Three religious-affiliated, nonprofit health care systems areasking the U.S. Supreme Court to step into a multimillion-dollarbattle with two plaintiffs firms that claim the pension plans of the medical networks are notexempt from federal law.

Related: Church Plan Clarification Act is nowlaw

Lisa Blatt, head of Arnold & Porter’s Supreme Court andappellate practice, filed petitions in the high court for threenonprofits that are targets of class actions brought by theWashington firm Cohen Milstein Sellers & Toll and Seattle’sKeller Rohrback.

Plaintiffs lawyers began suing nonprofit religious employers in2013, arguing that their pension plans did not qualify as “churchplans” that are exempt from the insurance premiums, requirementsand protections of the federal Employee Retirement Income SecurityAct. Those lawsuits, Blatt argued, defy 30 years of federaladministrative rulings that church plans do not have to beestablished by churches.

“As the firms themselves recently observed, these lawyers ‘havefor years together developed and litigated the innovative theory ofliability at issue here,’ ” Blatt wrote. She said the firms seek “billions of dollars in retroactive liability and a wholesaleupheaval in the administration of pension plans affecting religiousemployers and employees across the country.”

Related: Court says hospital chain can be sued inchurch plan case

In the last three years, plaintiffs firms have filed 36 classactions against hospital systems, claiming their pension plans werenot church plans, according to the petitions. The pending cases inthe Supreme Court are Advocate Health Care Network v.Stapleton, Dignity Health v.Rollins and Saint Peter’s Healthcare Systemv. Kaplan.

Cohen Milstein and Keller Rohrback have urged the justices notto review lower court decisions. The three federal appealscourts—the Third, Seventh and Ninth circuits—agreed with theplaintiffs’ interpretation that only pension plans “established bya church” are entitled to the church-plan exemption under theEmployee Retirement Income Security Act, or ERISA. Advocate HealthCare is based in Illinois, Dignity Health in California and SaintPeter’s in New Jersey.

The plaintiffs firms contend that “hundreds of church-associatedhospital conglomerates, often at the urging of ‘gotcha’ benefitconsultants, have in recent decades exploited a misreading of ERISAto lower their costs by claiming church-plan status for plans thathad been operated—correctly—as ERISA plans.”

Those plans, Cohen Milstein’s Karen Handorf said in a brief, noware often substandard, underfunded—and no church stands behindthem.

The 33,000 putative plaintiffs in the case against Advocate,Blatt said, seek $110 a day for every day Advocate Health Care didnot provide benefit statements of funding notices. “Stateddifferently, for just one year, respondents seek over $3.9 billionin penalties,” Blatt wrote.

In May, In May, Saint Francis Hospital and Medical Centerin Connecticut reportedly agreed to settle achurch plan lawsuit for $107 million.

“Just from a dollars and cents perspective, it’s a big issue,”said Eric Rassbach of the Becket Fund for Religious Liberty,which filed a brief in supportof the health care systems. “You’re dealing with a whole lot ofpension plans affected by this.”

‘Established and maintained by a church’

Church plans have been exempt from the Employee RetirementIncome Security Act since that law was enacted in 1974.

With the exemption, Congress sought to avoid government scrutinyof confidential church books and activities. In 1974, the employeeretirement act defined a church plan as one “established andmaintained for its employees by a church or by a convention orassociation of churches” that is tax-exempt.

In 1980, Congress amended the church-plan exemption to include“a plan maintained by an organization, whether a civil lawcorporation or otherwise, the principal purpose or function ofwhich is the administration or funding of a plan or program for theprovision of retirement benefits or welfare benefits, or both, forthe employees of a church or a convention or association ofchurches, if such organization is controlled by or associated witha church or a convention or association of churches.”

The high court battle is over whether the “established andmaintained by a church” requirement still applies.

Blatt said in her petition for Advocate Health Carethat the IRS in 1983 concluded a pension plan may qualify as achurch plan in two ways: “established and maintained by a church,”or maintained by a church-controlled or associatedorganization.

Since then, Blatt told the justices, the Internal RevenueService has issued more than 500 private letter rulings confirmingthat the plans of qualifying, church-affiliatedorganizations—including her clients—are exempt regardless ofwhether they were established by churches. The U.S. LaborDepartment has issued 70 advisory opinions to that effect, Blattsaid.

Keller Rohrback’s Lynn Sarko urged the justices to give weight to the threeappellate court decisions and not to “ex parte, non-binding privateletter rulings.”

Although Congress allowed churches to extend pension benefits toemployees of church-associated schools and hospitals, Sarko said,it did not allow “giant businesses” like Advocate Health Care tocreate exempt benefits plans simply by claiming a religiousaffiliation.

“Such a pure preference for religiously connected institutions,without any need to accommodate religious faith or practice, wouldhave violated the Establishment Clause,” Sarko told thejustices.

Finding lawyers

The church-plan lawsuits stemmed from concerns raised by thePension Rights Center in Washington, Karen Ferguson, the center’sdirector, said. “Several groups of employees of nonprofitsaffiliated with religious organizations came to us,” she said.“Exhibit A” was the Hospital Center at Orange, in New Jersey.

The Hospital Center paid insurance premiums for its pension planunder ERISA for more than two decades, Ferguson said. But in 1998,when the center was taken over by Cathedral Health Service, thepension plan was switched to a “church plan.”

Employees were not informed of the change until a nurse raised aquestion at a meeting about the center’s deteriorating financialcondition. The nurse and other co-workers sued; a settlement gavethe Internal Revenue Service time to reconsider its “church plan”exemption, which it did just before the pension money was due todisappear.

The Pension Benefit Guaranty Corp. covered a $30 million shortfall for800 employees. The Hospital Center is now closed.

“These private letter rulings—nobody knew about them except theapplicant and the IRS,” Ferguson said. “These cert petitionsessentially say: ‘The sky is falling; these innocent hospitalsmostly relied on these rulings.’ We darn well know they didn’t.They were ERISA plans until told ‘We have a deal for you—we cansave you millions and get you a refund on your pension premiumspaid.’ They knew darn well what they were doing—saving money at theexpense of retirees.”

Ferguson said the Pension Rights Center needed lawyers and foundCohen Milstein and Keller Rohrback. The two firms are “terrific andhave immersed themselves” in the problems with these pension funds,she said.

“The churches do not stand behind these plans,” Ferguson said.“They stand behind the plans they establish. That means these folksare left to go out on ice floes.”

There have been “hundreds and hundreds” of church-planconfirmations by the IRS in the past 35 years, said Mark Chopko ofStradley Ronon Stevens & Young, which filed an amicus brief supportingthe petitions on behalf of the Catholic Health Association.

“If you’ve got a government benefit that is available, and youask if you’re entitled, and get back that you are, I think youshould be able to rely on it as a practical matter,” Chopko said.“The time for someone to have raised a challenge would have been inthe 1980s. Now you have decades of reliance on the part of somehealth systems.”

This would not be the first time an interpretation of a law wasmistaken or changed, and an agency had to deal with the retroactiveimpact of a change, said James Keightley of Washington’s Keightley& Ashner, which specializes in matters involving the PensionBenefit Guaranty Corporation.

“It’s relatively clear that the internal [agency] interpretationcannot alter the statutory provisions,” Keightley said. “It’s alsopretty clear that three circuit courts have reached a conclusionregarding the interpretation. If the law goes the way I think, it’sgoing to be a real mess.”