Reichert v. Time Inc. et al
Filing
28
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS AND VACATING HEARING, Order by Hon. William Alsup granting in part and denying in part 14 Motion to Dismiss.(whalc1, COURT STAFF) (Filed on 11/3/2011)
1
2
3
4
5
6
IN THE UNITED STATES DISTRICT COURT
7
FOR THE NORTHERN DISTRICT OF CALIFORNIA
8
9
LORINDA REICHERT,
11
For the Northern District of California
United States District Court
10
12
13
No. C 11-03592 WHA
Plaintiff,
v.
14
TIME INC., ADMINISTRATIVE
COMMITTEE OF THE TIME WARNER
PENSION PLAN, and FMR LLC,
15
ORDER GRANTING IN
PART AND DENYING IN
PART DEFENDANTS’
MOTION TO DISMISS
AND VACATING HEARING
Defendants.
/
16
17
18
INTRODUCTION
In this breach-of-contract action, all defendants move to dismiss the complaint for failure
19
to state a claim. For the following reasons, defendants’ motion is GRANTED IN PART AND
20
DENIED IN PART.
21
STATEMENT
22
Plaintiff Lorinda Reichert was an employee of Sunset Publishing Corporation — a
23
subsidiary of defendant Time Inc. — for over forty years. From 2000 to 2009, plaintiff’s position
24
was Vice President of Administration and Manufacturing. In December 2008, plaintiff learned
25
that her position would soon be eliminated. Concerned about the financial implications of retiring
26
earlier than expected, plaintiff began closely examining her finances. Plaintiff had been
27
participating in the Time Warner Pension Plan since 1999. In June 2008, defendant Fidelity
28
Investments — a fiduciary of the Plan — began offering an online pension calculator. Through
1
this calculator a participant of the Plan could view a summary of pension benefits based on a
2
projected date of retirement (Compl. ¶¶ 4, 7, 10–11, 13, 15).
3
Between June and December 2008, plaintiff used the online pension calculator “on at least
4
six occasions.” Each time, the projected pension benefits were approximately $1.7 million if
5
taken as a lump sum. In September 2008, plaintiff contacted Fidelity to discuss her retirement
6
strategy, and Fidelity sent a summary including pension projections consistent with the online
7
projections. In December 2008, plaintiff received a pension statement from the Time benefits
8
department. The statement was also consistent with the $1.7 million lump sum valuation
9
(id. at ¶¶ 16, 17, 20).
In February 2009, plaintiff negotiated her severance agreement with Time. During the
11
For the Northern District of California
United States District Court
10
negotiations, she asked for a guarantee that her actual pension benefits would not be “materially
12
different” from the pension statement provided by the Time benefits department in
13
December 2008. A “good faith estimate” of the pension payout was appended to the agreement.
14
This appended estimate — like the previous estimates — stated that plaintiff’s payout would
15
be $1.7 million if taken as a lump sum (id. at ¶¶ 23–24).
16
Plaintiff’s termination date was March 15, 2009. In July 2009, she received a letter from
17
Fidelity stating that her projected pension benefits under the Plan would be
18
approximately $725,000. Alarmed by the discrepancy between this figure and previous
19
projections, plaintiff contacted the Time benefits department. She learned that the previous
20
estimates were erroneous because plaintiff’s years of service had been incorrectly calculated
21
(id. at ¶¶ 20, 26–27).
22
Plaintiff commenced the present action in July 2011, naming Time, the Administrative
23
Committee of the Time Warner Pension Plan, and Fidelity as defendants. Plaintiff alleges five
24
claims for relief: (1) breach of contract against Time; (2) breach of the covenant of good faith
25
and fair dealing against Time; (3) breach of fiduciary duty against Fidelity; (4) breach of fiduciary
26
duty against the Committee; and (5) professional negligence against Fidelity in the alternative to
27
the third claim for breach of fiduciary duty against Fidelity. All three defendants now move to
28
dismiss all claims for failure to state a claim. This order follows full briefing.
2
1
ANALYSIS
2
To survive a motion to dismiss, a complaint must contain sufficient factual matter,
3
accepted as true, to state a claim for relief that is plausible on its face. Ashcroft v. Iqbal,
4
556 U.S. 662, 129 S. Ct. 1937, 1949 (2009). A claim is facially plausible when there are
5
sufficient factual allegations to draw a reasonable inference that the defendants are liable for the
6
misconduct alleged. While a court “must take all of the factual allegations in the complaint as
7
true,” it is “not bound to accept as true a legal conclusion couched as a factual allegation.”
8
Id. at 1949–50 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). “[C]onclusory
9
allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss for
failure to state a claim.” Epstein v. Wash. Energy Co., 83 F.3d 1136, 1140 (9th Cir. 1996)
11
For the Northern District of California
United States District Court
10
(citation omitted).
12
1.
13
Plaintiff’s complaint alleges two claims against Time — breach of contract and breach of
CONTRACTUAL CLAIMS AGAINST TIME.
14
the duty of good faith and fair dealing. Defendants argue that plaintiff waived the right to bring
15
these claims when she signed a release at the same time that she signed her severance agreement.
16
In the release, plaintiff agreed to “release and forever discharge the Company and Time Warner”
17
and their “agents [and] employees” from “any and all actions, causes of action, [and] claims”
18
(Parker Exh. E at 5).
19
20
A.
Breach of Contract.
Plaintiff argues that the release does not defeat her claim for breach of contract because
21
she is seeking enforcement of the severance agreement itself (Opp. 10). Plaintiff argues that the
22
severance agreement was not properly performed because she is no longer eligible to receive the
23
amount of pension listed in the appended estimate.
24
The only language pertaining to the Plan in the severance agreement stated that on
25
March 1, 2009, plaintiff became “eligible to retire pursuant to the terms of the Time Warner
26
Pension Plan in effect at that time. A good faith estimate of [plaintiff’s] pension payout is
27
attached to this agreement” (Parker Exh. E at 2). The agreement contained no language
28
guaranteeing a specific amount of payout. Notably, during her severance negotiations, plaintiff
3
1
attempted to insert a clause promising that her actual payout would not be “materially different”
2
from the estimate, but Time refused. While the appended estimate was inaccurate, plaintiff does
3
not allege that the estimate was intentionally misleading or prepared in bad faith. Plaintiff admits
4
that Time did not discover the discrepancy until after the severance agreement had been signed
5
(Compl. ¶ 27).
6
Plaintiff does not dispute that every other element of the severance agreement has been
7
performed. The agreement, among other things, guaranteed her 104 weeks of severance pay
8
totaling $412,000 and payment for unused vacation days. Plaintiff has received the benefit of the
9
entire severance pay, and has become eligible to collect a pension according to the Plan. Plaintiff
has failed to identify any term of the severance agreement that has been breached. Plaintiff
11
For the Northern District of California
United States District Court
10
asserts insufficient facts to state a claim for breach of contract. Accordingly, defendants’ motion
12
to dismiss this claim is GRANTED.
13
B.
14
Breach of the Duty of Good Faith and Fair Dealing.
Plaintiff claims that Time breached its duty of good faith and fair dealing “by failing to
15
provide a reasonable and accurate pension estimate,” and by now representing that the actual
16
amount of the pension is significantly less than the original estimate (Compl. ¶ 39). Under
17
California law, every contract contains an implied covenant of good faith and fair dealing that
18
“neither party will do anything which will injure the right of the other to receive the benefits of
19
the agreement.” Wolf v. Walt Disney Pictures & Television, 162 Cal. App. 4th 1107, 1120
20
(2008).
21
Plaintiff fails to specify how Time supposedly prevented her from receiving the benefits of
22
the agreement. The severance agreement did not guarantee her $1.7 million in pension benefits.
23
The pension estimate appended to the agreement was not accurate. The estimate, however, was
24
prepared by Fidelity — not Time.
25
26
Furthermore, the release that plaintiff signed contained the following language
(Parker Exh. E at 5):
27
28
4
1
I understand and agree that I may later discover claims or facts in
addition to or different from those which I now know or believe to
be true with respect to the subject matters of this Agreement, but
that it is nevertheless my intention by signing this Agreement to
fully, finally and forever release any and all claims whether now
know or unknown, suspect or unsuspected, which now exist, may
exist, or previously have existed as set forth herein.
2
3
4
5
Plaintiff is attempting to use new information as a basis for a claim against Time. This is
6
expressly forbidden by the release she signed.
7
8
9
fair dealing. Accordingly, defendants’ motion to dismiss this claim is GRANTED.
2.
ERISA BREACH-OF-FIDUCIARY-DUTY CLAIMS.
Plaintiff alleges that Fidelity and the Committee breached fiduciary duties owed under
11
For the Northern District of California
United States District Court
10
Plaintiff has failed to state a claim against Time for breach of the duty of good faith and
ERISA. A fiduciary under ERISA has a duty to discharge its duties with respect to the Plan
12
“solely in the interest of the participants and beneficiaries,” and “with the care, skill, prudence,
13
and diligence under the circumstances then prevailing that a prudent man acting in a like capacity
14
and familiar with such matters would use in the conduct of an enterprise of like character and
15
with like aims.” 29 U.S.C. 1104(a)(1)(B). Defendants offer several reasons why plaintiff’s
16
ERISA claims must fail. None is persuasive. Each is addressed in turn.
17
A.
Fidelity and the Committee Were Not Included in the Release.
18
Defendants argue that plaintiff waived her right to bring claims against Fidelity and the
19
Committee by signing the release of claims. Defendants argue that Fidelity and the Committee
20
were covered by the release because they acted as “agents” or “administrators” of Time.
21
An individual is a fiduciary under ERISA if “he exercises any discretionary authority or
22
discretionary control respecting management of such plan or exercises any authority or control
23
respecting management or disposition of assets.” 29 U.S.C. 1002(21). Defendants do not dispute
24
that Fidelity was a fiduciary of the Plan. The Committee was expressly named as a fiduciary in
25
the Plan (Parker Exh. B at 60).
26
The Plan also stated that all fiduciaries must discharge their duties “solely in the interest of
27
the Participants and their Beneficiaries, for the exclusive purpose of providing benefits to such
28
persons” (ibid.) (emphasis added). It is clear from the language of the Plan that Fidelity and the
5
1
Committee owed a duty of loyalty to the participants in the Plan, not to Time. In their functions,
2
they were required to act as administrators of the Plan, and agents to the participants. As such,
3
they could not have been agents or administrators of Time. Accordingly, Fidelity and the
4
Committee were not covered by the release plaintiff signed.
5
B.
The Functions of Fidelity and the Committee
Were Not Purely Ministerial.
6
Defendants argue that the conduct plaintiff complained of involved a purely ministerial
7
(rather than fiduciary) function, and thus plaintiff’s breach of fiduciary duty claims must fail.
8
Defendants misleadingly imply that a fiduciary ceases owing a fiduciary duty when performing
9
tasks such as preparing a pension plan estimate. Not so. A person who has the power only to
10
with. 29 C.F.R. 2509.75-8. While part of the responsibilities of Fidelity and the Committee
For the Northern District of California
United States District Court
perform ministerial work and has no discretionary authority or control is not a fiduciary to begin
11
12
involved ministerial duties, their duties also included discretionary authority over the Plan. Thus,
13
they owed a fiduciary duty to the participants.
14
C.
Plaintiff Does Not Need to Allege an Intentional Misrepresentation.
15
Defendants next argue that plaintiff’s breach-of-fiduciary-duty claims must fail because
16
she failed to allege that Fidelity or the Committee made an intentional misrepresentation. To
17
support their argument that an intentional misrepresentation is necessary, defendants cite to
18
several decisions from other circuits. In the Ninth Circuit, however, “[a] person actively
19
misinforms by saying that something is true when it is not true. But the person also misinforms
20
by saying that something is true when the person does not know whether it is true or not.”
21
Making such affirmative misrepresentations violates the “core obligation of the ERISA
22
fiduciary.” Wayne v. Pacific Bell, 238 F.3d 1048, 1055 (9th Cir. 2001). It is therefore not
23
necessary for plaintiff to allege an intentional misrepresentation in order to state a claim for
24
breach of fiduciary duty. Plaintiff has stated sufficient facts to give rise to the inference that
25
Fidelity and the Committee made statements when they did not know if they were true or not.
26
These allegations state a claim for breach of fiduciary duty.
27
28
6
1
2
D.
Plaintiff States a Claim for Detrimental Reliance.
Defendants argue that the claims for breach of fiduciary duty should be dismissed because
statements. Defendants argue that plaintiff is in the same position now as if she had never
5
obtained an incorrect pension estimate. Plaintiff alleges in her complaint, however, that she
6
became concerned about her financial situation after learning she would have to retire several
7
years earlier than she had planned and began seeking clarification of her finances. Plaintiff
8
alleges that she declined to negotiate her severance package with Time until she received
9
confirmation of her pension payout. Plaintiff relied on her pension estimates while negotiating
10
her severance package, which is evidenced by the fact that she attempted to include language in
11
For the Northern District of California
plaintiff pled facts insufficient to establish that she detrimentally relied on the erroneous
4
United States District Court
3
the agreement that the payout would not be “materially different” from the estimates
12
(Compl. ¶¶ 14, 18, 24). Plaintiff has pled facts sufficient to support an inference that she relied
13
on the erroneous estimate and that she suffered a detriment by receiving less than half of the
14
payout she expected.
15
16
*
*
*
All of defendants’ arguments for dismissing the claims for breach of fiduciary duty fail.
17
Accordingly, defendants’ motion to dismiss the breach-of-fiduciary-duty claims against Fidelity
18
and the Committee is DENIED.
19
3.
20
As an alternative to the breach-of-fiduciary-duty claim against Fidelity, plaintiff alleges
21
professional negligence. Defendants argue that this claim based in California law is preempted
22
by ERISA. The preemption provision in ERISA provides that ERISA “shall supercede any and
23
all State laws insofar as they may now or hereafter relate to any employee benefit plan.”
24
29 U.S.C. 1144(a) (emphasis added). A state law may “relate to” a benefit plan — and therefore
25
be preempted — even if the law was not specifically designed to effect such plans, or the effect is
26
only indirect. Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 139 (1990).
27
28
PROFESSIONAL NEGLIGENCE CLAIM AGAINST FIDELITY.
Plaintiff alleges that Fidelity “breached its professional duties by providing grossly
inaccurate information to [plaintiff] regarding her pension benefits under the Pension Plan on at
7
1
least ten occasions” (Compl. ¶ 65). At the root of this claim is the allegation that Fidelity’s
2
inaccurate estimates related to the Plan, and for this reason plaintiff’s claim for professional
3
negligence is preempted by ERISA. Accordingly, defendants’ motion to dismiss this claim
4
is GRANTED.
5
CONCLUSION
6
For the foregoing reasons, defendants’ motion to dismiss is GRANTED IN PART AND
7
DENIED IN PART. More specifically, defendants’ motion to dismiss plaintiff’s first, second, and
8
fifth claims is GRANTED. Defendants’ motion to dismiss plaintiff’s second and third claims is
9
DENIED. This is a troubling case if the allegations are sound, and the Court will allow full
discovery against Time and all others involved to get to the bottom of how and why a large error
11
For the Northern District of California
United States District Court
10
like this could have been made. Discovery may show that Time acted in good faith, but perhaps it
12
will show that Time suspected that an error may have been made and let it go unexamined. This
13
order will allow plaintiff leave to seek an amendment and will allow plaintiff to conduct some
14
discovery before having to re-plead.
15
Even if Time were totally dismissed from the action, third-party discovery would be
16
permitted against Time, including document and deposition discovery, to find out how the error
17
occurred, given that at all events the action would go forward as to other defendants. So, pending
18
a motion for leave to amend, Time will remain as a party and be subject to the party discovery
19
rules. Plaintiff must file a motion for leave to amend by MARCH 8, 2012, to be heard on the
20
normal 35-day track. Meanwhile, all parties must cooperate in reasonable discovery. The
21
hearing scheduled for November 17 is VACATED.
22
23
IT IS SO ORDERED.
24
25
Dated: November 3, 2011.
WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE
26
27
28
8
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?