading of the term “princi-
pal purpose,” a committee constituted specifically to manage
employee benefit plans could qualify. The purpose of the or-
ganization maintaining or administering a church plan need
not be the same as that of the plan sponsor itself. After all, no
pension sponsor ever has the provision, let alone
18 No. 18-3325
maintenance, of a pension or other employee benefit plan as
its principal purpose. Its principal purpose is the enterprise
that employs the people who participate in the benefit plans.
Further discovery on remand, however, will not be futile.
The district court here believed—leaning heavily on the Tenth
Circuit’s opinion in Medina v. Catholic Health Initiatives, 877
F.3d 1213 (10th Cir. 2017)—that no amount of discovery could
save plaintiff’s case. The district court wrote that Medina was
“well-reasoned and essentially ‘on all fours’ with this case”
and followed Medina in granting summary judgment.
Medina presented similar issues in applying the ERISA
church plan exemption to a hospital chain affiliated with the
Roman Catholic Church, where the plans were administered
by internal committees established by the employer. 877 F.3d
at 1220. The Tenth Circuit applied the statute’s requirements
through a three-step inquiry. The first step asks whether the
entity seeking to use the church plan exemption under the
principal-purpose option is itself “a tax-exempt nonprofit or-
ganization associated with a church.” Id. at 1222. If it is, the
second step asks whether “the entity’s retirement plan [is]
maintained by a principal-purpose organization? That is, is
the plan maintained by an organization whose principal pur-
pose is administering or funding a retirement plan for entity
employees?” Id. If that answer is also yes, the third step asks
whether “that principal-purpose organization [is] itself asso-
ciated with a church.” Id. Applying this test, the Tenth Circuit
determined that committees assigned to administer the reli-
gious nonprofit’s benefit plans can constitute principal-pur-
pose organizations and affirmed summary judgment for the
hospital system. Id. at 1226. Medina further held that the
church plan exemption does not violate the Establishment
No. 18-3325 19
Clause. Id. at 1234, discussing Lemon v. Kurtzman, 403 U.S. 602,
612 (1971).
Medina does not justify the denial of plaintiff’s Rule 56(d)
motion for two related reasons. First, of course, Medina was
decided on a motion for summary judgment filed after the
parties completed discovery, providing a more complete fac-
tual record. Second, we are not prepared, at this point, to com-
mit ourselves to the Medina test, or at least to this district
court’s interpretation of Medina, under which, for example, it
would not matter if the Committees formally charged with
plan administration did not actually administer them. See
Smith, 349 F. Supp. 3d at 743 n.4. In this case, which presents
at least genuine issues of material law, it would be more pru-
dent to know more about the potentially relevant facts before
deciding they are not relevant.
For example, recall that 29 U.S.C. § 1002(33)(C)(i) provides
that a “plan established and maintained for its employees …
includes a plan maintained by an organization … the princi-
pal purpose or function of which is the administration or
funding of a plan or program for the provision of retirement
benefits or welfare benefits….” This statutory language of
§ 1002(33)(C)(i) might reasonably be read to imply that a prin-
cipal-purpose organization must actually administer the plan.
The district court rejected this argument in a footnote, stating
that “the question is not whether the Plan Committees are do-
ing their jobs well or excessively delegating their authority,
but rather whether the structure satisfies the requirements of
the church plan definition.” 349 F. Supp. 3d at 743 n.4. We do
not share, at least at this point, that confidence that only paper
formalities matter. In light of the language and purpose of the
statute, one arguable reading of § 1002(33)(C)(i) is that a
20 No. 18-3325
Committee’s excessive delegation of its authority and respon-
sibility could amount to a failure to “maintain” the Plan—a
concept which in its ordinary meaning encompasses, but is
not necessarily limited to, “administration or funding”—as
required by the statute.
Plaintiff Smith argues that OSF has thus far refused to pro-
duce evidence that could show whether the Committees that
were at least formally charged with administering these Plans
actually did so in reality. She has offered evidence that the
Committees met rarely and briefly. The Committee for the
OSF plan met for a total of only seventy minutes over an eight-
year period. The Committee for the St. Anthony Plan met only
twice from 2010 to 2017. Plaintiff argues that this evidence at
least suggests that the committees may not be really adminis-
tering the plans at all, making discovery of internal emails and
other communications, and depositions of key personnel, vi-
tal to her ability to defend summary judgment.
OSF acknowledged at oral argument that merely naming
a committee that never actually met or administered the plan
would not be enough to satisfy the statute. OSF is not neces-
sarily entitled to summary judgment just because it has pro-
duced documents showing how the Plans are supposed to be
run. If further discovery reveals, as a practical matter, that the
Committees exist only on paper, then it is possible the Plans
are not actually exempt from ERISA. Accordingly, upon re-
mand, the district court must allow relevant discovery and
should then assess whether OSF’s Plan Committees did, in
fact, serve as principal-purpose organizations qualifying the
Plans for exemption from ERISA.
OSF offers a couple of additional reasons to justify the de-
nial of the Rule 56(d) motion. It contends that the search terms
No. 18-3325 21
proposed by plaintiff for electronic records amount to a pro-
verbial fishing expedition because they would reach every
email ever sent by the Committees. This is not a convincing
reason to deny all further discovery. Discovery was cut off, in
effect, when the parties had barely begun to negotiate the
search terms, let alone asked the court to resolve the dispute.
In fact, Smith was still waiting for a response to her proposed
custodian list and search terms for electronic discovery when
OSF moved for summary judgment and discovery ended.
OSF also cites plaintiff’s failure to file a motion to compel
as evidence that she was not diligently pursuing discovery.
The argument only serves to emphasize how premature this
summary judgment decision was. Parties are expected to
meet and confer at least once to resolve their discovery dis-
putes before requesting help from the court. Fed. R. Civ. P.
37(a)(1). A party’s compliance with that requirement should
not be held against her in deciding a Rule 56(d) motion.4
* * *
Concurring in Advocate Health, Justice Sotomayor ob-
served that organizations like OSF “bear little resemblance to
those Congress considered when enacting the 1980 amend-
ment to the church plan definition.” 137 S. Ct. at 1663. Smith
has alleged OSF is underfunding its pension by nearly half,
perhaps jeopardizing the benefits of thousands of hospital
and health-care employees who depend upon these Plans.
4 We have not forgotten Smith’s Establishment Clause argument,
which she presents as an as-applied challenge. Because the factual picture
remains too underdeveloped to decide even the application of the statute,
we do not address the constitutional question now. Those issues can await
further development.
22 No. 18-3325
With such high stakes, beneficiaries are entitled to conduct
meaningful discovery before the courts decide legal issues
such as whether formal structures are sufficient to satisfy the
church plan definition, regardless of day-to-day realities.
The judgment of the district court is VACATED and this
case is REMANDED for further proceedings consistent with
this opinion.