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

The African Methodist Episcopal Church retirement plan and third-party administrators had federal ERISA charges from a class action 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 consolidated amended complaint were 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 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 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 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, 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 breach of fiduciary duty on Count I, against Newport and Symetra, under Tennessee 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 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.