Haug v. Midstate Mechanical Incorporated et al

Filing 28

ORDER granting 20 Defendants' Motion for Partial Dismissal of Plaintiff's First Claim for Relief with regard to the request for § 502(c)(1) penalties. Signed by Judge James A Teilborg on 6/8/12.(DMT)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Plaintiff,
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vs.
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Midstate Mechanical, Inc., an Arizona)
corporation; Midstate Mechanical)
Nonqualified Defined Contribution Plan;)
Midstate Mechanical Nonqualified)
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Deferred Compensation Plan,
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Defendants.
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Jon Haug,

No. CV-11-1584-PHX-JAT
ORDER

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Pending before the Court is Defendants’ Motion for Partial Dismissal of the Amended
Complaint. (Doc. 20). The Court now rules on the motion.

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I.

BACKGROUND

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On August 11, 2011, Plaintiff Jon Haug filed a Complaint against Defendants

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Midstate Mechanical, Inc., Midstate Mechanical Nonqualified Defined Contribution Plan,

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and Midstate Mechanical Nonqualified Deferred Compensation Plan. (Doc. 1). Plaintiff’s

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Complaint sought a declaratory judgment, including an order that Defendants violated 29

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U.S.C. § 1132(c)(1); damages for breach of the covenant of good faith and fair dealing; and

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for an accounting of funds. Id. at 6-8. Defendants moved to dismiss Plaintiff’s claims on the

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basis that they fail to state a claim upon which relief may be granted. (Doc. 7). In his

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response, Plaintiff conceded that his claims for breach of the covenant of good faith and fair

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dealing and for an accounting should be dismissed. (Doc. 9 at 1). The Court also dismissed

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Plaintiff’s Claim for damages under the Employee Retirement Income Security Act of 1974

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(ERISA) § 502(c)(1), 29 U.S.C. § 1132, but granted him leave to amend the complaint to

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allege facts and legal grounds to satisfy the pleading standard. (Doc. 17).

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Plaintiff subsequently filed an Amended Complaint on March 2, 2012. (Doc. 19).

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Defendants again move to dismiss the complaint with regard to Plaintiff’s claim for penalties

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under §502(c)(1), alleging that the documents Plaintiff requested are not required to be

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produced under ERISA § 104(b)(4), 29 U.S.C. § 1024(b)(4). (Doc. 20 at 1). Plaintiff

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responds that ERISA does require production of the documents. (Doc. 24 at 1).

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II.

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MOTION TO DISMISS
A.

12(b)(6) Legal Standard

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The Court may dismiss a complaint for failure to state a claim under 12(b)(6) for two

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reasons: 1) lack of a cognizable legal theory and 2) insufficient facts alleged under a

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cognizable legal theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir.

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1990).

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To survive a 12(b)(6) motion for failure to state a claim, a complaint must meet the

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requirements of Federal Rule of Civil Procedure 8(a)(2). Rule 8(a)(2) requires a “short and

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plain statement of the claim showing that the pleader is entitled to relief,” so that the

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defendant has “fair notice of what the . . . claim is and the grounds upon which it rests.” Bell

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Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S.

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41, 47 (1957)).

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The factual allegations of the complaint must be sufficient to raise a right to relief

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above a speculative level. Id. Rule 8(a)(2) “requires a ‘showing,’ rather than a blanket

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assertion, of entitlement to relief. To survive a motion to dismiss, a complaint must contain

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sufficient factual matter, which, if accepted as true, states a claim to relief that is “plausible

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on its face.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). Facial plausibility exists if the

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pleader pleads factual content that allows the court to draw the reasonable inference that the

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defendant is liable for the misconduct alleged. Id. Plausibility does not equal “probability,”
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but plausibility requires more than a sheer possibility that a defendant has acted unlawfully.

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Id.

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In deciding a motion to dismiss under Rule 12(b)(6), the Court must construe the facts

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alleged in the complaint in the light most favorable to the drafter of the complaint and the

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Court must accept all well-pleaded factual allegations as true. See Shwarz v. United States,

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234 F.3d 428, 435 (9th Cir. 2000). Nonetheless, the Court does not have to accept as true a

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legal conclusion couched as a factual allegation. Papasan v. Allain, 478 U.S. 265, 286

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(1986).

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B.

ERISA § 502(c)

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Section 502(a) of the Employee Retirement Income Security Act of 1974 (ERISA)

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creates an “exclusive remedy for rights guaranteed under ERISA.” Ingersoll-Rand Co. v.

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McClendon, 498 U.S. 133, 144 (1990). Section 502(a)(1) permits a participant or beneficiary

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to recover the relief provided for in § 502(c). 29 U.S.C. § 1132(a)(1)(A). Section

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502(c)(1)(B) provides, in part, that a plan administrator “who fails or refuses to comply with

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a request for any information which such administrator is required by this subchapter to

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furnish to a participant or beneficiary . . . may in the court’s discretion be personally liable

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to such participant or beneficiary . . . . ” 29 U.S.C. § 1132(c)(1)(B) (emphasis added).

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Administrators are required to furnish “a copy of the latest updated summary plan

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description, and the latest annual report, any terminal report, the bargaining agreement, trust

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agreement, contract, or other instruments under which the plan is established or operated”

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upon written request of a participant or beneficiary. 29 U.S.C. § 1024(b)(4). As the plain

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language of § 502(c)(1) indicates, a remedy exists only if there is a violation of a participant

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or beneficiary’s right to information under ERISA. See Williams v. Caterpillar, Inc., 944

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F.2d 658, 667 (9th Cir. 1991). Absent a violation of an ERISA-provided right, § 502(c)(1)

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does not provide any relief.

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C.

Discussion
i.

The Issue

Accepting the facts alleged as true, Plaintiff has shown that he asked for “all
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documents showing how the Committee was constituted, who made the determination who

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would be on the Committee, the board resolution appointing the Committee and any minutes

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or documents that reflect any determination by the Committee,” as well “copies of the board

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minutes.” (Doc. 19 at 6). He alleges that the administrator was required to provide all of these

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documents upon written request. Plaintiff concedes that he was provided a copy of the board

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resolution appointing the Committee, which showed how it was constituted. (Doc. 19 at 6).

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As such, the sole issue is whether “any minutes or documents that reflect any

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determination by the Committee” that Haug was in violation of the plan come within the

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meaning of “other instruments under which the plan is established or operated.”

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ii.

“Other Instruments”

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Plaintiff cites to the regulations of the Department of Labor as evidence for the

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meaning of “other instruments.” (Doc. 24 at 2). The sections of the regulations dealing with

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disclosure requirements are 29 C.F.R § 2520.104B-1 through 29 C.F.R § 2520.104B-30.

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Plaintiff, however, cites the Department’s definition of what is “relevant” to a claimants

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claim, in the context of a claims process. 29 C.F.R. § 2560.503-1(m)(8)(i-ii). The regulations

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cited have no bearing on the definition of “other instruments.”

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The Ninth Circuit Court of Appeals has interpreted §104(b)(4) narrowly and has

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rejected a general disclosure approach. See Hughes Salaried Retirees Action Comm. v. Adm’r

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of Hughes Non-Bargaining Ret. Plan, 72 F.3d 686, 691 (9th Cir. 1995). “[T]he broad term,

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other instruments, should be limited to the class of objects that specifically precedes it.”

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Shaver v. Operating Engineers Local 428 Pension Trust Fund, 332 F.3d 1198, 1202 (9th Cir.

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2003). The preceding terms are “governing plan documents.” Curtiss-Wright Corp. v.

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Schoonejongen, 514 U.S. 73, 84 (1995). “The relevant documents are those documents that

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provide individual participants with information about the plan and benefits.” Hughes, 72

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F.3d at 690. Administrators need only disclose “legal documents that describe the terms of

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the plan, its financial status, and other documents that restrict or govern the plan's operation.”

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Shaver, 332 F.3d at 1202.

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Plaintiff raises the Sixth Circuit position that “all other things being equal, courts
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should favor disclosure where it would help participants understand their rights.” Bartling

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v. Fruehauf Corp., 29 F.3d 1062, 1070 (6th Cir. 1994). This approach is more permissive

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than that of the Ninth Circuit, which is itself more permissive than that of the Second or

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Fourth Circuits. See Faircloth v. Lundy Packing Company, 91 F.3d 648, 654 (4th Cir.1996)

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(“The clear and unambiguous meaning of this statutory language encompasses only formal

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or legal documents under which a plan is set up or managed”) and Board of Trustees of the

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CWA/ITU Negotiated Pension Plan v. Weinstein, 107 F.3d 139, 142 (2d Cir.1997)

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(“Congress meant the formal legal documents that govern or confine a plan's operations,

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rather than the routine documents with which or by means of which a plan conducts its

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operations.”). The Ninth Circuit had the opportunity to consider the permissive approach of

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the Sixth Circuit, and implicitly rejected it. Thus, this Court must narrowly interpret the term

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“other instruments.”

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iii.

“Any Minutes or Documents That Reflect Any Determination
by the Committee”

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Applying the Ninth Circuit approach, the Court finds that any documents reflecting
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the determination of the Committee regarding Plaintiff’s compliance with the plan do not
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constitute governing documents of the plan. The plan is clearly not operating under such
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instruments within the meaning of § 104(b)(4). As such, the request does not fit under §
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104(b)(4), and Plaintiff has failed to state a legal basis for relief under § 502(c)(1).
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III.

CONCLUSION

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Accordingly,
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IT IS ORDERED granting Defendants’ Motion for Partial Dismissal (Doc. 20) of
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Plaintiff’s First Claim for Relief with regard to the request for § 502(c)(1) penalties.
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DATED this 8th day of June, 2012.
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