Sender v. Franklin Resources Inc

Filing 121

ORDER by Judge Edward M. Chen Granting Defendant's Motion for Judgment on the Pleadings and Motion for Summary Judgment; and Denying Plaintiff's Motion to Remand 74 77 113 . (emcsec, COURT STAFF) (Filed on 3/14/2013)

1
2
3
4
5

UNITED STATES DISTRICT COURT

6

NORTHERN DISTRICT OF CALIFORNIA

7
8

JOHN SENDER,

9

Plaintiff,

For the Northern District of California

United States District Court

10
11

v.
FRANKLIN RESOURCES, INC.,

12
13

No. C-11-3828 EMC

Defendant.
___________________________________/

ORDER GRANTING DEFENDANT’S
MOTION FOR JUDGMENT ON THE
PLEADINGS AND MOTION FOR
SUMMARY JUDGMENT; AND
DENYING PLAINTIFF’S MOTION TO
REMAND
(Docket Nos. 74, 77, 113)

14
15
16

Plaintiff John B. Sender has filed suit against Defendant Franklin Resources, Inc. Under the

17

current operative complaint (i.e., the second amended complaint or “SAC”), the only claim being

18

asserted is an ERISA claim, more specifically a claim for benefits pursuant to the terms of an

19

employee stock ownership plan (“ESOP” or “Plan”). See 29 U.S.C. § 1132(a)(1)(B). Currently

20

pending before the Court are three motions: (1) Mr. Sender’s motion to remand, (2) Franklin’s

21

motion for judgment on the pleadings, and (3) Franklin’s motion for summary judgment. Having

22

considered the parties’ briefs and accompanying submissions, as well as the oral argument of

23

counsel, the Court hereby DENIES the motion to remand, GRANTS the motion for judgment on the

24

pleadings, and GRANTS the motion for summary judgment.

25

///

26

///

27

///

28

///

1
2
3

I.
A.

MOTION TO REMAND

Factual & Procedural Background
Mr. Sender initiated this lawsuit against Franklin in state court. In the first amended

4

complaint (“FAC”) – filed while the case was still in state court – Mr. Sender alleged that he was

5

previously an employee of Franklin; that, during his time with Franklin, he acquired shares in a

6

now-discontinued ESOP; but that ultimately those shares were never delivered to him. See FAC ¶ 1.

7

Mr. Sender also alleges that he was not aware that he was entitled to any shares as retirement

8

benefits until 2007, when he received a letter from the Social Security Administration. See FAC ¶

9

14. By that time, the Plan had not been in existence for more than twenty years. See FAC ¶ 12.
On the face of the amended complaint, Mr. Sender asserted only state law claims: (1) breach

11
For the Northern District of California

United States District Court

10

of fiduciary duty, (2) negligence, and (3) an order directing issuance and delivery of a share

12

certificate pursuant to the California Corporation Code.1 Franklin nevertheless removed, arguing

13

that the state law claims were preempted by ERISA and therefore removable. In an order filed on

14

October 20, 2011, the Court agreed with Franklin and thus denied Mr. Sender’s motion to remand

15

the case back to state court and further granted Franklin’s motion to dismiss. See Docket No. 25

16

(order). The Court gave Mr. Sender an opportunity to file an amended complaint, which he did. In

17

the SAC, Mr. Sender asserted a single ERISA claim, namely, a claim for benefits pursuant to 29

18

U.S.C. § 1132(a)(1)(B) (providing that “[a] civil action may be brought . . . by a participant or

19

beneficiary . . . to recover benefits due to him under the terms of his plan [or] to enforce his rights

20

under the terms of the plan”). Mr. Sender did not bring any other ERISA claim, such as one for

21

breach of fiduciary duty.

22

Now, more than a year later, Mr. Sender has filed a second motion to remand, asserting that

23

the Court lacks subject matter jurisdiction over this case because, under Supreme Court precedent,

24

see Beck v. PACE Int’l Union, 551 U.S. 96 (2007), “once a retirement plan has been terminated[,]

25
1

26
27
28

See Cal. Corp. Code § 419(b) (providing that, “[i]f a corporation refuses to issue a new
share certificate or other certificate in place of one theretofore issued by it, or by any corporation of
which it is the lawful successor, alleged to have been lost, stolen or destroyed, the owner of the lost,
stolen or destroyed certificate or the owner’s legal representative may bring an action in the superior
court of the proper county for an order requiring the corporation to issue a new certificate in place of
the one lost, stolen or destroyed”).

2

1

ERISA no longer applies to a dispute regarding whether beneficiaries received proper payment

2

therefrom [and] [s]tate court remedies alone apply.” Mot. at 1.

3

B.

Legal Standard

4

A defendant may remove an action to federal court based on federal
question jurisdiction or diversity jurisdiction. However, “‘[i]t is to be
presumed that a cause lies outside [the] limited jurisdiction [of the
federal courts] and the burden of establishing the contrary rests upon
the party asserting jurisdiction.’” The “strong presumption against
removal jurisdiction means that the defendant always has the burden
of establishing that removal is proper,” and that the court resolves all
ambiguity in favor of remand to state court.

5
6
7
8
9

Hunter v. Philip Morris USA, 582 F.3d 1039, 1042 (9th Cir. 2009).
In the instant case, Franklin removed based on federal question jurisdiction – i.e., because

11
For the Northern District of California

United States District Court

10

the state law claims were completely preempted by ERISA. Mr. Sender now argues that, under the

12

Supreme Court’s decision in Beck, once the Plan at issue terminated, he was barred from bringing

13

any ERISA claim and therefore was correct at the outset in asserting only state law claims.

14

C.

15
16
17

Beck
Because Mr. Sender’s motion is predicated entirely on Beck, a brief discussion of the case is

warranted.
In Beck, the employer, Crown, had defined-benefit pension plans for its employees, who

18

were part of a union. In 2000, Crown filed for bankruptcy and proceeded to liquidate its assets. See

19

Beck, 551 U.S. at 98-99. Under ERISA, Crown was allowed to terminate the pension plans

20

voluntarily, and one of the possibilities that Crown considered was a “standard” termination under

21

ERISA which would involve the purchase of annuities. See id. at 99. The union, however,

22

suggested that Crown instead merge the pension plans covering the union members with a different

23

plan – more specifically, a multiemployer plan. In other words, Crown would convey all plan assets

24

to the multiemployer plan, and the multiemployer plan would assume all plan liabilities. See id.

25

Crown decided against the union’s proposal, largely because it learned that it had overfunded

26

certain of the pension plans. This meant that, if Crown terminated the pension plans by purchasing

27

annuities, it would “retain a projected $5 million reversion for its bankruptcy creditors after

28

satisfying its obligations to plan participants and beneficiaries.” Id. In contrast, if Crown were to

3

1

adopt the union’s proposal (i.e., merger), then the $5 million would go to the multiemployer plan.

2

See id. Furthermore, “the Pension Benefit Guaranty Corporation (PBGC), which administers an

3

insurance program to protect plan benefits, agreed to withdraw the proofs of claim it had filed

4

against Crown in the bankruptcy proceedings if Crown went ahead with an annuity purchase.” Id. at

5

99-100. Crown thus consolidated the pension plans into a single plan and terminated that plan

6

through the purchase of a $84 million annuity which fully satisfied its obligations to plan

7

participants and beneficiaries and also allowed it to “reap the $5 million reversion in surplus funds.”

8

Id. at 100.

9

The union and two plan participants filed an adversary action against Crown in the
bankruptcy court, asserting that “Crown’s directors had breached their fiduciary duties under ERISA

11
For the Northern District of California

United States District Court

10

by neglecting to give diligent consideration to [the union’s] merger proposal.” Id. The issue

12

presented to the Supreme Court was “whether an employer that sponsors and administers a single-

13

employer defined-benefit pension plan has a fiduciary obligation under [ERISA] to consider a

14

merger with a multiemployer plan as a method of terminating the plan.” Id. at 98.

15

The Supreme Court held in favor of Crown because, as a matter of law, a merger was not a

16

permissible form of plan termination under ERISA; rather, a merger was an alternative to plan

17

termination. See id. at 106 (noting that a merger “represents a continuation rather than a cessation

18

of the ERISA regime”) (emphasis in original).

19
20
21
22
23
24
25
26
27
28

None of the above has any relevance to the case at bar. However, in reaching the above
holding, the Supreme Court made note that termination and merger were different in that
terminating a plan through purchase of annuities (like terminating
through distribution of lump-sum payments) formally severs the
applicability of ERISA to plan assets and employer obligations. Upon
purchasing annuities, the employer is no longer subject to ERISA’s
multitudinous requirements, such as (to name just one) payment of
insurance premiums to the PBGC . . . . And the PBGC is likewise no
longer liable for the deficiency in the event that the plan becomes
insolvent; there are no more benefits for it to guarantee. The assets of
the plan are wholly removed from the ERISA system, and plan
participants and beneficiaries must rely primarily (if not exclusively)
on state-contract remedies if they do not receive proper payments or
are otherwise denied access to their funds. Further, from the
standpoint of the participants and beneficiaries, the risk associated
with an annuity relates solely to the solvency of an insurance
company, and not the performance of the merged plan’s investments.

4

1
2

Id. (emphasis omitted and added).
Mr. Sender relies on the italicized language above to support his claim that, “once an ERISA

3

qualified retirement plan has been terminated, . . . ERISA no longer applies to disputes that arise

4

thereunder for benefits and state court remedies alone apply.” Mot. at 2. Mr. Sender overreads this

5

dictum. The only point that the Supreme Court was making in Beck was that, where an employer

6

terminates a plan through a purchase of an annuity, and the entity in charge of the annuity fails to

7

make a payment to a plan participant or beneficiary, the plan participant or beneficiary does not have

8

an ERISA claim but rather must seek relief under state contract law (an annuity being in the end a

9

contract). See, e.g., Hallingby v. Hallingby, 574 F.3d 51, 55 (2d Cir. 2009) (stating that, “[w]hen an
employer terminates an employee benefit plan and provides for the payment of benefits by

11
For the Northern District of California

United States District Court

10

purchasing annuities in accordance with [ERISA], the annuities and the benefits they provide are no

12

longer covered by ERISA”; citing Beck in support). The language in Beck was focused on the

13

specific circumstance of termination through purchase of an annuity, a means of termination

14

provided for by statute. See Beck, 551 U.S. at 99 (citing 29 U.S.C. § 1341(b)(3)(A)(i)). Notably, in

15

quoting from Beck, Mr. Sender leaves out the critical language about termination of a plan being

16

effected through the purchase of an annuity. See Mot. at 2 (quoting Beck as follows:

17

“‘[T]erminating a plan . . . formally severs the applicability of ERISA to plan assets and employer

18

obligations’”; the ellipsis leaves out the critical language “through purchase of annuities”).

19

In the case at bar, there is nothing to suggest the Plan was terminated through a purchase of

20

annuities. Indeed, Mr. Sender appears to concede it was not. See Reply at 3 (noting that there was

21

not a purchase of an annuity upon plan termination but rather a lump sum payment of benefits). But

22

Mr. Sender argues that Beck can be read more broadly – i.e., to stay that, where there is a

23

termination of a plan, by whatever means, then ERISA has no more applicability and only state law

24

governs. To be sure, Mr. Sender is not without some support for this position. As he points out, the

25

Supreme Court stated that “terminating a plan through purchase of annuities (like terminating

26

through distribution of lump-sum payments) formally severs the applicability of ERISA to plan

27

assets and employer obligations.” Beck, 551 U.S. at 106 (emphasis added).

28

5

1

Nevertheless, the Court does not agree with Mr. Sender’s contention that any claim that

2

comes after plan termination can be based only on state law and not ERISA. Cf. Wilmington

3

Shipping Co. v. New Eng. Life Ins. Co., 496 F.3d 326, 338 (4th Cir. 2007) (stating that “there is no

4

provision in the [ERISA] statutory scheme that expressly revokes participants’ standing upon

5

termination of the plan”). Whether ERISA or state law controls is largely dependent on when the

6

alleged misconduct at issue took place, i.e., during the existence of the plan or thereafter. If the

7

alleged misconduct took place during the existence of the plan, then, as a general matter, ERISA

8

should control, even if suit is brought after termination. See, e.g., General Produce Distribs. v.

9

Professional Benefit Trust Mult. Employer Welfare Benefit Plan & Trust, No. 08 C 5681, 2009 U.S.
Dist. LEXIS 69194, at *14-15 (N.D. Ill. Aug. 7, 2009) (stating that “Beck in no way suggests that

11
For the Northern District of California

United States District Court

10

plan administrators who breach fiduciary duties during the life of a plan are somehow immunized

12

from liability once the plan terminates[;] [i]ndeed, such a conclusion would be contrary to ERISA’s

13

remedial objectives”). If it is not based on such conduct, state law may control in many, if not most,

14

situations. See Beck, 551 U.S. at 106 (stating that, after a plan terminates through a purchase of an

15

annuity, “plan participants and beneficiaries must rely primarily (if not exclusively) on state-contract

16

remedies if they do not receive proper payments or are otherwise denied access to their funds”).

17

Nonetheless, there are instances in which ERISA still controls even where misconduct takes place

18

after plan termination. See, e.g., Horn v. Berdon, Inc. Defined Ben. Pension Plan, 938 F.2d 125 (9th

19

Cir. 1991) (applying ERISA to a claim for breach of fiduciary duty where, after plan terminated,

20

employer found that there was a surplus – i.e., plan assets exceeded liabilities – and distributed

21

surplus to corporation rather than beneficiaries); see also Vaughn v. Bay Environmental

22

Management, Inc., 567 F.3d 1021, 1027 (9th Cir. 2009) (indicating that, even after plan termination,

23

a plan could be “‘viewed as continuing to exist for the purpose of distributing the equitably vested

24

benefits’”); cf. Gallagher v. Life Ins. Co. of N. Am., No. C 07-05224 SBA, 2008 U.S. Dist. LEXIS

25

119693, at *36-37 (N.D. Cal. Mar. 19, 2008) (stating that plaintiff had a claim for benefits under 29

26

U.S.C. § 1132(a)(1)(B) even though “the Plan no longer exists [as of January 1, 1996]” because “the

27

Plan benefits have flowed to [plaintiff] continuously, since December 5, 1989, through their

28

termination on June 6, 2006”) (emphasis in original).

6

1

Notably, several of the cases cited by Franklin fall in line with the general principle that the

2

timing of the misconduct at issue dictates whether or not ERISA applies. In Vaughn, for example,

3

the plaintiffs claimed that the employer and plan trustees had breached their fiduciary duties

4

because, during the existence of the plans at issue, they had invested the plans’ assets imprudently.

5

See Vaughn, 567 F.3d at 1024. In Peralta v. Hispanic Business, Inc., 419 F.3d 1064 (9th Cir. 2005),

6

the charge was a breach of fiduciary duty on the ground that the employer did not provide notice of

7

termination of a long term disability plan. See id. at 1067-68.

8

Because the timing of the alleged misconduct informs whether or not ERISA is applicable,

alleged misconduct at issue was. A copy of that complaint – the first amended complaint (“FAC”) –

11
For the Northern District of California

the Court evaluates Mr. Sender’s complaint as it stood at the time of removal to determine what the

10

United States District Court

9

is attached to the notice of removal. See Docket No. 1 (FAC).

12

In the FAC, Mr. Sender pleaded the following state law causes of action: (1) a claim for

13

breach of fiduciary duty; (2) a claim for negligence; and (3) a claim requesting an order directing the

14

issuance and delivery of a share certificate pursuant to California Corporations Code § 419(b).

15

Implicitly, the fiduciary duty claim is predicated on misconduct during the existence of the Plan. Cf.

16

Waller v. Blue Cross, 32 F.3d 1337, 1339 (9th Cir. 1994) (“agree[ing] with defendants that

17

participants and beneficiaries of a terminated plan have no standing to seek legal damages for breach

18

of fiduciary duty once the Plan was terminated and Plan liabilities were satisfied”; adding that

19

plaintiffs had “standing to pursue the equitable remedy of a constructive trust to distribute

20

defendants’ allegedly ill-gotten profits to the former participants and beneficiaries”). For that claim,

21

Mr. Sender alleges as follows:

22

23.

Franklin served as a fiduciary with regard to [Mr.] Sender’s
interest in the ESOP. In this capacity, Franklin was obligated
to protect and safeguard [Mr.] Sender’s interests and ensure
that he received all benefits to which he was entitled.

24.

Franklin failed to fulfill its fiduciary obligations owed to [Mr.]
Sender by, inter alia, failing to ensure that [Mr.] Sender
actually received the stock certificates reflecting his interest in
the ESOP and failing to adequately maintain records related to
the ESOP.

23
24
25
26
27

///

28

///

7

1

Docket No. 1 (FAC ¶¶ 23-24). Likewise, the negligence claim is predicated on misconduct during

2

the existence of the Plan. See Docket No. 1 (FAC ¶ 28) (alleging that “Franklin had a duty to use

3

such skill, prudence, and diligence that other fiduciaries of ESOPs commonly possess and exercise”

4

and that “Franklin breached that duty by engaging in the actions, and failures to take action, alleged

5

above”). Importantly, both the fiduciary duty and negligence claims are rooted in duties owed under

6

ERISA, further strengthening this Court’s conclusion that federal ERISA jurisdiction obtains.

7

While the § 419(b) claim seems to be predicated on alleged misconduct that took place post-

8

Plan termination, see Docket No. 1 (FAC ¶ 36) (alleging that Franklin refused [in 2008], and

9

continues to refuse, to issue [Mr.] Sender a new share certificate in place of the original
certificates”), that is immaterial because the fiduciary duty and negligence claims are governed by

11
For the Northern District of California

United States District Court

10

ERISA, which is sufficient to give rise to federal question jurisdiction. Any remaining claim would

12

be covered by supplemental jurisdiction.

13

Of course, when Mr. Sender ultimately repled his claims, he did not choose to make any

14

claim of breach of fiduciary duty under ERISA, see 32 U.S.C. § 1132(a)(2), and instead simply

15

brought a claim for benefits. See id. § 1132(a)(1)(B). Nevertheless, the fact remains that Mr.

16

Sender’s complaint at the time of removal was based on a fiduciary duty theory, and that alleged

17

misconduct was during the existence of the Plan.

18

Accordingly, the Court concludes that Franklin’s removal of the case was proper because, at

19

the very least, Mr. Sender’s fiduciary duty and negligence claims, as pled in the FAC, were

20

preempted by ERISA. Mr. Sender’s motion to remand is therefore denied, and the Court now turns

21

to the two motions filed by Franklin.

22
23
24

II.
A.

MOTION FOR JUDGMENT ON THE PLEADINGS

Factual & Procedural Background
As noted above, in the current operative complaint, i.e., the SAC, Mr. Sender has asserted a

25

single ERISA claim, namely, a claim for benefits pursuant to § 1132(a)(1)(B). After Franklin

26

answered the SAC, the parties began to have disputes about the discovery that Mr. Sender could take

27

in the ERISA case, which then gave rise to the question of whether Franklin was a proper defendant

28

in the case. At a hearing on one of the discovery disputes, the Court instructed Mr. Sender to file an

8

1

amended complaint (Mr. Sender had asked at the hearing for leave to file an amended complaint),

2

after which Franklin would then file a motion to dismiss under Federal Rule of Civil Procedure

3

12(b)(6) and a motion for summary judgment. See Docket No. 70 (civil minutes). Ultimately, Mr.

4

Sender declined to file a third amended complaint, choosing instead to “stand” on the SAC as pled.

5

Docket No. 72 (statement). Franklin accordingly filed the currently pending motion for judgment on

6

the pleadings (as well as the motion for summary judgment).2

two periods of time: (1) from June 1972 to January 1978 and (2) from 1983 to 1989. See SAC ¶ 10.

9

The Plan at issue – an ESOP – was established in 1975 and terminated in 1981.3 See SAC ¶¶ 11-12.

10

At the time that Mr. Sender left employment with Franklin in 1978, the Plan still existed, but it did

11
For the Northern District of California

In his SAC, Mr. Sender alleges as follows. Mr. Sender was an employee of Franklin during

8

United States District Court

7

not allow for immediate distributions to participants younger than 55 years old; accordingly, the

12

benefits that Mr. Sender had accrued from 1975 to 1978 remained in the Plan. See SAC ¶ 11. When

13

Franklin subsequently terminated the Plan, the Plan assets were distributed to participants. See SAC

14

¶ 12. Although Mr. Sender should have received distributions, he did not. According to Mr.

15

Sender, “Franklin has no records demonstrating that the transfer of stock or cash was actually made

16

to, and received by, [him].” SAC ¶ 12 (emphasis in original).

17

In 2007, Mr. Sender received a letter from the Social Security Administration, which advised

18

him that he “may be entitled to pension benefits from Franklin upon retirement.” SAC ¶ 14. Mr.

19

Sender contacted Franklin to pursue the issue. In April 2008, Mr. Sender was “informed that the

20

Franklin Resources, Inc. Administrative Committee had denied [his] claim. The Committee stated

21

that the ‘ESOP records maintained by Franklin clearly indicate that [he] previously received a full

22
23
24
25
26
27
28

2

In his papers, Mr. Sender suggests that Franklin’s motion should be rejected because it does
not comport with the Court’s procedural order which allowed Franklin to file a motion to dismiss
once Mr. Sender amended his complaint. See Opp’n at 2 n.1. This argument is rejected. Mr.
Sender chose not to file an amended complaint; thus, it was fair for Franklin to file the equivalent of
a motion to dismiss (i.e., a motion for judgment on the pleadings) with respect to the complaint that
Mr. Sender chose to “stand” on. Docket No. 72 (statement). Franklin’s motion for judgment on the
pleadings covers the very territory that was discussed during the prior discovery hearings – i.e.,
whether Franklin is a proper defendant in the action.
3

There does not appear to be any dispute that the Plan was actually terminated in 1983, but
termination was retroactively effective as of 1981. See Smith Decl., Exs. M-N (memo from Franklin
to employees, dated 1983, and 1983 tax form).

9

1

distribution of [his] benefits from the ESOP.’” SAC ¶ 16. Mr. Sender disputes this, claiming that

2

there is no evidence that “the stock was ever received or later sold by [him].” SAC ¶ 17.

3

Mr. Sender appealed the Administrative Committee’s decision. In his May 2008 appeal

4

letter, Mr. Sender did not “‘dispute that the Company created a Certificate reflecting his share

5

balance nor that his name[] appeared on the Company’s List of Registered Shareholders.’” SAC ¶

6

18. Mr. Sender asked, however: “‘What evidence, if any, shows that [he] ever received the Stock

7

Certificate reflecting his ESOP shares – what evidence is there that it was delivered.’” SAC ¶ 18.

8
9

Mr. Sender’s appeal was unsuccessful, and so he initiated the instant lawsuit against Franklin
in May 2011. See Docket No. 1 (complaint). As noted above, the case was initiated in state court
but was removed to federal court in August 2011. See Docket No. 1 (notice of removal). This Court

11
For the Northern District of California

United States District Court

10

held that Mr. Sender’s claims were preempted by ERISA, thereby conferring federal jurisdiction,

12

and Mr. Sender eventually filed a SAC which asserted a single claim for relief – i.e., a claim for

13

benefits pursuant to § 1132(a)(1)(B).

14

Significantly, the SAC does not claim that Franklin, as employer, failed to fund the Plan.

15

Rather, the claim is that the Plan failed to distribute the benefits owed under the Plan. In July 2012,

16

during a hearing on one of Mr. Sender’s discovery motions, the following colloquy took place

17

between the Court and Mr. Sender’s counsel, which confirmed the scope of Mr. Sender’s claim.

18

Court:

. . . . [Y]ou’re not alleging that there’s a failure of
Franklin to put the stock into the Plan. It was the
failure of the Plan to then distribute the stock to Mr.
Sender.

Counsel:

Technically that would be correct, your Honor. But
frankly, I think this sort of all amounts to somewhat of
a shell game in terms of these entities. . . .

19
20
21
22
23

Docket No. 75 (Perkins Decl., Ex. B) (Tr. at 6) (emphasis added).

24

B.

Legal Standard

25

Under Federal Rule of Civil Procedure 12(c), “a party may move for judgment on the

26

pleadings” after the pleadings are closed “but early enough not to delay trial.” Fed. R. Civ. P. 12(c).

27

A Rule 12(c) motion is “‘functionally identical’” to a Rule 12(b)(6) motion to dismiss for failure to

28

state a claim, and therefore the same legal standard applies. Cafasso v. General Dynamics C4 Sys.,

10

1

Inc., 637 F.3d 1047, 1055 n.4 (9th Cir. 2011). That is, a court considers “whether the complaint’s

2

factual allegations, together with all reasonable inferences, state a plausible claim for relief.” Id. at

3

1054; see also Johnson v. Rowley, 569 F.3d 40, 44 (2d Cir. 2009) (stating that, “[t]o survive a Rule

4

12(c) motion, the complaint must contain sufficient factual matter, accepted as true, to state a claim

5

to relief that is plausible on its face” (internal quotation marks omitted).

6

C.

7

Franklin’s Motion to Strike (Docket No. 96)
Because a motion for judgment on the pleadings asks a court to make a determination based

e.g., the evidence may be judicially noticed. See Pavlina v. Safeco Ins. Co. of Am., No. 12-CV-534-

10

LHK, 2012 U.S. Dist. LEXIS 159991, at *8 (N.D. Cal. Nov. 6, 2012); North Am. Capacity Ins. Co.

11
For the Northern District of California

on the pleadings alone, evidence outside the pleadings is, as a general matter, not appropriate unless,

9

United States District Court

8

v. Navigators Specialty Ins. Co., No. C 12-01488 RS, 2012 U.S. Dist. LEXIS 144077, at *3 (N.D.

12

Cal. Oct. 4, 2012).

13

In the instant case, both parties have submitted evidence outside the pleadings. Franklin has

14

filed a motion to strike in which it contests some of the evidence submitted by Mr. Sender as

15

evidence that may not be judicially noticed. More specifically, Franklin seeks to strike the

16

following documents:

17

(1)

Exhibits A, E, and F attached to the Kessler declaration, see Docket No. 92 (Kessler Decl.);

18

(2)

the Sender declaration, see Docket No. 90 (Sender Decl.); and

19

(3)

all exhibits attached to the Smith declaration. See Docket No. 79 (Smith Decl.).

20

The motion to strike the Sender declaration and the exhibits attached to the Smith declaration

21

are denied as moot. Those declarations appear to have been offered in conjunction with the motion

22

for summary judgment only, and not the motion for judgment on the pleadings.

23

As for the Kessler declaration, the exhibits at issue are as follows.

24

///

25

///

26

///

27

///

28

///

11

1

1.

2

Exhibit A is an e-mail dated September 4, 2007.4 Its author is Nicole Smith, who appears to

Exhibit A

3

have worked in Franklin’s human resources department at the time. The recipient of the e-mail is

4

Maria Gray.

5

Ms. Smith sent the e-mail to Mr. Gray to “pick[] [her] brain about what trail there could be

6

from a transfer agent or such in tracking down this stock [i.e., the stock that Mr. Sender claims was

7

not distributed to him]. . . . I was hoping that someone with knowledge about stock transactions and

8

transfers and registration could help me figure out where else to look and what questions to ask since

9

we have not had any luck finding the plan files so far.” Kessler Decl., Ex. A (e-mail). In the e-mail,
Ms. Smith noted: “I am obviously concerned about our liability on this” because “they are now

11
For the Northern District of California

United States District Court

10

estimating that the value of the stock in question would now be worth between $32 million and $50

12

million.” Kessler Decl., Ex. A (e-mail).

13

Franklin is correct that this e-mail may not be judicially noticed. First, the e-mail may not be

14

judicially noticed under Federal Rule of Evidence 201. See Fed. R. Evid. 201(b) (providing that a

15

“court may judicially notice a fact that is not subject to reasonable dispute because it: (1) is

16

generally known within the trial court’s territorial jurisdiction; or (2) can be accurately and readily

17

determined from sources whose accuracy cannot reasonably be questioned”). Second, the e-mail

18

may not be judicially noticed pursuant to the Ninth Circuit’s incorporation-by-reference doctrine

19

because Mr. Sender did not necessarily rely upon the e-mail in his complaint or allege the contents

20

of the e-mail in his complaint. See Coto Settlement v. Eisenberg, 593 F.3d 1031, 1038 (9th Cir.

21

2010) (noting that “[w]e have extended the doctrine of incorporation by reference to consider

22

documents in situations where the complaint necessarily relies upon a document or the contents of

23

the documents are alleged in a complaint, the document’s authenticity is not in question and there

24

are no disputed issues as to the document’s relevance”). Third, to the extent Mr. Sender argues that

25

the Court may take judicial notice of the e-mail because it is a part of the administrative record, he

26

has cited only district court case (outside the Ninth Circuit) to show the administrative record in an

27
28

4

As noted above, Mr. Sender claims that he received a notice from the SSA in 2007, which
prompted him to contact Franklin about benefits that he was allegedly owed.

12

1

ERISA case – compiled by a private entity rather than a government body – may be judicially

2

noticed in the context of a Rule 12 motion to dismiss. See Brown v. Walgreens Income Prot. Plan

3

for Store Mgrs., No. 10-14442, 2012 WL 1060093, at *2 (E.D. Mich. Mar. 29, 2012). That case is

4

not binding authority on this Court and, in any event, is not persuasive.

5

While the Court thus declines to take judicial notice of the e-mail, the Court may still have to

6

take the evidence into consideration at some point – more specifically, if the Court were to grant

7

Franklin’s motion for judgment on the pleadings. This is because, if the Court were to grant

8

Franklin’s motion, then it would have to consider whether Mr. Sender should be allowed to amend.

9

See Corner v. Paragon Sys., No. C-12-41752 EMC, 2012 U.S. Dist. LEXIS 151741, at *5-6 (N.D.
Cal. Oct. 22, 2012) (noting that, although Rule 12(c) does not mention leave to amend, courts

11
For the Northern District of California

United States District Court

10

generally have discretion to grant a Rule 12(c) motion with leave to amend). Exhibit A may be

12

considered in that context.

13

2.

14

Exhibit F is an e-mail, dated March 3, 2008. Its author is Brad Huss, who was Franklin’s

Exhibit F

15

outside counsel at the time and who is currently one of the attorneys of record representing Franklin

16

in this lawsuit. The recipient of the e-mail is Ms. Smith, who as noted above appears to have

17

worked in Franklin’s human resources department at the time.

18
19
20
21
22
23
24
25
26
27
28

In the e-mail, Mr. Huss states in relevant part as follows:
I believe that the current plan Administrative Committee is the
best entity to consider and rule on Sender’s claim for benefits and any
appeal that he may file if the claim is denied. The SPD [Summary
Plan Description] for the old ESOP says that the Plan Administrator is
the Plan Administrative Committee and that the Administrative
Committee will process benefit claims when there has been a
termination of employment. The SPD also says that any appeal is to
be presented to the Administrative Committee. The current
Administrative Committee acts for the profit sharing/401(k) plan and
the effective date of that Plan is 10/01/1981. The old ESOP was still
in existence when the profit sharing plan became effective and it is
quite likely that there was only one administrative committee for both
plans and that the current Administrative Committee is the same body
or a successor to it. I doubt that it would be worthwhile to try to
research the literal history of the Committee and its members all the
way back to the early eighties, unless there are readily accessible
minutes for it. Also, the current Committee is the logical choice in
any event as it is the body at Franklin that is performing the analogous
function today.

13

1

Kessler Decl., Ex. F (e-mail) (emphasis added).

2

Consistent with the above, the Court finds that this e-mail may not be judicially noticed

3

either. The e-mail does not meet the requirements of Federal Rule of Evidence 201, and further it

4

was not incorporated by reference into the complaint. However, as above, if the Court does grant

5

Franklin’s motion, then it shall consider the e-mail in determining whether Mr. Sender should be

6

allowed to amend.

7

3.

8

Exhibit E is a document titled “Summary Plan Description” (“SPD”) for the Plan. The SPD

9

notes, inter alia, that:
C

“Every fiscal year . . . the Board of Directors will determine the amount of the Company

11
For the Northern District of California

United States District Court

10

Exhibit E

contribution,” which “may be in Franklin Resources, Inc. Stock or in cash,” Kessler Decl.,

12

Ex. E (SPD at 1);

13

C

14
15

Decl., Ex. E (SPD at 1);
C

16
17

stock and/or cash will be allocated to each participant under a certain formula, see Kessler

“[f]unds to provide benefits under the Plan will be obtained from the Trust fund account,”
Kessler Decl., Ex. E (SPD at 5); and

C

“[a]ll contributions are paid to the Trustee, who is responsible for safe guarding the Plan

18

assets for the benefit of Plan participants and who distributes the funds as provided in the

19

Plan.” Kessler Decl., Ex. E (SPD at 6).

20

In its motion to strike, Franklin argues that the SPD should not be considered in conjunction

21

with its Rule 12(c) motion because, “[a]lthough the Plan document itself is properly incorporated by

22

reference into Plaintiff’s Complaint, the summary plan description does not constitute the terms of

23

the Plan,” as the Supreme Court has expressly held. Docket No. 96 (Mot. at 5); see also CIGNA

24

Corp. v. Amara, 131 S. Ct. 1866, 1878 (2011) (stating that “we conclude that the summary

25

documents, important as they are, provide communication with beneficiaries about the plan, but that

26

their statements do not themselves constitute the terms of the plan for purposes of §

27

[1132](a)(1)(B)”) (emphasis in original). Furthermore, the SPD states on its face that, “[i]n the

28

14

1

event of any conflict between this pamphlet and the legal documents, the provisions of the Plan and

2

Trust Documents will govern.” Kessler Decl., Ex. E (SPD at 6).

3

At the end of the day, the motion is largely moot because Mr. Sender does not really rely on

reliance on the SPD is in footnote 9 of his opposition where, he argues the SPD “is explicit that a

6

claim lies against Franklin for unpaid benefits under the Plan,” Opp’n at 16 n.9 – presumably

7

because the SPD states that “[b]enefits under the Plan are enforceable by law and litigation [may] be

8

used against the Company for enforcement of your claim.” Kessler Decl., Ex. E (SPD at 5)

9

(emphasis added). But even here Mr. Sender concedes that the Plan is ultimately controlling. See

10

Opp’n at 16 n.9 (adding that the SPD “is entirely consistent with the governing Plan documents and

11
For the Northern District of California

the SPD in his opposition to Franklin’s motion. The one place where Mr. Sender does place some

5

United States District Court

4

provides further confirmation that Franklin is a proper party hereto”) (emphasis added).

12

Accordingly, the motion to strike the SPD is denied as moot.

13

D.

14

Cyr
As noted above, the sole claim brought by Mr. Sender is one pursuant to§ 1132(a)(1)(B),

15

which provides that “[a] civil action may be brought . . . by a participant or beneficiary . . . to

16

recover benefits due to him under the terms of his plan [or] to enforce his rights under the terms of

17

the plan.” 29 U.S.C § 1132(a)(1)(B). Mr. Sender has decided not to bring any other ERISA claim,

18

including a claim for breach of fiduciary duty. He only sues to obtain the benefit due under the Plan

19

– shares of Franklin stock. In its motion for judgment on the pleadings, Franklin argues that it is not

20

a proper defendant with respect to Mr. Sender’s § 1132(a)(1)(B) claim. Typically the proper

21

defendant in such a suit is the plan and/or plan administrator, not the employer. See, e.g., Vaughn,

22

567 F.3d at 1028 (9th Cir. 2009) (noting that, “whereas claims under ERISA § [1132](a)(2) can be

23

brought against any fiduciary, ‘the defendant [in an action brought under § [1132](a)(1)(B)] is the

24

plan itself (or plan administrators in their official capacities only)’”).

25

As both parties recognize, the issue of who is a proper defendant for a § 1132(a)(1)(B) claim

26

was most recently addressed by the Ninth Circuit in Cyr v. Reliance Standard Life Insurance Co.,

27

642 F.3d 1202 (9th Cir. 2011). The specific issue before the court was whether parties other than

28

the plan or plan administrator could be sued. The Ninth Circuit began by noting that, “[b]y its terms,

15

1

§ 1132(a)(1)(B) does not appear to limit which parties may be proper defendants in that civil

2

action.” Id. at 1205. The court then pointed out that the Supreme Court had read no limitations as to

3

who could be sued under a similar ERISA provision, see 29 U.S.C. § 1132(a)(3) (providing that “[a]

4

civil action may be brought – . . . by a participant, beneficiary, or fiduciary (A) to enjoin any act or

5

practice which violates any provision of this title or the terms of the plan, or (B) to obtain other

6

appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this title

7

or the terms of the plan”), and therefore no prescribed limitations should be read into §

8

1132(a)(1)(B). See Cyr, 642 F.3d at 1206.

9

Notably, the Ninth Circuit also took into account that, under another provision in ERISA,
“[a]ny money judgment under this title against an employee benefit plan shall be enforceable only

11
For the Northern District of California

United States District Court

10

against the plan as an entity and shall not be enforceable against any other person unless liability

12

against such person is established in his individual capacity under this title.” 29 U.S.C. § 1132(d)(2)

13

(emphasis added). This provision, the court explained, provided support to its conclusion that

14

parties other than the plan or plan administrator could be potential defendants: “The ‘unless’ clause

15

necessarily indicates that parties other than plans can be sued for money damages under other

16

provisions of ERISA, such as § 1132(a)(1)(B), as long as that party’s individual liability is

17

established.” Id. at 1207.

18

In Cyr itself, the plaintiff had brought suit against not only the plan and plan administrator

19

(CTI) but also the insurer of the plan (Reliance). The Ninth Circuit rejected the insurer’s argument

20

that it could not be held liable, explaining that

21
22
23
24
25

[a] plan administrator can be an entity that has no authority to resolve
benefit claims or any responsibility to pay them. In this case, for
example, CTI was identified as the plan administrator, but it had
nothing to do with denying [plaintiff’s] claim for increased benefits.
Reliance [the insurer] denied [plaintiff’s] request for increased benefits
even though, as the plan insurer, it was responsible for paying
legitimate benefits claims. Reliance is, therefore, a logical defendant
for an action by [the plaintiff] to recover benefits due to her under the
terms of the plan and to enforce her rights under the terms of the plan,
which is precisely the civil action authorized by § 1132(a)(1)(B).

26
27

Id. at 1207 (emphasis added).

28

16

1

Thus, under Cyr, the question for a court is who is a logical defendant for a claim brought

2

pursuant to § 1132(a)(1)(B). In determining who is a logical defendant, a court considers who has

3

authority to resolve benefit claims or who has responsibility to pay them. See id.

4

1.

5

Although Mr. Sender claims that Franklin had the authority to resolve benefit claims, that is

Authority to Resolve Benefit Claims

6

not supported by the Plan document. The Plan document on its face states that the entity to

7

administer the Plan is the Plan Committee – not Franklin.5 See Kessler Decl., Ex. B (Plan ¶¶ 8.01,

8

8.03) (providing that “[t]he Plan shall be administered by the Plan Committee,” and that “[t]he Plan

9

Committee shall have power and authority: (1) To perform all acts and do all things necessary to
carry out this Plan and the intent and purposes thereof”).

11
For the Northern District of California

United States District Court

10

In his papers, Mr. Sender claims that the Plan Committee is really just an internal committee

12

within Franklin, see Opp’n at 15 (asserting that “[t]his is a committee within Franklin like any other

13

management committee”), but there are no allegations in the SAC to this effect. Indeed, the Plan

14

Committee may simply have been a committee within the Plan itself – a legally distinct entity from

15

Franklin, see 29 U.S.C. § 1132(d)(1) (noting that a “plan may sue or be sued under this title as an

16

entity”); see also Washington-Baltimore Newspaper Guild Local 35 v. Washington Star Co., 543 F.

17

Supp. 906, 910 (D.D.C. 1982) (in case evaluating a claim of privilege, noting that ERISA

18

“established, in clear and unmistakable terms, that a pension fund is an independent entity, separate

19

from the employer” and that, “despite an employer’s close involvement with and funding of the

20

Plan, it nevertheless exists as a fully separate legal entity”) – not a committee of Franklin.

21

Mr. Sender suggests that the Plan Committee was an internal committee within Franklin

22

because the Plan Committee members were appointed by Franklin’s board of directors and at least

23

one of the members had to be a Franklin officer. Furthermore, Franklin was required to “indemnify

24
25
26
27
28

5

Because the Plan document on its face identifies a plan administrator, Mr. Sender’s
argument that Franklin – as the plan sponsor – should be deemed the “default” plan administrator is
without merit. See Opp’n at 15 (citing 29 U.S.C. § 1002(16)(A), which provides that “[t]he term
‘administrator’ means – (i) the person specifically so designated by the terms of the instrument
under which the plan is operated; (ii) if an administrator is not so designated, the plan sponsor; or
(iii) in the case of a plan for which an administrator is not designated and a plan sponsor cannot be
identified, such other person as the Secretary may by regulation prescribe”) (emphasis added).

17

1

and hold harmless each member of the Plan Committee . . . arising from any act or omission of such

2

member, except when the same is judicially determined to be due to the gross negligence or willful

3

misconduct of such member.” See Kessler Decl., Ex. B (Plan ¶¶ 8.01, 8.08). Nonetheless, these

4

provisions do not establish a plausible claim that the Plan Committee was an internal committee

5

within Franklin.6 See Bell Atl. v. Twombly, 550 U.S. 544, 557 (2007) (stating that there is a “need at

6

the pleading stage for allegations plausibly suggesting (not merely consistent with) agreement [i.e.,

7

conspiracy]”) (emphasis added).

8

Of course, even if Mr. Sender could make a plausible showing that Franklin was the plan

or otherwise had the authority to resolve benefit claims, there is a bigger obstacle before him. Even

11
For the Northern District of California

administrator (i.e., because the Plan Committee was just an internal committee within the company)

10

United States District Court

9

if Franklin were the decisionmaker for the Plan, it does not necessarily follow that it should have to

12

pay benefits out of its own pocket simply because of this decisionmaking authority. As the Seventh

13

Circuit has noted, “[t]he proper defendant in a suit for benefits under an ERISA plan is . . . normally

14

the plan itself, rather than the plan administrator, because the plan is the obligor[;] [t]o sue the

15

administrator for benefits is like suing a corporation’s CEO to collect a corporate debt.” Feinberg v.

16

RM Acquisition, LLC, 629 F.3d 671, 673 (7th Cir. 2011) (noting that “[t]he proper defendant in a

17

suit for benefits under an ERISA plan is . . . normally the plan itself, rather than the plan

18

administrator, because the plan is the obligor[;] [t]o sue the administrator for benefits is like suing a

19

corporation’s CEO to collect a corporate debt”).

20

The Seventh Circuit’s statement is consistent with Ninth Circuit law. As noted above, in

21

Cyr, the Ninth Circuit stated that “parties other than plans can be sued for money damages under . . .

22

§ 1132(a)(1)(B), as long as that party’s individual liability is established.” Cyr, 642 F.3d at 1207

23

(emphasis added). And prior to Cyr, the Ninth Circuit has noted that a § 1132(a)(1)(B) claim is

24
25
26
27
28

6

To the extent Mr. Sender suggests that the Huss e-mail (Exhibit F attached to the Kessler
declaration, which Franklin argues should be stricken) lends support to his position because it states
that “the current [Plan] Committee is the logical choice [to decide Mr. Sender’s] claim as it is the
body at Franklin that is performing the analogous function today.” Kessler Decl., Ex. F (e-mail)
(emphasis added), that argument has little merit. First, the e-mail speaks as to the plan administrator
for the plan that succeeded the Plan at issue; second, the e-mail is simply a statement made by
outside counsel.

18

1

generally brought against a plan or plan administrator acting in its official capacity. See Vaughn567

2

F.3d at 1028 (noting that, “whereas claims under ERISA § [1132](a)(2) can be brought against any

3

fiduciary, ‘the defendant [in an action brought under § [1132](a)(1)(B)] is the plan itself (or plan

4

administrators in their official capacities only)’”); see also Evans v. Akers, 534 F.3d 65, 72 (1st Cir.

5

2008) (stating that, “[w]hereas a suit ‘to recover benefits’ under § 502(a)(1)(B) is brought against

6

the plan itself (or the plan administrators in their official capacities), a suit brought under § 502(a)(2)

7

seeks to hold the plan’s fiduciaries liable in their personal capacities for breaches of their duty to the

8

plan”); Graden v. Conexant Sys. Inc., 496 F.3d 291, 301 (3d Cir. 2007) (stating that, “[i]n a §

9

1132(a)(1)(B) claim, the defendant is the plan itself (or plan administrators in their official
capacities only)”). Here, Mr. Sender does not assert a claim of individual liability for, e.g., breach

11
For the Northern District of California

United States District Court

10

of fiduciary duty. Rather, as noted above, he is only suing to collect benefits allegedly owed. Thus,

12

even assuming that Franklin was the decisionmaker for the Plan, that would simply mean (as

13

Franklin argues) that, at best, it would be ordered to make a benefits decision favorable to Mr.

14

Sender, should he prevail on the merits. Thus, ultimately, the question comes down to who has the

15

responsibility to actually pay benefits. As discussed below, Mr. Sender has failed to establish in the

16

SAC that Franklin qua employer has that responsibility.

17

2.

18

Although Mr. Sender argues to the contrary, the person or entity responsible to pay benefit

Responsibility to Pay Benefit Claims

19

claims was the Plan/Trust. The fact that Franklin was obligated, as the employer, to make

20

contributions to the Plan/Trust, see Kessler Decl., Ex. B (Plan ¶¶ 3.01-.02) (providing that Franklin

21

shall make a contribution each year and that “[t]he Employer’s contribution for each year shall be

22

paid to the Trustee”), does not gainsay the fact that the contributions were then held by the

23

Plan/Trust. Both the Plan and Trust documents make this clear. See Kessler Decl., Ex. B (Plan ¶

24

4.04) (providing that, “[o]n each Anniversary Date the Employer’s annual contribution . . . shall be

25

allocated to the Participants’ Investment Accounts and Stock Accounts as follows . . . .”); Kessler

26

Decl., Ex. D (Trust Agreement ¶ 1.01) (providing that “Employer contributions shall be paid to the

27

Trustee from time to time in accordance with the Plan” and that “[a]ll Employer contributions

28

hereafter made . . . shall be held by the Trustee in trust hereunder as the Trust assets”). Compare

19

1

Leister v. Dovetail, Inc., 546 F.3d 875, 879 (7th Cir. 2008) (noting that “benefits are an obligation of

2

the plan, so the plan is the logical and normally the only proper defendant[,] [b]ut in cases such as

3

this, in which the plan has never been unambiguously identified as a distinct entity, we have

4

permitted the plaintiff to name as defendant whatever entity or entities, individual or corporate,

5

control the plan”) (emphasis added).

6

To the extent Mr. Sender argues that the SPD (Exhibit E to the Kessler declaration, which

7

Franklin argues should be stricken) establishes that “a claim lies against Franklin for unpaid benefits

8

under the Plan,” Opp’n at 16 n.9, that argument is without merit. Although the SPD states that

9

“[b]enefits under the Plan are enforceable by law and litigation [may] be used against the Company
for enforcement of your claim.” Kessler Decl., Ex. E (SPD at 5) (emphasis added), the document

11
For the Northern District of California

United States District Court

10

also states that “[f]unds to provide benefits under the Plan will be obtained from the Trust fund

12

account.” Kessler Decl., Ex. E (SPD at 5). Furthermore, the SPD states on its face that, “[i]n the

13

event of any conflict between this pamphlet and the legal documents, the provisions of the Plan and

14

Trust Documents will govern.” Kessler Decl., Ex. E (SPD at 6). As noted above, the Plan and Trust

15

documents both indicate that contributions are made by Franklin to the Plan/Trust and that the

16

Plan/Trust then holds those contributions on behalf of the beneficiaries.

17

Given the fact that the Plan/Trust takes control of the contributions from Franklin, the only

18

person or entity who could be commanded to give up the contributions to Mr. Sender in the instant

19

case (should he prevail) is the Plan/Trust. Arguably, if Franklin had failed to make contributions to

20

the Plan/Trust as required by the Plan and Trust documents, then Mr. Sender should be entitled to

21

get a remedy from Franklin. But as Franklin points out and as noted above, at a hearing before this

22

Court, Mr. Sender specifically conceded that Franklin had made the necessary contributions to the

23

Plan/Trust; it was simply the failure of the Plan/Trust to then deliver the contributions to him.

24

Court:

. . . . [Y]ou’re not alleging that there’s a failure of
Franklin to put the stock into the Plan. It was the
failure of the Plan to then distribute the stock to Mr.
Sender.

Counsel:

Technically that would be correct, your Honor. But
frankly, I think this sort of all amounts to somewhat of
a shell game in terms of these entities. . . .

25
26
27
28

20

1

Docket No. 75 (Perkins Decl., Ex. B) (Tr. at 6) (emphasis added). Mr. Sender also effectively made

2

this concession in his SAC. See SAC ¶ 18 (quoting from Mr. Sender’s appeal of the Administrative

3

Committee decision as follows: “‘[Sender] does not dispute that the Company created a Certificate

4

reflecting his share balance nor that his name[] appeared on the Company’s List of Registered

5

Shareholders’”). Because Mr. Sender’s allegations comes down to a claim that the Plan/Trust did

6

not deliver the stock to him, Mr. Sender must look to the Plan/Trust for relief, and not Franklin.

7

To the extent an argument could be made that, even if Mr. Sender were obligated to look to

made any specific allegations to support this theory in his SAC.7 More important, at the hearing,

10

Mr. Sender explicitly disavowed reliance on an alter ego or “piercing the veil” theory. Mr. Sender

11
For the Northern District of California

the Plan/Trust for relief, the Plan/Trust is really just an alter ego for Franklin, Mr. Sender has not

9

United States District Court

8

expressly argued that he did not need to rely on such a theory because the Plan Committee was just

12

an internal committee within Franklin. He proffered no basis for asserting alter ego.

13

Finally, to the extent Mr. Sender argues that Franklin should be held liable because he

14

otherwise would be deprived of a remedy for a wrong, that argument is unpersuasive. As Franklin

15

points out, ERISA does not always provide a remedy for a wrong. See, e.g., Peralta v. Hispanic

16

Business, Inc., 419 F.3d 1064, 1073 (9th Cir. 2005) (in case where plaintiff sued her employer, also

17

the plan administrator, for a breach of fiduciary duty under ERISA (i.e., § 1132(a)(2)), noting that,

18

“[i]n this case, there is no possibility that [plaintiff] can recover any benefits under the now-defunct

19

plan pursuant to § 1132(a)(1)(B)”) (emphasis added); see also Evans, 534 F.3d at 72-73 (taking note

20

that a plan may be liable under § 1132(a)(1)(B) but nevertheless may still be judgment proof – e.g.,

21

because “ERISA’s fiduciary obligations prevent plans from paying judgments out of funds allocable

22

to other participants”; thus noting that, “for most plaintiffs the sensible route is to use § 1132(a)(2)

23
24
25
26
27
28

7

Presumably, an alter-ego theory may be made even under ERISA law. See Carter v. Health
Net of Cal., Inc., 374 F.3d 830, 839 (9th Cir. 2004) (rejecting party’s complaint that arbitrator
improperly favored California law over federal law on alter ego determinations because “‘it is well
settled that when ERISA is silent on an issue, we may turn to state law to fashion the appropriate
federal common-law rule’”); Seide v. Crest Color, 835 F. Supp. 732, 736-37 (S.D.N.Y. 1993)
(stating that “federal law ‘gives less deference to the corporate form than does the strict alter ego
doctrine of state law, and that ‘courts have without difficulty disregarded form for substance where
ERISA’s effectiveness would otherwise be undermined’”). However, none was made here.

21

1

[i.e., breach of fiduciary duty] to get the money in the first instance from a solvent party liable to

2

make good on the loss, not from the plan itself”).

3

3.

4

Based on the above, the Court grants Franklin’s motion for judgment on the pleadings. Even

Immaterial Arguments

5

if Franklin were the plan administrator or otherwise had the authority to resolve benefit claims, that

6

decisionmaking authority alone does mean that it should be obligated to pay benefits out of its own

7

pocket, assuming that Mr. Sender will prevail on the merits. The Plan and Trust documents show

8

that the real party who would be obligated to give stock or otherwise make payments to Mr. Sender

9

(should he prevail) is the Plan/Trust itself, which is now defunct.
The remaining arguments made by Mr. Sender in his opposition brief do not alter this

11
For the Northern District of California

United States District Court

10

conclusion. For example, the fact that the current plan’s Administrative Committee accepted Mr.

12

Sender’s claim in 2007 and then denied it8 does not mean that Franklin should be obligated to pay.

13

Even if that Administrative Committee is an internal committee within Franklin, that does not mean

14

that Franklin was legally responsible to pay benefits owed by the Plan. As for Mr. Sender’s

15

contention that Franklin admitted liability in its answer or waived its right to assert the defense that

16

it is not the proper defendant, that argument is entirely without merit. In its answer,9 Franklin

17

asserted a number of affirmative defenses, including failure to state a claim, “[t]he relief Sender

18

seeks against Franklin is not available under ERISA,” and “Sender’s remedies are limited to those

19

provided by ERISA.” Docket No. 34 (first, ninth, and tenth affirmative defenses).

20
21
22
23
24
25
26
27
28

8

Franklin fairly points out that the current plan Administrative Committee might well have
taken up Mr. Sender’s claim simply so that it could not be charged with a violation of ERISA for not
reviewing the claim. See Reply at 11. Even if the Administrative Committee had found Mr. Sender
correct in that he did not receive the benefit (stock) owed under the Plan, that would not have
empowered the Committee to remedy the situation, given the nonexistence of the Plan and the
absence of any claim of breach of fiduciary duty.
9

This appears to have been the first answer that Franklin made in the action, whether in state
or federal court. At the very least, this was the first answer that Franklin made to an ERISA claim, as
asserted by Mr. Sender.

22

1

E.

Amendment

2

As the Court is granting Franklin’s motion, the only remaining question is whether it should

3

permit Mr. Sender to amend his complaint. Based on the evidence of record, any amendment would

4

be futile. As noted above, even if Franklin was the plan administrator (by virtue of the Plan

5

Committee being an internal committee within the company) or otherwise had the authority to

6

resolve benefit claims, the bottom line is that the person or entity who should pay out is the

7

Plan/Trust, and not Franklin. The exhibits attached to the Kessler declaration, including the Smith

8

e-mail and the Huss e-mail, at most reflect Franklin’s concern that it could be held liable. They do

9

not change the fact that the Plan/Trust no longer exists. Because amendment would be futile, the
Court grants Franklin’s motion for judgment on the pleadings and dismisses Mr. Sender’s claim with

11
For the Northern District of California

United States District Court

10

prejudice.

12

III.

MOTION FOR SUMMARY JUDGMENT

13

Because the Court is granting Franklin’s motion for judgment on the pleadings, it need not

14

address Franklin’s motion for summary judgment. Nevertheless, the Court has decided to address

15

the motion as it provides an independent ground for dismissal. In the motion, Franklin argues that it

16

is entitled to summary judgment because there is no genuine dispute of material fact that Mr.

17

Sender’s ERISA claim is barred by the statute of limitations and/or laches.

18

A.

Factual & Procedural Background

19

In his sole claim for benefits under ERISA, see 29 U.S.C. § 1132(a)(1)(B), Mr. Sender

20

maintains that he never received stock to which he was entitled under the then-existing ESOP.

21

The parties do not appear to dispute that Mr. Sender was an employee of Franklin and that he

22

worked for Franklin (1) from approximately June 1972 to January 1978 and (2) from approximately

23

1983 to 1989. See SAC ¶ 10; Ans. ¶ 10. The parties also do not appear to dispute that there was an

24

ESOP in existence during Mr. Sender’s first stint of employment with Franklin, which was

25

established in 1975 and which terminated in 1983, albeit retroactively effective as of 1981. See

26

SAC ¶¶ 11-12; Ans. ¶¶ 11-12; Smith Decl., Exs. —N (memo from Franklin to employees, dated

27

1983, and 1983 tax form). Finally, the parties do not appear to dispute that Mr. Sender was entitled

28

to stock through the ESOP and that the stock to which he was entitled (at or about the time the Plan

23

1

was terminated) constituted 1,450 shares. See Smith Decl., Ex. A (stock certificate); SAC ¶ 18

2

(quoting from May 2008 appeal to Administrative Committee as follows: “‘[Sender] does not

3

dispute that the Company created a Certificate reflecting his share balance nor that his name[]

4

appeared on the Company’s List of Registered Shareholders’”). What is in dispute is whether Mr.

5

Sender was actually given those shares. Mr. Sender maintains that the stock certificate was never

6

actually given to him; Franklin asserts to the contrary.

7

For purposes of the motion for summary judgment, the Court assumes that Mr. Sender never

summary judgment because Mr. Sender should have brought his claim for the stock certificate far

10

earlier. According to Franklin, to comply with the statute of limitations, Mr. Sender should have

11
For the Northern District of California

actually got the stock certificate. Franklin argues that, nevertheless, it should still be entitled to

9

United States District Court

8

filed suit, at the latest, by 1988 because he knew – or at least should have known – back in the 1982-

12

84 time period that he was entitled to the stock under the Plan but that the stock had not been

13

delivered to him.10 Franklin points to evidence reflecting that, during the 1982-84 time period, Mr.

14

Sender had received benefits from the stock that should have made clear to him his entitlement to

15

the stock. In particular, Mr. Sender voted proxy cards for 1,470 shares of stock (1,450 shares from

16

the ESOP and 20 shares that Mr. Sender already owned) and further received dividends for the 1,470

17

shares of stock, as reported on his tax returns. In addition to the statute of limitations, Franklin

18

contends that the doctrine of laches is an independent bar to Mr. Sender’s claim for relief.

19

In opposition, Mr. Sender claims that, during his first period of employment with Franklin,

20

he was never even aware that the ESOP existed and that, at best, there was only a “short comment”

21

made to him in passing (by Phil Scatena of Franklin) when he left in 1978 that he “may be entitled to

22

a retirement benefit from a retirement plan” but that “such benefit would not be available to [him]

23
24
25
26
27
28

10

The parties agree that there is a four-year statute of limitations for Mr. Sender’s ERISA
claim. See Mot. at 12 (noting that, because ERISA does not contain a statute-of-limitations
provision, courts look to analogous state law and, under California law, there is a four-year statute of
limitations for claims of breach of a written contract); Opp’n at 14 (agreeing); Withrow v. Bache
Halsey Stuart Shield, Inc., 655 F.3d 1032, 1036 (9th Cir. 2011) (applying California’s four-year
statute of limitations for contract disputes to an ERISA claim brought pursuant to § 1132(a)(1)(B)).

24

1

until [he] reached retirement age.” Sender Decl. ¶ 5. Mr. Sender also claims that he was never

2

informed that the Plan was terminated.11 See Sender Decl. ¶ 3.

3

Mr. Sender discounts Franklin’s evidence that he voted proxy cards and received dividends

4

in the 1982-84 period on two grounds: (1) because, during that time, he also owned company stock

5

independent of any ESOP and (2) because, even if he knew or should have known that he was voting

6

on or getting dividends on ESOP stock, that does not mean that he should therefore have sought

7

delivery of the stock because he had those rights even without delivery – i.e., he still had no

8

expectation that the stock itself should be available to him any earlier than retirement. See Docket

9

No. 105 (Opp’n to Mot. to Strike at 5) (arguing that “Plaintiff would have received dividends and
proxy cards whether the stock was in the trust account waiting for his retirement decades hence, or if

11
For the Northern District of California

United States District Court

10

it had been distributed to a share certificate in 1982”).

12

B.

13

Legal Standard
Federal Rule of Civil Procedure 56(a) provides a court shall grant summary judgment to the

14

moving party “if the movant shows that there is no genuine dispute as to any material fact and the

15

movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). An issue of fact is genuine

16

only if there is sufficient evidence for a reasonable jury to find for the nonmoving party. See

17

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986). “The mere existence of a scintilla of

18

evidence . . . will be insufficient; there must be evidence on which the jury could reasonably find for

19

the [nonmoving party].” Id. at 252. At the summary judgment stage, evidence must be viewed in

20

the light most favorable to the nonmoving party and all justifiable inferences are to be drawn in the

21

nonmovant’s favor. See id. at 255.

22

Where the plaintiff has the ultimate burden of proof, the defendant may prevail on a motion

23

for summary judgment simply by pointing to the plaintiff’s failure “to make a showing sufficient to

24

establish the existence of an element essential to [the plaintiff’s] case.” Celotex Corp. v. Catrett,

25

477 U.S. 317, 322 (1986). However, where a defendant moves for summary judgment based on an

26

affirmative defense for which it has the burden of proof – such as the statute of limitations – the

27
28

11

As discussed below, Franklin has moved to strike the Sender declaration.

25

1

defendant “must establish beyond peradventure all of the essential elements of the . . . defense to

2

warrant judgment in [its] favor.” Martin v. Alamo Cmty. College Dist., 353 F.3d 409, 412 (5th Cir.

3

2003) (internal quotation marks and emphasis omitted); see also Clark v. Capital Credit &

4

Collection Servs., 460 F.3d 1162, 1177 (9th Cir. 2006) (noting that a defendant bears the burden of

5

proof at summary judgment with respect to an affirmative defense).

6

C.

Franklin’s Motion to Strike (Docket No. 98)

7

Before the Court may address the merits of Franklin’s motion for summary judgment, it must

8

first resolve Franklin’s motion to strike, as that will inform what evidence the Court may consider in

9

conjunction with the summary judgment motion. In its motion to strike, Franklin argues that the
Court should disregard the declaration submitted by Mr. Sender – in its entirety or, at the very least,

11
For the Northern District of California

United States District Court

10

in part.

12

To the extent Franklin argues that the declaration should be stricken in its entirety, the Court

13

does not agree. Franklin takes the position that the Court should ignore the Sender declaration

14

because it was not part of the administrative record. But as the summary judgment motion is not

15

addressing the merits of the administrative decision – as Franklin readily admits, see Docket No. 111

16

(Reply ISO Mot. to Strike at 3) (stating that the summary judgment motion “does not involve the

17

merits of Plaintiff’s claim for benefits”) – and thus the Court may look outside of the administrative

18

record to resolve this motion.

19

In the alternative, Franklin argues that the Sender declaration should be stricken in part: (1)

20

because it contains information that is not relevant for purposes of the summary judgment motion

21

and (2) because it contains “patently false” information. Docket No. 98 (Mot. to Strike at 7). As to

22

the first argument, Franklin is technically right. The Sender declaration contains many statements to

23

the effect that Mr. Sender did not actually receive the stock, but that is a merits issue; for purposes of

24

the summary judgment motion, the Court is assuming that Mr. Sender did not in fact (as he claims)

25

actually get the stock. Even so, Franklin has not cited to any authority establishing that the Court is

26

required to strike such statements. Even Federal Rule of Civil Procedure 12(f), which applies to

27

pleadings and not declarations, provides that a “court may strike . . . an insufficient defense or any

28

redundant, immaterial, impertinent, or scandalous matter.” Fed. R. Civ. P. 12(f) (emphasis added).

26

1

The Court does not see any purpose in striking the irrelevant information because there is no

2

prejudice to Franklin.

3

As to the second argument, it does not matter whether or not the Court strikes the allegedly

4

false statement in the Sender declaration. In his declaration, Mr. Sender stated that he “provided all

5

information in my possession that was requested by Franklin in the course of its administrative

6

review.” Sender Decl. ¶ 10. Franklin claims the statement was false because Mr. Sender failed, at

7

least during the administrative review, to provide copies of his tax returns for the years 1982 and

8

1984. Because this statement has no relevance to the merits of the summary judgment motion, the

9

motion to strike is moot.
D.

11
For the Northern District of California

United States District Court

10

Accrual of Claim
As noted above, the parties agree that there is a four-year statute of limitations for Mr.

12

Sender’s § 1132(a)(1)(B) claim. See note 1, supra. The parties disagree, however, as to when that

13

claim accrued.

14

Under Ninth Circuit law, “‘an ERISA cause of action accrues either at the time benefits are

15

actually denied or when the insured has reason to know that the claim has been denied.’” Chuck v.

16

Hewlett Packard Co., 455 F.3d 1026, 1031 (9th Cir. 2006) (emphasis added). As to the latter prong,

17

the Ninth Circuit has emphasized that

18

[a] participant need not file a formal application for benefits before
having “reason to know” that his claim has been finally denied.
Instead, a cause of action accrues when a pension plan communicates
“a clear and continuing repudiation” of a claimant’s rights under a
plan, such that the claimant could not have reasonably believed but
that his benefits had been “finally denied.”

19
20
21

///

22

///

23

///

24

///

25

///

26

///

27

///

28

///

27

a denial of a claim’ may trigger the statute of limitations by clearly alerting the plaintiff that his

3

entitlement to benefits has been repudiated.” Miller v. Fortis Benefits Ins. Co., 475 F.3d 516, 521

4

(3d Cir. 2007) (also stating that there may be repudiation other than through a formal denial “when a

5

beneficiary knows or should know he has a cause of action”). Courts have explained that an event

6

other than a denial of a claim should be enough to trigger to the statute of limitations because “[i]t

7

seems obvious” that a plaintiff should not be able to “indefinitely extend the statute of limitations by

8

indefinitely delaying the filing of a claim for benefits.” Blakely v. Caterpillar, Inc., No. 09-CV-

9

1318, 2010 U.S. Dist. LEXIS 51457, at *6 (C.D. Ill. Mar. 8, 2010); see also Scruggs v. ExxonMobil

10

Pension Plan, No. CIV-06-0465-F, 2008 U.S. Dist. LEXIS 49597, at *13-14 (W.D. Okla. June 30,

11
For the Northern District of California

Id. (emphasis added); see also Withrow, 655 F.3d at 1036.12 “In other words, some ‘event other than

2

United States District Court

1

2008) (rejecting plaintiff’s argument that there must be a claim for benefits and a denial in order for

12

a claim to accrue because this would mean that “so long as the prospective plaintiff never sought

13

benefits so that her claims were never denied, the limitations period would never begin to run on her

14

benefit claims”).

15
16

Mr. Sender argues that, under the above Ninth Circuit standard, his claim did not accrue until
December 2008 – when the current plan’s Administrative Committee denied his appeal. In turn,

17
18
19
20
21
22
23
24
25
26
27

12

Other circuit courts have ruled similarly. For example, in Romero v. Allstate Corp., 404
F.3d 212 (3d Cir. 2003), the Third Circuit noted as follows:
Under the general formulation of the discovery rule, a claim will
accrue when the plaintiff discovers, or with due diligence should have
discovered, the injury that forms the basis for the claim. The rule that
has developed in the more specific ERISA context is that an ERISA
non-fiduciary duty claim will accrue after a claim for benefits due
under an ERISA plan has been made and formally denied.
Occasionally, however, an ERISA non-fiduciary claim will accrue
before a formal application is made and/or before benefits are formally
denied, such as “when there has been a repudiation [of the benefits] by
the fiduciary which is clear and made known to the beneficiary.” This
“clear repudiation” concept is consistent with the federal discovery
rule and, in the specific context of ERISA, avoids a myriad of ills that
would accompany any rule that required the denial of a formal
application for benefits before a claim accrues.
Id. at 222-23 (emphasis omitted and added).

28

28

1

Franklin argues that, under this standard, his claim accrued in the 1982-84 period because, during

2

that time, he knew that he was getting stock-related benefits (i.e., the right to vote proxy cards and

3

get dividends) but that he had not actually been delivered the stock itself. Mr. Sender responds that,

4

under the Plan/Trust, he was entitled to voting rights and dividends without the stock actually being

5

delivered to him (i.e., while the stock remained in the Plan/Trust). Mr. Sender also argues that, to

6

the extent he was getting voting rights and dividends, he thought that was for the company stock that

7

he owned independent of the ESOP. Those two issues are addressed below.

8

E.

9

Voting and Dividends
For purposes of the summary judgment motion, the Court accepts Mr. Sender’s claim that he

did not know about any ESOP for his first term of employment with Franklin until a passing

11
For the Northern District of California

United States District Court

10

reference about one was made when he left employment for the first time – and even then the

12

reference suggested that he would get benefits under the Plan only at retirement. The Court also

13

accepts Mr. Sender’s claim that he did not know, during the relevant period, that the ESOP was

14

actually terminated in the early 1980’s.

15

Accepting that the above constituted Mr. Sender’s actual knowledge, the Court must then

16

focus on the issue of Mr. Sender’s constructive knowledge – i.e., should he have known that he was

17

getting benefits prior to retirement, which would put him on notice that he did not have to wait until

18

retirement to obtain the stock.

19

Franklin takes the position that, when Mr. Sender got the right to vote proxy cards and

20

received dividends or distributions in the 1982-84 period, then he should have known that he was

21

getting benefits and should have had the stock along with those benefits.13 In response, Mr. Sender

22
23
24
25
26
27
28

13

As noted above, it appears undisputed that the stock certificate that Mr. Sender allegedly
should have been given back in the early 1980’s from the Plan/Trust constituted 1,450 shares of
stock. See Smith Decl., Ex. A (stock certificate, dated 8/4/1982). It also appears undisputed that
Mr. Sender also had 20 shares of company stock independent of the ESOP stock, see Smith Decl.,
Ex. F (Bank of New York document, dated 1/31/1982, reflecting 16 shares in account 00401200-1);
Smith Decl., Ex. Z (reflecting stock split which would increase shares from 16 to 20); see also Mot.
at 7 n.4, for a total of 1,470 shares of stock (back in the early 1980’s). See Smith Decl., Ex. G (Bank
of New York document, dated 2/14/1983, reflecting 1,470 shares in account 00401200-1).
Franklin has submitted evidence that, at the very least, Mr. Sender exercised his voting rights
on the account that held the 1,470 shares of stock in 1983. See Smith Decl., Ex. I (proxy card for
account 004012001, dated 2/18/1983). Franklin has also submitted evidence indicating that Mr.

29

1

has two arguments: (1) he did not know that the right to vote and dividends/distributions were

2

related to the ESOP stock because he also owned company stock outside of the ESOP, and thus he

3

was not necessarily alerted that he had the benefit of the ESOP shares, see Sender Decl. ¶ 14, and (2)

4

even if he should have known that the right to vote and dividends/distributions were related to the

5

ESOP stock, he still had no reason to seek delivery of the stock at that time because he was entitled

6

to those rights even without actual delivery of the stock (i.e., he was entitled to those rights even

7

while the stock remained in the Plan/Trust).

There is no dispute that Mr. Sender did own company stock outside of the ESOP. But the

10

bulk of this “other” company stock consisted of shares that Mr. Sender purchased from Franklin’s

11
For the Northern District of California

1.

9

United States District Court

8

former chairman of the Board, Lou Jamison, see Sender Decl. ¶ 13, and these “Jamison shares” were

12

not held by Mr. Sender individually – as were the ESOP shares – but rather were held by him and

13

his wife jointly. The Jamison shares held jointly by Mr. Sender and his wife were in a different

14

account from the shares of company stock that he held individually. Mr. Sender separated out

15

dividends on the jointly owned Jamison stock from the dividends on the stock he held individually

16

as reflected in his tax returns which drew a distinction between the two tranches of stock. See Smith

17

Decl., Ex. K (FRI/SEN 000933). He also received and signed separate and distinct proxy cards for

18

the stock he held as an individual and for the Jamison stock that he jointly owned with his wife. See

19

Smith Decl., Exs. I-J (two different proxy cards for two different accounts, one held by Mr. Sender

20

alone and one held by Mr. Sender and his wife). These proxies clearly denominated the difference

21

in ownership. Through his actions, Mr. Sender recognized the distinction between the Jamison stock

22

held with his wife and his other stock owned individually. See also Sender Decl. ¶ 4 (stating that “I

23

consider myself to be a careful recordkeeper”). This negates his claim that he erroneously believed

24

he was getting proxy cards and dividends based only on the Jamison stock. See Villiarimo v. Aloha

25

Island Air, Inc., 281 F.3d 1054, 1061 (9th Cir. 2002) (noting that “this court has refused to find a

26

‘genuine issue’ where the only evidence presented is ‘uncorroborated and self-serving’ testimony”);

Other Company Stock

27
28

Sender received dividends on the 1,470 shares of stock in 1983. See Mot. at 8-9.

30

1

Leslie v. Grupo ICA, 198 F.3d 1152, 1157 (9th Cir. 1999) (indicating that, even on summary

2

judgment, a court need not credit self-serving testimony unsupported by corroborating evidence and

3

undermined by other credible evidence); see also SEC v. Phan, 500 F.3d 895, 900 (9th Cir. 2007)

4

(stating that, “[i]n most cases” – but not all – the fact “‘[t]hat an affidavit is self-serving bears on its

5

credibility, not on its cognizability for purposes of establishing a genuine issue of material fact’”).

6

At the very least, the undisputed facts show Mr. Sender should have known that the Jamison stock

7

could not have been the source of the dividends and proxy cards.

8
9

11
For the Northern District of California

United States District Court

10

As to the stock that Mr. Sender held in his individual name, he did own 20 shares outside of
the ESOP stock. But for Mr. Sender to argue that he thought that the dividends he received were
attributable to those 20 shares is not sustainable for the reasons explained in Franklin’s reply brief.

20

In 1982, before the distribution of 1,450 shares of Franklin stock to
Plaintiff from the ESOP during that year, Plaintiff owned 20 shares of
Franklin stock. Following the distribution to Plaintiff of the Franklin
stock from the ESOP, Plaintiff was paid 73 times the amount of
dividends he would have paid on his original 20 shares. The dividends
paid in 1983 (and reported by Plaintiff on his tax return for that year)
were $.10/share in March 1983 and $.06/share in October 1983.
Therefore, instead of the $2.00 in dividends that Plaintiff would have
received on his original 20 shares, Plaintiff in March 1983 actually
received $147.00 in divided payments from Franklin. Instead of the
$2.40 in dividends he would have received in October 1983 on his
original shares, Plaintiff actually received $176.00. These are not
insignificant differences, particularly in 1983, when the value of the
dollar was less than half of what it is today. It is disingenuous for
Plaintiff, a self-professed “businessman,” and “careful recordkeeper,”
to claim that he did not pay attention to his receipt of Franklin
dividend payments and that he did not notice the substantial difference
in the amount of dividends paid, particularly when he declared them
on his 1983 income tax returns and paid income tax on them.

21

Reply at 9 (emphasis added; also explaining why Mr. Sender should have known that the dividends

22

were not being paid on his Franklin money market account). In other words, because Mr. Sender

23

was getting significantly more dividends than could be attributable to the 20 non-ESOP shares, he

24

should have known – at the very least – that he was getting dividends on company stock other than

25

the non-ESOP stock that he independently owned. Of course, one could argue that that does not

26

necessarily mean that Mr. Sender should have known that that company stock came from the ESOP.

27

But Mr. Sender identifies no other source form which he could have expected that stock to come,

28

especially after 1984 when, as Franklin points out, it is clear that Mr. Franklin was getting a

12
13
14
15
16
17
18
19

31

1

distribution from the ESOP specifically. See Smith Decl., Ex. O (1984 tax form reflecting

2

distribution of $44.03 to Mr. Sender from the Plan/Trust).

3

Indeed, it is significant that Mr. Sender does not dispute getting the 1984 distribution from

4

the Plan/Trust. Compare Sender Decl. ¶ 12 (stating that “I wish to be unequivocal that I had never

5

seen or received . . . the documents attached to the Smith Decl. as Exhibits A, B, L, and M,” but not

6

Exhibit O). At the very least, this distribution put Mr. Sender on notice that he was in fact getting

7

benefits prior to retirement (contrary to what he had been told earlier), and thus the failure of the

8

Plan to give him the stock as part of that distribution should have been seen by Mr. Sender as a clear

9

repudiation.14
2.

11
For the Northern District of California

United States District Court

10

Mr. Sender, of course, claims that, even if he knew that the voting rights and

Rights Without Delivery

12

dividends/distributions came from the ESOP stock, he still had no reason to pursue delivery of the

13

stock certificate because these were rights that he was entitled to even without actual delivery of the

14

stock to him (i.e., while the stock remained in the Plan/Trust). In support of this claim, Mr. Sender

15

cites to¶ 6.05 of the Plan document, which provides as follows: “So long as the Trustee is holding

16

funds for the benefit of any Employee, such Employee, will share proportionately in the net income

17

or losses of the Trust, including unrealized appreciation and depreciation of Employer Stock held in

18

his Stock Account.” Smith Decl., Ex. P (Plan ¶ 6.05). While this provision could potentially – in

19

isolation – be read as Mr. Sender contends, other provisions in the Trust Agreement make clear that

20

Mr. Sender’s reading is without merit:

21

C

22
23

“All Employer contributions . . . shall be held by the Trustee in Trust hereunder as the Trust
assets.” Smith Decl., Ex. Q (Trust Agreement ¶ 1.01) (emphasis added).

C

“Unless otherwise directed by the Company or the Plan Committee, the Trustee shall hold,

24

invest and administer the Trust assets as a single fund without identification of any part of

25

the Trust assets with or allocation of any part of the Trust assets to the Company or to any

26
27
28

14

Even if that repudiation was not immediately apparent to Mr. Sender, it should have
become obvious at some point over the following 23 years prior to 2007.

32

1

Participant or group of Participants of the Company or their Beneficiaries.” Smith Decl.,

2

Ex. Q (Trust Agreement ¶ 1.02) (emphasis added).

3

C

“As directed by the Plan Committee, the Trustee shall have the authority and power to: . . .

4

(j) exercise any of the powers of an owner, with respect to such Employer Stock and other

5

securities or other property comprising the Trust assets.” Smith Decl., Ex. Q (Trust

6

Agreement, Art. III(j)) (emphasis added).

7

C

“The Trustee shall vote all Employer Stock held by it as part of the Trust assets at such time

8

and in such manner as the Plan Committee shall direct . . . .” Smith Decl., Ex. Q (Trust

9

Agreement, Art. IV).
As Franklin argues, the above provisions indicate that, if the stock had not actually been delivered to

11
For the Northern District of California

United States District Court

10

Mr. Sender, then he would not have any voting rights and dividends; rather, those benefits would

12

have remained with the Trust/Trustee.

13

To the extent Mr. Sender might argue that he did not know of the Plan or Trust terms, he

14

does not specifically state in his declaration that he never saw the Plan or Trust documents during

15

the relevant period. Compare Sender Decl. ¶ 12 (stating that “I wish to be unequivocal that I had

16

never seen or received . . . the documents attached to the Smith Decl. as Exhibits A, B, L, and M,”

17

but not Exhibits P and Q which are the Plan and Trust documents). In any event, even if Mr. Sender

18

had never seen the Plan or Trust documents, Mr. Sender has articulated no basis that would justify

19

his claimed belief that he could get the right to vote and dividends/distributions without actually

20

getting the stock itself.15 See Villiarimo, 281 F.3d at 1061 (noting that “this court has refused to find

21

a ‘genuine issue’ where the only evidence presented is ‘uncorroborated and self-serving’

22

testimony”); Leslie, 198 F.3d at 1157 (indicating that, even on summary judgment, a court need not

23

credit self-serving testimony unsupported by corroborating evidence and undermined by other

24

credible evidence). Furthermore, the test for accrual of the claim here is not what Mr. Sender knew,

25

but what he should have known.

26
27
28

15

The Court also questions the plausibility of the claimed belief given that, at the time he
worked for Franklin in the early 1980s, Mr. Sender appears to have been a vice president of sales
and further had been a businessman for more than 15 years. See Sender Decl. ¶ 4 (in declaration
from December 2012, stating that “I have been a businessman for more than 49 years”).

33

1

Accordingly, the Court agrees with Franklin that – based in particular on the dividends and

2

the 1984 distribution from the Plan/Trust – Mr. Sender should have known, as of the 1982-84

3

period, that he was getting benefits based on the ESOP stock prior to retirement (contrary to what he

4

had been told by Mr. Scatena), in which case the failure of the Plan/Trust to give that stock to Mr.

5

Sender constituted a clear repudiation, if not in 1984, then at some point over the next 23 years.

6

This conclusion is underscored by the fact that it is undisputed that Mr. Sender is a sophisticated

7

businessman who had the title (as confirmed at the hearing) of vice president of sales at Franklin.

8

Mr. Sender’s claim accrued if not in 1984, then certainly sometime before 2007, and is therefore

9

time barred.

11
For the Northern District of California

United States District Court

10

F.

Laches
Not only is Mr. Sender’s claim for relief barred by the statute of limitations but it is also

12

barred by the doctrine of laches. “‘Laches is an equitable time limitation on a party’s right to bring

13

suit,’ resting on the maxim that ‘one who seeks the help of a court of equity must not sleep on his

14

rights.’” Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829, 835 (9th Cir. 2002). As

15

Franklin argues, laches is a distinct defense from the statute of limitations, see id., and “laches may

16

apply whether or not any statutory limitations period runs,” Jackson v. Axton, 25 F.3d 884, 888 (9th

17

Cir. 1994) – although, “[i]f the plaintiff filed suit within the . . . limitations period, the strong

18

presumption is that laches is inapplicable.” Jarrow, 304 F.3d at 835.

19

“To prove laches, the ‘defendant must prove both an unreasonable delay by the plaintiff and

20

prejudice to itself.’” Evergreen Safety Council v. RSA Network, Inc., 697 F.3d 1221, 1226 (9th Cir.

21

2012). “When evaluating the reasonableness of a delay, the evaluation period begins when the

22

plaintiff knew (or should have known) of the [potential cause of action], and ends with the initiation

23

of the lawsuit in which the defendant seeks to invoke the laches defense.” Id.; see also Internet

24

Specialties West, Inc. v. Milon-Digiorgio Enters., 559 F.3d 985, 990 (9th Cir. 2009) (stating that

25

“[t]he limitations period for laches starts when the plaintiff ‘knew or should have known about its

26

potential cause of action’”); Trustees of the S. Cal. Bakery Drivers Sec. Fund v. Middleton, 366 Fed.

27

Appx. 810, 813 (9th Cir. 2010) (in ERISA case, stating that, for laches defense, defendant “must

28

34

1

show (1) inexcusable delay in Bakery Drivers’ assertion of a known right; and (2) prejudice to

2

[defendant]”).

applicable here. That is, Mr. Sender should have known as of the 1982-84 period that the Plan had

5

repudiated his right to the stock because he was getting the right to vote and dividends/distributions

6

without actually having possession of the stock. Even if there was not a clear repudiation in the

7

1982-84 period, at some point well before 2007 (i.e., four years before the filing of the complaint in

8

2011), the Plan’s failure to deliver the stock should have been seen as a repudiation. In this respect,

9

it is notable that Mr. Sender admits that he was told in 1978 (even if only in passing) that he might

10

get benefits from the ESOP at the time of his retirement. With this knowledge, Mr. Sender could

11
For the Northern District of California

As to unreasonable delay, the Court’s analysis above on the statute of limitations is largely

4

United States District Court

3

easily have asked to see the terms of the Plan, in which case he would have seen that distributions

12

under the Plan were available upon an individual reaching 55 years of age. See SAC ¶ 11 (alleging

13

that, “[w]hen [Mr.] Sender left his employment with Franklin in 1978, the ESOP did not permit

14

immediate distributions to participants younger than 55 years old”). Mr. Sender turned 55 in or

15

about 1997, see Sender Decl. ¶ 5 (stating that, “in 1978 I was 36 years old”), which was well before

16

2007 (i.e., four years before the filing of the complaint in 2011).

17

As for the matter of prejudice, it is clear that Franklin has suffered prejudice as a result of

18

Mr. Sender’s unreasonable delay. The Ninth Circuit has noted that one form of prejudice in the

19

laches context is evidentiary prejudice. “Evidentiary prejudice includes such things as lost, stale, or

20

degraded evidence, or witnesses whose memories have faded or who have died.” See Danjaq LLC

21

v. Sony Corp., 263 F.3d 942, 955-56 (9th Cir. 2001) (adding that there is also expectations-based

22

prejudice – i.e., where a defendant “took actions or suffered consequences that it would not have,

23

had the plaintiff brought suit promptly” – and even economic prejudice – e.g., where the plaintiff

24

seeks to profit from a financial risk that the defendant took). As Franklin notes,

25
26
27

many of the records relating to [Mr.] Sender’s claim no longer exist.
All of the ESOP’s service providers have destroyed their records
under their normal document retention policies. . . . Even the DOL and
the IRS destroyed all records relating to the ESOP under existing
document retention policies.

28

35

1

Mot. at 17. Furthermore, “many of the employees of Franklin who had been involved in the

2

administration of the ESOP in the early 1980s either no longer work for Franklin or are no longer

3

alive,” and Franklin’s own records “are not as complete as they could [have been if Mr. Sender]

4

brought his claim within a reasonable period of time,” particularly because ERISA “only requires an

5

employer to keep records for a period of six years after filing the required government reports for an

6

ERISA plan, the last of which for the Franklin ESOP was filed in 1985.” Mot. at 18 (citing 29

7

U.S.C. § 102716). Mr. Sender does not dispute these facts.

8
9

Accordingly, laches is an independent ground justifying summary judgment in favor of
Franklin.
IV.

CONCLUSION

11
For the Northern District of California

United States District Court

10

Based on the foregoing, the Court rules as follows.

12

(1)

Mr. Sender’s motion to remand is denied. The Court has subject matter jurisdiction

13

over the instant case because at least two of the claims pled in the complaint at the time of removal

14

were preempted by ERISA.

15

(2)

Franklin’s motion for judgment on the pleadings is granted. Even if Franklin were

16

the plan administrator or otherwise had the authority to resolve benefit claims, that decisionmaking

17

authority alone does mean that it should be obligated to pay benefits out of its own pocket, should

18

Mr. Sender prevail on the merits. The Plan and Trust documents show that the real party who would

19

be obligated to give stock or otherwise make payments to Mr. Sender (should he prevail) is the

20
21
22
23
24
25
26
27
28

16

Section 1027 provides:
Every person subject to a requirement to file any report or to certify
any information therefor under this title . . . shall maintain records on
the matters of which disclosure is required which will provide in
sufficient detail the necessary basic information and data from which
the documents thus required may be verified, explained, or clarified,
and checked for accuracy and completeness, and shall include
vouchers, worksheets, receipts, and applicable resolutions, and shall
keep such records available for examination for a period of not less
than six years after the filing date of the documents based on the
information which they contain . . . .

29 U.S.C. § 1027.

36

1

Plan/Trust itself, which is now defunct. Because amendment of the complaint would be futile, the

2

Court dismisses Mr. Sender’s ERISA claim with prejudice.

3

(3)

Franklin’s motion for summary judgment is granted. There is no genuine dispute of

4

material fact that Mr. Sender’s claim for relief is time barred, pursuant to both the statute of

5

limitations and the doctrine of laches. This case presents a paradigm example of why there is a

6

statute of limitations and the doctrine of laches.

7
8
9

The Clerk of the Court is instructed to enter judgment in accordance with the above and
close the file in this case.
This order disposes of Docket Nos. 74, 77, and 113.

11
For the Northern District of California

United States District Court

10
IT IS SO ORDERED.

12
13

Dated: March 14, 2013

14

_________________________
EDWARD M. CHEN
United States District Judge

15
16
17
18
19
20
21
22
23
24
25
26
27
28

37