June 29, 2010
ELCA Seeks Dismissal of Claims in Pension Plan Suit
The ELCA churchwide organization filed a motion in U.S. District Court in Minnesota June 28, seeking dismissal of all claims against it in a lawsuit filed following termination of a defined benefit compensation retirement plan by Augsburg Fortress Publishers (AFP).
On April 21 former employees of the Minneapolis-based publisher who were covered by the terminated pension plan filed a class action lawsuit in the U.S. District Court of Minnesota. Named as defendants were Augsburg Fortress; its president and chief executive officer, chief financial officer and vice president of human resources and organizational development; the ELCA; and current and former members of the publisher's board of trustees. About 500 people were affected by the termination of the plan.
The lawsuit seeks to recover losses allegedly suffered by the plaintiffs because of what they claim were "breaches of duty" with regard to the termination of the defined benefit pension plan. The suit also asks the federal district court to declare that the terminated pension plan is not a church plan, but a defined benefit plan regulated by the 1974 Employee Retirement Income Security Act (ERISA).
Augsburg Fortress, a separately incorporated entity apart from the ELCA churchwide organization, maintained and continues to maintain its own retirement benefits for its staff. At the time the lawsuit was filed, the ELCA churchwide organization asserted that "it had no role in the creation, management, funding or termination of the Augsburg Fortress pension plan." It also denied all legal claims made against it by the plaintiffs.
The plaintiffs assert that the ELCA is liable for the Augsburg Plan's losses under ERISA or, alternatively, state law, states the ELCA's dismissal motion. The ELCA churchwide organization denied this. The ELCA churchwide organization noted that it is named in three counts regarding ERISA. One count seeks a declaration that the terminated pension plan is an ERISA Plan (Count I); another claims the ELCA had a duty to monitor the plan under ERISA rules (Count V); a third claims the ELCA had a co-fiduciary duty under ERISA (Count VI).
"All ERISA counts must be dismissed because the Plan is a 'church plan,' not an ERISA plan," the ELCA motion stated. "Even if the Plan is deemed an ERISA plan, Plaintiffs' allegations that the ELCA is an appointing fiduciary fail to state a claim as a matter of law, requiring dismissal of Counts V and VI as to the ELCA."
Augsburg Fortress Publishers similarly filed a motion on Monday seeking to dismiss the counts based on ERISA but did not address other claims in the lawsuit.
The ELCA churchwide organization motion also said the plaintiffs claim that Augsburg Fortress is an "alter ego of ELCA" which should render the ELCA liable for breach of contract (Count X), or for failure to keep the promises made to the publisher's employees concerning their pension (Count XI) or under the Minnesota Consumer Fraud Act (Count XII).
"The allegations that AFP is an alter ego of the ELCA are neither legally sufficient nor plausible. The Minnesota Consumer Fraud Act allegations also fail to state a claim under the terms of the statute," the ELCA's motion stated. "Accordingly, the ELCA requests dismissal of all claims asserted against it."
In 2005 Augsburg Fortress' board of trustees froze the organization's defined benefit plan, and began offering a 403b defined contribution plan to employees. The costly defined benefit plan "has been underfunded for about nine years," Beth A. Lewis, Augsburg Fortress president and chief executive officer, said at the time the defined benefit plan was terminated on Dec. 31, 2009.
Lewis said when that plan was terminated most participants in the defined benefit plan would receive a lump sum payment. The trustees provided for a "more equitable allocation of plan assets among plan participants," she wrote in a letter to plan participants. Without the amendment, more than half of the plan participants would have received nothing at all, Lewis wrote.
"If we had done nothing, the plan would have run out of money in approximately five years and left about 60 percent of those in the plan with no retirement benefits," Lewis said. "We didn't think that was equitable or fair."
Distributions were made to plan participants in March, Lewis said. Lewis denied all claims of wrongdoing against Augsburg Fortress in the lawsuit.