Medina v. Catholic Health Initiatives et al

Filing 226

ORDER: That the Recommendation of United States Magistrate Judge 210 , filed August 13, 2014, is APPROVED and ADOPTED IN PART and, respectfully, REJECTED IN PART. Defendants' Motion To Dismiss Plaintiffs' Amended Complaint With Memorandum in Support 123 , filed December 23, 2013, is GRANTED IN PART and DENIED IN PART. By Judge Robert E. Blackburn on 9/30/2014.(trlee, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Robert E. Blackburn
Civil Action No. 13-cv-01249-REB-KLM

JANEEN MEDINA, individually, and on behalf of all others similarly situated, and on
behalf of the CHI Plans,
Plaintiff,
v.
CATHOLIC HEALTH INITIATIVES, a Colorado corporation, et al.,

ORDER RE: RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
Blackburn, J.
The matters before me are (1) the Recommendation of United States
Magistrate Judge [#210],1 filed August 13, 2014; (2) Defendants’ Objections to
Recommendation of Magistrate Judge Regarding Motion To Dismiss Plaintiff’s
Amended Complaint [#216], filed August 27, 2014; and (3) Plaintiff’s Objection to
Recommendation of Magistrate Judge [#218], filed September 2, 2014. I sustain
both plaintiff’s and defendants’ objections in part and overrule them in part, and approve
and adopt the recommendation in part and, respectfully, reject it in part, as further set
forth herein.
As required by 28 U.S.C. § 636(b), I have reviewed de novo all portions of the
recommendation to which objections have been filed, and have considered carefully the
recommendation, objections, and applicable caselaw. Both parties have presented

1

“[#210]” is an example of the convention I use to identify the docket number assigned to a
specific paper by the court’s electronic case filing and management system (CM/ECF). I use this
convention throughout this order.

relatively limited objections. For example, there is no objection to the magistrate
judge’s determination that defendants’ motion to dismiss the claims for discretionary
statutory penalties as barred by limitations is premature and thus that the motion should
be denied without prejudice. I agree, and adopt the recommendation in this respect.
In addition, neither party objects to the substance of the magistrate judge’s
recommendation that Counts II and VI be dismissed as against the individual
defendants. Defendants do object, however, to the recommendation that these claims
be dismissed without prejudice as against the individual defendants. (See
Recommendation at 23 n.11.) I sustain this objection. Because these particular
defendants are not proper parties as to Counts II and VI, these claims as against them
are properly dismissed with prejudice.2 See Blough v. Cooperative Benefit
Administrators, Inc., 2013 WL 5740448 at *4 (W.D. Okla. Oct. 22, 2013). The
2

This determination does not preclude plaintiff from seeking leave to refile these claims against
some other, ostensibly proper, defendant, and I am disinclined to venture too far down the path of
considering the propriety of any such request in the context of resolving the instant objections.
Nevertheless, plaintiff’s apparently blithe assurance that her anticipated motion to amend the complaint to
assert these claims against a proper party defendant should and will be granted strikes this court as
overly optimistic. Without unduly anticipating the proper determination of any such motion at this
juncture, I would point out that the considerations informing such a decision at this stage – well past the
deadline for amendment of the pleadings – go well beyond the requirements of Rule 15 and its liberal
standards:

Where . . . a motion to amend the pleadings . . . is filed after the
scheduling order deadline, a two-step analysis is required. Once a
scheduling order's deadline for amendment has passed, a movant must
first demonstrate to the court that it has a “good cause” for seeking
modification of the scheduling deadline under Rule 16(b). If the movant
satisfies Rule 16(b)'s “good cause” standard, it must then pass the
requirements for amendment under Rule 15(a).
Colorado Visionary Academy v. Medtronic, Inc., 194 F.R.D. 684, 687 (D. Colo. 2000) (citation and
internal quotation marks omitted). Despite a prior amendment, plaintiff has yet to establish that the CHI
Plan is even subject to ERISA, without which determination none of her dependent claims, including
Counts II and VI, will survive. The court notes all of this not by way of proscription, but only to recognize
that any motion for leave to amend will be considered with a critical eye, keeping in mind all relevant legal
and equitable considerations that inform that decision in the particular circumstances of this case.

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recommendation therefore is approved and adopted as to the dismissal of these claims,
but rejected insofar as it suggests that the dismissal should be without prejudice.
I thus turn to the parties’ substantive objections. These are directed to the
magistrate judge’s recommended disposition of Count VII of the Amended Complaint
([#82], filed November 22, 2013), which alleges a cause of action for breach of fiduciary
duty pursuant to section 502(a)(2) of ERISA, 29 U.S.C. § 1132(a)(2), against the
individual members of the CHI and Affiliates Defined Benefit Plan Subcommittee (the
“DB Plan Subcommittee”),3 the Board of Stewardship Trustees (the “BOST”),4 and the
Humane Resources Committee (“HR Committee”).5 Plaintiff claims that this claim
should be allowed to proceed against these defendants because she has adequately
pled that they are “functional fiduciaries” under section 3(21)(A)(iii) of ERISA, 29 U.S.C.
§ 1002(21)(A)(iii).
“[U]nder ERISA, an individual may acquire fiduciary status either by (a) being
expressly appointed by the plan as a fiduciary, or (b) by exercis[ing] the fiduciary
functions set forth in ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A).” Holdeman v.
Devine, 474 F.3d 770, 777 (10th Cir. 2007) (alteration in original). See also Mertens v.

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The named defendants who were members of the DB Plan Subcommittee are David R.
Edwards; Donald Jones; Dean Swindle; and Patricia G.Webb. This group of defendants also includes
John and Jane Does 6-10. (Am. Compl. ¶ 21 at 11-12 [#82], filed November 22, 2013.)
4

The named defendants who were members of the BOST are Geraldine Bednash; Maureen
Comer; Richard Corrente; Katherine Gray; Barbara Hagedorn; James Hamill; Antoinette Hardy-Waller;
Phyllis Hughes; Andrea J. Lee; David R. Lincoln; Kevin E. Lofton; Christopher R. Lowney; Eleanor F.
Martin; Mary Margaret Mooney; Lillian Murphy; Mary Jo Potter; Patricia Smith; and Edward Speed. This
group of defendants also includes John and Jane Does 1-5. (Am. Compl. ¶ 19 at 7-10 [#82], filed
November 22, 2013.)
5

The named defendants who were members of the HR Committee are Phyllis Hughes; Andrea
J. Lee, David R. Lincoln; and Mary Jo Potter. This group of defendants also includes John and Jane
Does 1-5. (Am. Compl. ¶ 19 at 7-10 [#82], filed November 22, 2013.)

3

Hewitt Associates, 508 U.S. 248, 262, 113 S.Ct. 2063, 2071, 124 L.Ed.2d 161 (1993)
(“ERISA. . . defines ‘fiduciary’ not in terms of formal trusteeship, but in functional terms
of control and authority over the plan, thus expanding the universe of persons subject to
fiduciary duties – and to damages[.]”) (internal citation omitted; emphasis in original). A
person may be considered a fiduciary in one of three statutorily enumerated
circumstances:
a person is a fiduciary with respect to a plan to the extent (i)
he exercises any discretionary authority or discretionary
control respecting management of such plan or exercises
any authority or control respecting management or
disposition of its assets, (ii) he renders investment advice for
a fee or other compensation, direct or indirect, with respect
to any moneys or other property of such plan, or has any
authority or responsibility to do so, or (iii) he has any
discretionary authority or discretionary responsibility in the
administration of such plan.
29 U.S.C. § 1002(21)(A). The magistrate judge determined that plaintiff plausibly
alleged but a single, narrow fiduciary claim against the members of the DB Plan
Subcommittee under subsection (i).6 Plaintiff takes no issue with the magistrate judge’s
6

I reject defendants’ suggestion that they cannot be held liable individually. This argument is
based on an overly generous reading of the holding of Averhart v. US WEST Management Pension
Plan, 46 F.3d 1480 (10th Cir. 1994). Although the court there did find, in the particular circumstances of
the case, that the fiduciary duties there alleged ran only to the plan administrator, id. at 1489-90, there
appears to have been no allegation that the individual defendant himself exercised or had any type of
discretionary authority that might make him a fiduciary under section 3(21)(A). Indeed, to read the holding
of Averhart as broadly as defendants suggest would nullify the functional fiduciary doctrine all together.
Moreover, defendants’ attempts to distinguish the Tenth Circuit’s decision in Eaves v. Penn, 587
F.2d 453 (10th Cir. 1978), are unconvincing. Contrary to defendants’ argument, that case in fact did hold
that an individual director and officer of the company was a functional fiduciary. See id. at 458-59 (“[W]e
hold that . . . [defendant] in recommending, designing and implementing amendment of the profit-sharing
plan to an employee stock ownership plan, acted in a fiduciary capacity under the Act.”). The magistrate
judge’s assessment of Eaves properly noted that it did not stand for the proposition that a defendant’s title
or position alone was sufficient to confer fiduciary status. (See Recommendation at 31.) The holding of
that case simply leads one back to the functional fiduciary doctrine, and consideration of whether plaintiff’s
allegations are sufficient to invoke that doctrine as to the individual defendants in this case.

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determination that the allegations of the Amended Complaint are otherwise inadequate
to allege that the individual defendant are functional fiduciaries under the definitions
found at subsections (i) and (ii) of this section, and I concur with her thorough and wellreasoned assessment in that regard. However, plaintiff insists that she has asserted
viable claims against all the individual defendants pursuant to subsection (iii). I concur.
Plaintiff points out that while section 3(21)(A)(i) confers fiduciary obligations on a
person who “exercises” discretionary authority or control over the management of an
ERISA plan, subsection (iii) requires only that the person “has any discretionary
authority or discretionary responsibility in the administration of such plan.” Clearly, this
subsection (iii) must address conduct other than the exercise of discretionary authority,
lest it be found superfluous. See TRW Inc. v. Andrews, 534 U.S. 19, 31, 122 S.Ct.
441, 449, 151 L.Ed.2d 339 (2001) (“It is a cardinal principle of statutory construction that
a statute ought, upon the whole, to be so construed that, if it can be prevented, no
clause, sentence, or word shall be superfluous, void, or insignificant.”) (internal citation
and quotation marks omitted). Given that subsection (i) already addresses the
affirmative exercise of discretionary authority, subsection (iii) must create liability where
the defendant has such authority but fails to exercise it. Bouboulis v. Transport
Workers Union of America, 442 F.3d 55, 63 (2nd Cir. 2006) (“‘Subsection three
describes those individuals who have actually been granted discretionary authority,
regardless of whether such authority is ever exercised.’”) (quoting Olson v. E.F. Hutton
& Co., Inc., 957 F.2d 622, 625 (8th Cir. 1992)).
I agree with plaintiff that the allegations of her complaint are sufficient plausibly to

5

assert that the individual defendants, as members of their respective committees,
possessed the type of discretionary authority sufficient to make them functional
fiduciaries within the meaning of 29 U.S.C. § 1002(21)(A)(iii). The magistrate judge’s
conclusion to the contrary was based on the mistaken reliance of the “exercise”
language of subsection (i) in analyzing subsection (iii). Thus, although I agree with her
conclusion that the Amended Complaint fails to state a cause of action under
subsection (i) (with the one limited exception of plaintiff’s claims that the members of the
DB Plan Subcommittee authorized disbursements from the trust), I must respectfully
reject the suggestion that a similar result is warranted with respect to claims against the
individual defendants under subsection (iii).7
Plaintiff’s allegations are essentially that these committees had authority to act,
but did not. It can hardly be gainsaid, and thus is reasonable to infer, that a committee
can act, or fail to act, only through the actions or omissions of its individual constituent
members. Thus, although “group pleading” often is insufficient to apprise each
individual defendant of what he or she is specifically alleged to have done, and
therefore frequently does not meet the requirements of Rule 8, see Robbins v.
Oklahoma, 519 F.3d 1242, 1250 (10th Cir. 2008), I find the allegations of the Amended
Complaint here adequate to put the individual defendants on notice that they each
allegedly failed to exercise the authority of their positions to make the plan compliant
with ERISA in the ways set forth in the Amended Complaint. See Slack v.

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I thus disagree with those courts which appear to hold that liability under subsection (iii) may
attach without the concomitant showing of a breach of a duty owed under ERISA. See Olson v. E.F.
Hutton & Co., 957 F.2d 622, 625 (8th Cir. 1992); Healthcare Strategies, Inc. v. ING Life Insurance and
Annuity, 961 F.Supp.2d 393, 401 (D. Conn. 2013).

6

International Union of Operating Engineers, 2014 WL 4090383 at *16 (N.D. Cal. Apr.
19, 2014) (“‘Collective’ or ‘group’ pleading in a complaint is not per se improper and may
not, in itself, always be fatal to a claim.”); Howard v. Municipal Credit Union, 2008 WL
782760, at *12 (S.D.N.Y. Mar. 25, 2008) (“While Rule 8 does not prohibit ‘collective
allegations' against multiple defendants, it does require that the allegations be ‘sufficient
to put each [d]efendant on notice of what they allegedly did or did not do.’”) (internal
citations and quotation marks omitted). I thus expand the magistrate judge’s conclusion
that the individual members of the DB Plan Subcommittee potentially may be liable for
breaches of that committee’s fiduciary duties to include all alleged breaches of fiduciary
duty asserted in Count VII, not just the allegation that the magistrate judge found to
assert a claim under section 3(21)(A)(i).
Relatedly, I reject the magistrate judge’s recommendation that Count VII be
dismissed as against the individual members of the BOST and the HR Committee.
Although defendants argue that their rights in this regard were merely inchoate, the
operative document provides that “the Board and the HR Committee may itself [sic]
exercise any of the above duties delegated to the Committee with respect to the
Plans at any time.” (See Charter of the CHI & Affiliates Defined Benefit Retirement
Plan Subcommittee at 2 [#39-1], Exh. C (emphasis in original).) There were no
conditions or other limitations on the ability of these committees to assume some or all
of the responsibilities assigned to the DB Plan Subcommittee, which included, inter alia,
“general administration.” (See id. at 1-2.) The Amended Complaint thus plausibly can
be read to allege that these committees, acting through their respective individual

7

members, failed to exercise their authority to make the CHI Plan compliant with ERISA
even when the DB Plan Subcommittee would or did not. See Martin v. Schwab, 1992
WL 296531 at *4 (W.D. Mo. Aug. 11, 1992) (“The fact that defendants did not choose to
exercise their authority did not in any way diminish the authority bestowed on them[.]”)
I agree with the magistrate judge that a motion to dismiss is not the proper
vehicle to determine the fact-intensive questions that govern whether any individual
defendant in fact was a functional fiduciary under any definition set forth in section
3(21)(A)(iii).8 Moreover, the question whether the particular ways in which plaintiff
alleges defendants failed to act in fact do implicate fiduciary aspects of the individual
defendants’ responsibilities is not an issue properly before me at this juncture.9 I hold

8

There is a split in authority among the circuits as to whether “where . . . a committee or entity is
named as the plan fiduciary, the corporate officers or trustees who carry out the fiduciary functions are
themselves fiduciaries[.]” Stewart v. Thorpe Holding Co. Profit Sharing Plan, 207 F.3d 1143, 1156 (9th
Cir. 2000), cert. denied, 121 S.Ct. 768 (2001). Compare Confer v. Custom Engineering Co., 952 F.2d
34, 37 (3rd Cir. 1991) (“[W]hen an ERISA plan names a corporation as a fiduciary, the officers who
exercise discretion on behalf of the corporation are not fiduciaries . . . unless it can be shown that these
officers have individual discretionary roles as to plan administration.”) with Kayes v. Pacific Lumber Co.,
51 F.3d 1449, 1461 (9th Cir.) (“[W]e reject the Third Circuit's interpretation in Confer that an officer who
acts on behalf of a named fiduciary corporation cannot be a fiduciary if he acts within his official capacity
and if no fiduciary duties are delegated to him individually.”), cert. denied, 116 S.Ct. 301 (1995). The
trend among the limited number of federal courts that have considered the issue certainly makes it appear
that the Ninth Circuit’s approach – the same one relied on by the magistrate judge here – is favored. See
also In re Xerox Corp. ERISA Litigation, 2008 WL 918539 at *5 (D. Conn. March 31, 2008) (adopting
approach of Kayes); In re Enron Corp. Securities, Derivative, & ERISA Litigation, 284 F.Supp.2d 511,
567-70 (S.D. Tex. 2003) (concluding that Fifth Circuit in Bannistor v. Ullman, 287 F.3d 394, 403-06 (5th
Cir. 2002), essentially had adopted Ninth Circuit’s approach in Kayes). The issue merits much more indepth analysis than the parties have given it here, however, and I thus defer any attempt to discern which
side of the debate the Tenth Circuit would adopt.
9

In their objections, defendants argue further that even if the individual defendants might be
considered fiduciaries for some purposes, they were not fiduciaries with respect to the actions alleged in
Count VII:
[T]he “threshold question” in an action for breach of fiduciary duty is
whether the alleged fiduciary “was acting as a fiduciary (that is, was
performing a fiduciary function) when taking the action subject to
complaint.” Because virtually every business decision an employer
makes can have an adverse impact on an employee benefit plan, courts

8

only that the Amended Complaint sets forth allegations sufficient to plausibly assert
such claims at this early juncture in the proceedings.
THEREFORE IT IS ORDERED as follows:
1. That the Recommendation of United States Magistrate Judge [#210], filed
August 13, 2014, is APPROVED and ADOPTED IN PART and, respectfully,
REJECTED IN PART as follows:
a. That the recommendation is, respectfully, REJECTED insofar as it
recommends:
(1) that Counts II and VI of the Amended Complaint [#82], filed
November 22, 2013, be dismissed without prejudice as against the
individual defendants; and
(2) that Count VII of the Amended Complaint [#82], filed
November 22, 2013, be dismissed as against the individual
defendants under 29 U.S.C. § 1002(21)(A)(iii); and
b. That in all other respects, the recommendation is APPROVED and
ADOPTED as an order of this court;
must “examine the conduct at issue to determine whether it constitutes
management or administration of the plan, giving rise to fiduciary
concerns, or merely a business decision that has an effect on an ERISA
plan not subject to fiduciary duties.”
In re Luna, 406 F.3d 1192, 1207 (10th Cir. 2005) (internal citations omitted). See also 29 U.S.C. §
1002(21)(A) (person is a fiduciary “to the extent” he or she comes within the ambit of one of the three
subsections of that section). The magistrate judge noted this limitation on fiduciary liability under ERISA
(see Recommendation at 30-31), but did not address the issue further – likely because it was not raised
in the motion to dismiss. I will not do so either, since regardless whether these arguments ultimately
might have traction, matters not properly raised in the apposite motion itself are not appropriately brought
forward for the first time in an objection to the magistrate judge’s recommendation. See Marshall v.
Chater, 75 F.3d 1421, 1426 (10th Cir. 1996) (“Issues raised for the first time in objections to the
magistrate judge's recommendation are deemed waived.”).

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2. That the objections stated in Defendants’ Objections to Recommendation
of Magistrate Judge Regarding Motion To Dismiss Plaintiff’s Amended Complaint
[#216], filed August 27, 2014, are SUSTAINED IN PART and OVERRULED IN PART
as follows:
a. That the objections are SUSTAINED to the extent they object to the
recommendation that Counts II and VI be dismissed without prejudice as
against the individual defendants; and
b. That in all other respects, the objections are OVERRULED;
3. That Plaintiff’s Objection to Recommendation of Magistrate
Judge [#218], filed September 2, 2014, are SUSTAINED IN PART and OVERRULED
IN PART as follows:
a. That the objections are SUSTAINED to the extent that they object to
the recommendation that Count VII be dismissed as against the individual
defendants under 29 U.S.C. § 1002(21)(A)(iii); and
b. That in all other respects, the objections are OVERRULED;
4. That Defendants’ Motion To Dismiss Plaintiffs’ Amended Complaint With
Memorandum in Support [#123], filed December 23, 2013, is GRANTED IN PART
and DENIED IN PART as follows:
a. That the motion is GRANTED:
(1) With respect to Counts II and VI of the Amended Complaint
[#82], filed November 22, 2013, as against the individual
defendants, and these claims are DISMISSED WITH PREJUDICE

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as against those defendants;
(2) With respect to Count VII of the Amended Complaint [#82],
filed November 22, 2013, as against the individual defendants who
are members of the BOST and the HR Committee, insofar as this
claim is asserted pursuant to 29 U.S.C. §§ 1002(21)(A)(i) & (ii), and
those claims are DISMISSED WITHOUT PREJUDICE;
(3) With respect to Count VII of the Amended Complaint [#82],
filed November 22, 2013, as against the individual defendants who
are members of the DB Plan Subcommittee, insofar as this claim is
premised on 29 U.S.C. §§ 1002(21)(A)(i) or (ii), with the exception
of the allegation that these defendants “authorized disbursements
from the trust,” and those claims are DISMISSED WITHOUT
PREJUDICE; and
b. That in all other respects, the motion is DENIED;
5. That at the time judgment enters, judgment with prejudice SHALL ENTER in
favor of defendants, Geraldine Bednash; Maureen Comer; Richard Corrente; David R.
Edwards; Katherine Gray; Barbara Hagedorn; James Hamill; Antoinette Hardy-Waller;
Phyllis Hughes; Donald Jones; Carol Keenan; Andrea J. Lee; David R. Lincoln; Kevin E.
Lofton; Christopher R. Lowney; Eleanor F. Martin; Mary Margaret Mooney; Lillian
Murphy; Mary Jo Potter; Patricia Smith; Edward Speed; Dean Swindle; Patricia G.
Webb; and John and Jane Does 1-10, and against plaintiff, Janeen Medina, individually
and on behalf of all others similarly situated, and on behalf of the CHI Plans; as to the

11

claims asserted against them in Counts II and VI of the Amended Complaint [#82],
filed November 22, 2013;
6. That at the time judgment enters, judgment without prejudice SHALL ENTER
on behalf of Geraldine Bednash; Maureen Comer; Richard Corrente; Katherine Gray;
Barbara Hagedorn; James Hamill; Antoinette Hardy-Waller; Phyllis Hughes; Andrea J.
Lee; David R. Lincoln; Kevin E. Lofton; Christopher R. Lowney; Eleanor F. Martin; Mary
Margaret Mooney; Lillian Murphy; Mary Jo Potter; Patricia Smith; and Edward Speed,
and against plaintiff, Janeen Medina, individually and on behalf of all others similarly
situated, and on behalf of the CHI Plans; as Count VII of the Amended Complaint
[#82], filed November 22, 2013, to the extent such claim is premised on 29 U.S.C. §§
1002(21)(A)(i) or (ii); and
7. That at the time judgment enters, judgment without prejudice SHALL ENTER
on behalf of defendants, David R. Edwards; Donald Jones; Dean Swindle; and Patricia
G. Webb, and against plaintiff, Janeen Medina, individually and on behalf of all others
similarly situated, and on behalf of the CHI Plans; as to Count VII of the Amended
Complaint [#82], filed November 22, 2013, to the extent such claim is premised on 29
U.S.C. §§ 1002(21)(A)(i) or (ii), with the exception of the allegation that these
defendants “authorized disbursements from the trust.”
Dated September 30, 2014, at Denver, Colorado.
BY THE COURT:

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