Church ERISA Charges Dismissed, but Fiduciaries Newport, Symetra Still on the Hook

A FEDERAL JUDGE IN TENNESSEE DISMISSED MOST OF THE FIDUCIARY BREACH CLAIMS UNDER FEDERAL BENEFITS LAW IN MULTIDISTRICT LITIGATION.

Noah Zuss

The African Methodist Episcopal Church retirement plan and third-party administrators had federal ERISA charges from a class ac tion retirement complaint dismissed by a Tennessee federal judge’s ruling, but they still face state charges.

The court order on the defendants’ motions to dismiss the cons olidated amended complaint was granted, in part, and denied in part, by U.S. District Judge S. Thomas Anderson of the Western District of Tennessee’s Eastern Division.

The plaintiffs’ amended complaint alleged fiduciary breach charges against the AME Church’s Ministerial Retirement Annuity Plan ; plan administrators Newport Group Inc. and Symetra Life Insurance Co.; and Reverend Jerome Harris, the former executive director of the AME Church’s department of retirement services from 2000 until June 2021.

“The court holds that Symetra has not discharged its burden to show that plaintiffs lack the capacity to sue as representatives of the plan as a matter of Tennessee law and that the AMEC has not carried its burden to show why the Council of Bishops and the General Board lack the capacity to be sued as a matter of the law of corporations,” Anderson’s decision stated.

The lawsuit, brought by AME Church plan participants, alleged Harris mismanaged the plan and engaged in negligent conduct, to the detriment of the plan participants’ retirement assets, according to an amended complaint.

“Defendant Harris made a series of self-dealing, illegal, and/or risky investments without any oversight from the African Methodist Episcopal Church and its ministers,” the amended complaint stated.

The parties were briefed on the legal issues in a February meeting when the court held a motion hearing with the parties’ counsel, according to the order.

The plaintiffs are current or retired clergy of the church. The lawsuit alleged claims under Tennessee law and “in the alternative,” claims under the Employee Retirement Income Security Act, against the denomination, church officials, the third-party service providers to the plan, and others, according to the order.

ERISA Claims Dismissed

Anderson dismissed the alleged fiduciary breach claims in the amended complaint brought under the Employee Retirement Income Security Act.

“The amended complaint fails to state any plausible ERISA claim (counts 11 through 17); its claim for breach of trust and misappropriation of trust assets in violation of the Tennessee Uniform Trust Code (count 2) against the AMEC Defendants, Newport, and Symetra; its fraudulent concealment (count 5) and fraudulent misrepresentation (count 6) claims against the AMEC Defendants and Newport; its breach of contract (count 7) and promissory estoppel (count 8) claims against the AMEC; and its claim for the intentional infliction of emotional distress (count 9) against the AMEC. Defendants’ Motions [to Dismiss] are GRANTED as to each of these claims,” wrote Anderson in the order.

Defendants Newport and Symetra argued for the lawsuit to be dismissed for failure to state a claim upon which relief can ...continued on p5 be granted and lack of jurisdiction, but Anderson disagreed.

The amended complaint alleged a proper basis for the court to exercise original jurisdiction over the class action under the federal Class Action Fairness Act of 2005 because the amount “in controversy” exceeds $5 million, the named plaintiffs are residents of several states, and “the AMEC is a Pennsylvania corporation with its principal place of business in Tennessee,” states the order.

The amended complaint alleged claims under ERISA, making it a civil action arising under the laws of the United States and establishing the court’s jurisdiction under 28 United States Code, Section 1332, Anderson adds.

“‘The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States,’” the regulation states.

Anderson ruled that the District Court has proper subject matter jurisdiction over the case presented in the plaintiffs’ amended complaint and that the plaintiffs have alleged sufficient facts to demonstrate their Article III standing to bring this lawsuit.

“Therefore, Symetra’s motion to dismiss due to plaintiffs’ lack of capacity to sue is DENIED,” he wrote.

The amended complaint alleged three claims under Tennessee law against Symetra: breach of fiduciary duty (count 1), breach of trust in violation of the Tennessee Uniform Trust Code (count 2), and negligence (count 3), and the court concluded the amended complaint makes plausible allegations to satisfy plaintiffs’ burden of pleading their Article III standing to bring these claims, states the order.

The judge also affirmed a breach of fiduciary duty on Count against Newport and Symetra under TN law. The court held that the amended complaint plausibly alleged Newport and Symetra were fiduciaries to the plan, and the claim can proceed in state court, Anderson ruled.

“On the merits of the claims alleged in the amended complaint, plaintiffs have stated plausible claims for breach of fiduciary duty (count 1) and negligence (count 3) against Newport and Symetra,” the order stated.

The violations alleged by plaintiffs against defendants AMEC, Newport, and Symetra were of the Tennessee Uniform Trust Code for breach of trust and misappropriation of Trust Funds, according to the order. The defendants argued for the court to dismiss all of the amended complaint’s claims for breach of trust

Crisis Management and the Church, Where Prayer Meets Preparation

Dr. Cathryn Stout, Contributing Writer and misappropriation of trust funds, the order shows. “The court finds plaintiffs’ argument unpersuasive,” states the order and the defendants’ motion to dismiss is granted for Count 2.

The plaintiffs seek to represent a class defined as all U.S. participants in the African Methodist Episcopal Church Ministerial Retirement Annuity Plan and beneficiaries entitled to benefits as of January 1, 2021, under the African Methodist Episcopal Church Ministerial Retirement Annuity Plan, and all U.S. residents who are qualified employees of the AME Church who were not, but should have been, made participants or beneficiaries in the African Methodist Episcopal Church Ministerial Retirement Annuity Plan, according to the order. The class consists of more than 5,000 members, though the precise figure is unknown.

Dismissed ‘Without Prejudice’

The dismissed claims were ruled out by Anderson without prejudice, should the plaintiffs request a leave to amend, he wrote.

“The claims are hereby dismissed without prejudice to plaintiffs’ right to raise the same claims in a subsequent motion to amend their pleadings filed in accordance with Rule 7(b) and the [August 25, 2022] case management order previously set by the Court,” Anderson stated. The initial complaints filed in several jurisdictions were consolidated in the U.S. District Court for the Western District of Tennessee in June 2022, and the plaintiffs filed an amended consolidated complaint in August 2022.

The primary suit is Reverend Charles R. Jackson et al. v. Newport Group, Inc; Symetra Financial Corporation; Reverend Dr. Jerome V. Harris; and African Methodist Episcopal Church et al.

The AME Church and Symetra did not return a request for comment on the litigation. An Ascensus spokesperson for Newport says the firm does not comment on litigation.

The plaintiffs are represented by Branstetter, Stranch & Jennings PLLC, of Nashville, Tennessee; attorneys from Wright & Schulte LLC, based in Vandalia, Ohio; and attorneys from Osborne & Francis Law Firm PLLC, based in Orlando, court documents show.

Newport is represented by attorneys from the Groom Law Group, based in Washington, D.C., and Burch, Porter & Johnson PLLC, based in Memphis, Tennessee. Symetra is represented by attorneys from Carlton Fields, PA, based in Washington, D.C. The AME Church is represented by attorneys from the Memphis, Tennessee office of Baker Donelson. ❏ ❏ ❏

CONFIDENT YET NAIVE, A YOUNG PASTOR RECENTLY TOLD ME, “I HOPE I NEVER NEED YOU.” WITH AN EQUALLY CONFIDENT LAUGH, I REPLIED, “OH, BUT YOU WILL.”

This friendly banter followed a deep dive into crisis management, a major component of my job as chief of communications for an urban school district. With 14,000 employees, every day, someone somewhere needs support.

This work of privately reassuring, publicly responding, and collectively resetting has evolved from a job to a ministry. However, it pains me to see that too few of our religious institutions have the people or plans to handle the inevitable crises that strike all organizations.

Every church, every seminary, and every faith-based organization needs crisis management plans on deck and crisis management expertise on staff or on-call because God commands us to both pray and prepare. Through Noah and Joseph, God gives us examples of two prepared prophets who readied their communities to endure flood and famine, respectively. Those who are equipped endure. So likewise, we must strive to be both logistically and spiritually equipped because the inconvenient truth is that crises are part of the life cycle of all organizations.

When it comes to the faith-based community, some barriers to crisis management planning are an unwavering belief in grace and mercy and unrealistic expectations of clergy. I am the continuous recipient of God’s grace and mercy, and yet I know that the Savior–who can do all things–does call on us to do some things.

Being a good steward of the positions and places God has entrusted to us means preparing for self-inflicted wounds and unprovoked attacks.

This could span from financial scandals to cyber hacks, from abuse claims to natural disasters.

Then, there are moments when an entire city is thrust into the national spotlight, as we Memphians experienced following the death of Tyre Nichols and the statehouse battles of Justin Pearson. Churches committed to social justice should be poised to respond and pivot quickly. Having strategies and a vetted advisor to guide a faith ...continued on p6 community through such situations makes it easier to navigate these intense moments when they arrive.

When called upon, my first role is to listen and reassure. Then, I set expectations of what to anticipate in the hours or days ahead. Then, when hearts and minds are ready, I scenario plan, walking through options one by one and the outcome that each could achieve. Together, we strategize a path that aligns with the institution’s values.

Execution is easier when plans are already in place because I can simply evaluate and adjust instead of starting from scratch. Three key plans that all faith-based organizations should have on deck are a key person succession and sabbatical plan, a substitute space plan, and a city crisis response plan.

Succession and sabbatical plans allow leaders to retire, resign, or simply recharge with less guilt because they know that proper plans are in place to guide the organization through the interim period. A substitute space plan identifies a temporary sanctuary or office space if an organization is without access to its main space for a prolonged period. Mutual aid agreements between churches and nonprofits can be tremendously helpful in these situations.

Finally, a city crisis response plan helps a faith leader shift her thinking from her roll to her role. It raises the question, how should we reply when our neighbors are in need or when the social justice frontline is at our front door? While the response will be incident-specific, having these what-if conversations now helps an organization develop a philosophical framework. And these shouldn’t be one-time conversations. Reviewing all plans quarterly or biannually with your crisis team and crisis management specialist creates space for revision and, more importantly, reflection.

In the faith community, some may feel that crisis management is the sole duty of the pastor, the seminary dean, or the nonprofit director.

Still, just as spiritual leaders seek legal or financial advice, they must also have the freedom to seek crisis management support without shame. Leaders feel constant pressure to exude calm and strength for those in their care; recognizing their need for additional support during a crisis affirms their humanity.

I’ve witnessed that even God’s most anointed servants need a thought partner and a safe place to process before they can persevere. Clergy and lay leaders are many things, but they are neither infallible nor inexhaustible, which is why all faith leaders must keep Jesus on the main line and the crisis manager on line two.

Dr. Cathryn Stout is a scholar of American cultural history and chief of Communications and Broadcast Services for Memphis-Shelby County Schools. She is pursuing a Master of Divinity at the Interdenominational Theological Center.