Today, the Supreme Court issued three decisions, described below, of interest to the business community.
- ERISA—Church Plans
- Securities Law—Statute of Limitations
- Federal Civil Procedure—Intervention—Article III Standing
Advocate Health Care Network v. Stapleton, No. 16-74
ERISA regulates retirement and welfare benefit plans sponsored by most—but not all—employers. Today, the Supreme Court held unanimously that ERISA's "church plan" exemption shields religiously affiliated organizations (like hospitals) from the statute's requirements, and not just the churches themselves. The statute defines a "church plan" as "a plan established and maintained ... for its employees ... by a church," but Congress has also provided that "[a] plan established and maintained for its employees ... by a church ... includes a plan maintained by an organization ... the principal purpose ... of which is the administration or funding of [such] plan ... for the employees of a church ..., if such organization is controlled by or associated with a church." In an opinion by Justice Kagan joined by all participating Justices (with Justice Gorusch absent), the Court construed the proviso to mean that any principal-purpose organization affiliated with a church qualifies for the church-plan exemption, regardless of whether the plan at issue was actually established by a church in the colloquial sense.
This widely anticipated decision has substantial implications for the healthcare industry, where religiously affiliated hospitals, following longstanding IRS advice, have treated their plans as exempt from ERISA—which means that they have deviated from ERISA's system for prefunding pension obligations. The hospitals at issue in the case decided today would have faced a $4 billion shortfall in funding the pensions of 300,000 workers if the Court had ruled differently.
Securities Law—Statute of Limitations
Kokesh v. SEC, No. 16-529
Except where Congress has provided otherwise, a five-year limitations period applies to any "action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise." Today, the Supreme Court held unanimously through an opinion by Justice Sotomayor that claims for disgorgement imposed as a sanction for violating federal securities laws are subject to the five-year limitations period. In so holding, the Court reversed the judgment of the U.S. Court of Appeals for the Tenth Circuit, which distinguished between statutory monetary penalties, which it deemed subject to the 5-year limit, and claims for disgorgement, as to which the Tenth Circuit believed no statutory period applied. In the view of the unanimous Court, because disgorgement orders go beyond compensation and are designed to label defendants as wrongdoers, they are penalties that trigger the 5-year clock. This decision reduces the exposure of individuals under investigation by the SEC.
Federal Civil Procedure—Intervention—Article III Standing
Town of Chester v. Laroe Estates, Inc., No. 16-605
Federal Rule of Civil Procedure 24(a)(2) entitles an individual to intervene in pending litigation if that individual "claims an interest relating to the property or transaction that is the subject of the action" and cannot otherwise protect his interests. Answering a question that it had left unresolved for more than 30 years, the Supreme Court today held that intervenors of right must demonstrate Article III standing when they seek additional relief beyond that which the plaintiff requests. Because the Court could not determine, from the record in today's case, whether the intervenor was seeking additional relief, the Court remanded the case for further proceedings.
The unanimous opinion was authored by Justice Alito.
Originally published June 5, 2017
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