Salas et al v. International Union of Operating Engineers et al

Filing 250

ORDER RE: FIFTH CAUSE OF ACTION (ERISA) 177 , 178 , 179 , 180 , 181 , 182 , 190 , 191 by Judge Dean D. Pregerson: Defendants Motions to Dismiss the Fifth Claim are DENIED. (lc). Modified on 2/19/2015 (lc).

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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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MARIO SALAS, individually
and on behalf of all others
similarly situated; et al.,

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Plaintiffs,

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v.
INTERNATIONAL UNION OF
OPERATING ENGINEERS, a trade
union; et al.,
Defendants.
___________________________

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Case No. CV 12-10506 DDP (VBKx)

ORDER RE: FIFTH CAUSE OF ACTION
(ERISA)

[Dkt. Nos. 177, 178, 179,
180, 181, 182, 190, 191]

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Presently before the court are four separate Motions to

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Dismiss Plaintiffs' Fifth Claim for violation of the Employee

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Retirement Income Security Act (“ERISA”).

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182) The substance of the four motions is essentially the same.

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Having considered the submissions of the parties and heard oral

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argument, the court denies the motions and adopts the following

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order.

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I.

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(Dkts. 177, 179, 181,

Background
The Fifth Claim of Plaintiff’s Fourth Amended Complaint

(“FAC”) alleges that Defendants violated ERISA by issuing, or

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allowing Defendant William Waggoner to issue, a thirteenth (i.e.,

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additional) monthly pension payment from Local 12's ERISA-governed

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Pension Plan (the “Plan”) to retirees at the end of each year.

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Plaintiffs allege that the decision to make the thirteenth payment

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was motivated by a desire to curry favor with retirees for the

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purpose of securing votes for Defendant Waggoner and his slate of

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candidates for elected union positions.

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Defendants now move to dismiss Plaintiffs’ Fifth claim.

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II.

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(4AC ¶¶ 500-15.)

Several

Legal Standard
A complaint will survive a motion to dismiss when it contains

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“sufficient factual matter, accepted as true, to state a claim to

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relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S.

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662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,

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570 (2007)).

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“accept as true all allegations of material fact and must construe

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those facts in the light most favorable to the plaintiff.” Resnick

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v. Hayes, 213 F.3d 443, 447 (9th Cir. 2000).

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need not include “detailed factual allegations,” it must offer

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“more than an unadorned, the-defendant-unlawfully-harmed-me

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accusation.”

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allegations that are no more than a statement of a legal conclusion

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“are not entitled to the assumption of truth.” Id. at 679.

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other words, a pleading that merely offers “labels and

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conclusions,” a “formulaic recitation of the elements,” or “naked

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assertions” will not be sufficient to state a claim upon which

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relief can be granted.

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quotation marks omitted).

When considering a Rule 12(b)(6) motion, a court must

Iqbal, 556 U.S. at 678.

Although a complaint

Conclusory allegations or

Id. at 678 (citations and internal

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In

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“When there are well-pleaded factual allegations, a court should

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assume their veracity and then determine whether they plausibly

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give rise to an entitlement of relief.” Id. at 679.

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must allege “plausible grounds to infer” that their claims rise

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“above the speculative level.” Twombly, 550 U.S. at 555.

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“Determining whether a complaint states a plausible claim for

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relief” is a “context-specific task that requires the reviewing

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court to draw on its judicial experience and common sense.”

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556 U.S. at 679.

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Plaintiffs

Iqbal,

III. Discussion
Under ERISA, a fiduciary with control over a Pension Trust

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shall act (1) solely in the interest of the participants, (2) “for

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the exclusive purpose” of providing benefits for participants and

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their beneficiaries, (3) with the “care, skill, prudence, and

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diligence” that a prudent man acting under similar circumstances

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would, and (4) to minimize the risk of large losses whenever

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reasonably possible. 29 U.S.C. § 1104(a)(1); see also Donovan v.

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Marzzola, 716 F.2d 1226, 1231 (9th Cir. 1983).

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violates ERISA if he breaches any of these duties.

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A fiduciary

Plan fiduciaries are liable for the breaches of their co-

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fiduciaries if they (1) knowingly participate in an act of such

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other fiduciaries, knowing that such acts are a breach, (2) fail to

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satisfy their own responsibilities, thus enabling the breach, or

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(3) knowingly fail to make reasonable efforts under the

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circumstances to remedy a co-fiduciary’s breach. 29 U.S.C. §

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1105(a)(1)-(3). Trustees of plans with multiple trustees are also

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liable if they fail to use “reasonable care to prevent a co-trustee

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from committing a breach.” 29 U.S.C. § 1105(b)(1).
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Here, Plaintiffs allege that Defendants violated the duties of

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loyalty, exclusivity, and prudence.

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contend that Defendants did not act in the interests of

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beneficiaries or with the exclusive purpose of providing for plan

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participants, but were instead motivated by a desire to aid

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Waggoner's electoral ambitions.

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Defendants acted imprudently by approving a thirteenth payment to

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retirees that the Fund could ill-afford.

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A.

Specifically, Plaintiffs

Plaintiffs further contend that

Standard of Review

Courts apply an arbitrary and capricious standard of review to

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resolve claims that allege that trustees incorrectly used their

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discretion to balance valid interests among beneficiaries. See,

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e.g., Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989)

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(Where an ERISA plan grants “discretionary authority to determine

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eligibility for benefits or to construe the terms of the plan, a

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plan administrator’s interpretation of a plan is reviewed for abuse

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of discretion”); Johnson v. Trustees of Western Conference of

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Teamsters Pension Fund, 879 F.2d 651, 1139 (9th Cir. 1989) (“Where,

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as here, an ERISA trust instrument vests discretionary power in the

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trustees to construe and administer the trust's terms, we review

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the trustees’ interpretations of those terms . . . for abuse of

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discretion.”); Tapley v. Locals 302 and 602 of IUOE Emp'rs Constr.

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Ret. Plan, 728 F.3d 1134, 1139 (9th Cir. 2013) (“We equate the

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abuse of discretion standard with arbitrary and capricious

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review.”).

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administrator’s benefit determination relies on clearly erroneous

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findings of fact, is unsupported by substantial evidence, or lacks

“Abuse of discretion can be found where an

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reasonable basis.” Shane v. Albertson's Inc. Emps. Disability Plan,

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381 F. Supp. 2d 1196, 1199 (C.D. Cal. 2005).

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In cases alleging that a fiduciary misused or imprudently

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allocated funds to non-beneficiaries, courts generally apply a less

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permissive, de novo standard of review. See Moody v. Liberty Life

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Assurance Co. Of Boston, 595 F.Supp.2d 1090, 1096-1097 (N.D. Cal.

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2009); Kowalewski v. Detweiler, 770 F. Supp. 290, 292-93 (D. Md.

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1991).

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discretion over management and disposition of Plan assets (FAC ¶

Though the FAC itself alleges that Defendants were given

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505), and Plaintiffs acknowledge that retirees have a valid

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interest in the Plan as participants, Plaintiffs nevertheless argue

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that the court should review de novo Defendants’ decision to issue

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(or facilitate) the thirteenth payment to retirees.

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Plaintiffs contend that the Fifth claim is not a challenge to

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a discretionary decision regarding allocation of benefits among

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retirees and non-retirees, but rather concerns a “long-standing

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practice that was inconsistent with trustees’ fiduciary duties to

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act prudently and loyally to participants and that was detrimental

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to the Pension Fund as a whole.” (Dkt. 196 at 13.)

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Plaintiffs argue, because the FAC alleges that Defendants

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“substantially harmed the Plan by gratuitously giving away excess

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pension benefits,” this case involves a dispute between

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beneficiaries and non-beneficiaries, which implicates a breach of

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the duty of loyalty to the former, and should be reviewed de novo.

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(Id.)(emphasis in original).

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Thus,

The pension plan at issue here is not attached to the

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complaint, nor are the terms of that plan presently before the

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court.

There is insufficient basis, therefore, for this court to
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conclude whether the decision to make the alleged thirteenth

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payment was made pursuant to some provision of the trust instrument

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granting the trustees the discretion to make such a decision.

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commonplace, unremarkable allegation that the trustees generally

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had discretion to manage the Plan cannot alone suffice to trigger

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deferential review.

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standard.

The

Accordingly, the court applies a heightened

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B.

Defendants’ Duties

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Plaintiffs allege that by approving or allowing additional

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pension payments to retirees, Defendants knowingly violated, among

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other duties, the duties of loyalty and prudence owed to all Plan

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participants and beneficiaries under 29 U.S.C. § 1104. (Id. ¶ 510.)

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Defendant Bourguignon, Defendants Crawford and Prlich,

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Defendant Poss, and Defendants Waggoner, Adams, Sikorski, Billy,

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Hawn, Davison, and Operating Engineer Funds, Inc. (“OEFI”) each

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filed motions to dismiss Plaintiffs’ Fifth claim. Though the

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substance of these four motions differs slightly, the arguments are

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essentially the same.

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First, Defendants argue that the FAC should be dismissed

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because Plaintiffs have offered no facts to support conclusory

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assertions. (See, e.g., Defendant Waggoner's Reply, Dkt. No. 209,

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at 17.) (“Plaintiff's allegation that the Pension Fund is 30%

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underfunded and in critical condition are unsupported

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conclusions.”)

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are not plausible under the Iqbal/Twombly standard because there is

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an “obvious alternative explanation” for the alleged facts, such as

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they are. (Dkt. 209 at 19.) Defendants claim that the “obvious

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alternative explanation” is that the Trustees “fulfilled their

Second, Defendants argue that Plaintiffs’ claims

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obligation under [ERISA] Section 404 to act solely in the interest

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and for the exclusive purpose of providing benefits to

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participants, in this case the retirees.” (Id.) Defendants further

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contend that any political benefit to Waggoner was merely an

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incidental effect of the increased payments to retirees.

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Plaintiffs’ FAC alleges that Defendants made the thirteenth

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payment to retirees “for the purpose of securing votes for

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Waggoner.”

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allegation that retirees, the only group to benefit from the

(FAC 251).

The FAC supports this assertion with the

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additional payment, have the highest participation rate in union

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elections.

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underfunded, that pension contributions were historically not

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tailored to provide for thirteen payments to retirees, and that

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current members have been forced to make additional pension

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contributions to ensure the viability of the fund.

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(FAC 251). Plaintiffs further allege that the Plan is

(FAC 32, 252).

These allegations, taken as a whole, are sufficient to state a

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plausible claim for breach of Defendants' duty of loyalty under

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ERISA.

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force in union elections, are the sole beneficiaries of additional

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payments from a fund that, Plaintiffs allege, is in financial

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distress.

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made solely for the purpose of securing retiree votes.

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Defendants contend, and a trier of fact might ultimately find, that

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any election-related benefits to Waggoner were merely incidental,

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the court must consider the allegations in the light most favorable

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to Plaintiffs at this stage.

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factual allegations simply by reformulating them in a light more

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favorable to the parties seeking dismissal.

The FAC alleges that retirees, a distinct and powerful

Plaintiffs contend that the additional payments were
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Defendants cannot escape Plaintiffs'

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III. Conclusion
For the reasons set forth herein above, Defendants’ Motions to
Dismiss the Fifth Claim are DENIED.

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IT IS SO ORDERED.

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Dated: February 18, 2015
DEAN D. PREGERSON
United States District Judge

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