Wengert v. Rajendran et al

Filing 42

ORDER- The ESOP Committee's Motion to Strike Plaintiff's Request for Jury Trial 21 is granted. Ordered by Magistrate Judge Thomas D. Thalken. (MKR)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA

SUSAN WENGERT, f/k/a
SUSAN MCCONNELL,
8:15CV366
Plaintiff,
vs.

ORDER

THERESA A. RAJENDRAN,
Personal Representative of the
Estate of Timothy McConnell,
deceased, and Trustee of the
Timothy McConnell Trust,
and MARK SWANSON, MICHAEL
HERZOG, and JAY VAN ROY,
Members of the Majors Plastics,
Inc., Employee Stock Ownership
Plan,
Defendants.
This matter is before the court on the motion to strike jury demand (Filing No. 21)
filed by the defendants Mark Swanson, Michael Herzog, and Jay Van Roy (collectively
the ESOP Committee). The ESOP Committee filed a brief (Filing No. 22) in support of
the motion. The plaintiff filed a brief (Filing No. 26) in opposition to the motion. The
ESOP Committee filed a brief (Filing No. 30) in reply.

The defendant Theresa A.

Rajendran (Rajendran) did not join the motion to strike or participate in the briefing.

BACKGROUND
This action was filed by the surviving spouse of Timothy McConnell (the
decedent) to recover funds allegedly improperly distributed from the decedent’s 401(k)
plan and employee stock ownership plan to the decedent’s daughter, Rajendran, acting
as the personal representative of the decedent’s estate and as trustee of the Timothy
McConnell Trust (the Trust). The decedent was the Chief Executive Officer of Majors
Plastics, Inc. (Majors Plastics).

See Filing No. 29 - Am. Compl. ¶ 11.

During his

employment with Majors Plastics, the decedent participated in Majors Plastics’ 401(k)
plan and Employee Stock Ownership Plan (ESOP), which is an employee benefits plan
governed by the Employee Retirement Income Security Act of 1974 (ERISA). Id. ¶¶ 11-

12, 20.

The ESOP Committee is comprised of members of the ESOP’s Plan

Administrative Committee. Id. ¶¶ 7, 11.
The decedent died on September 14, 2014.

Id. ¶ 18.

At the time of the

decedent’s death, a divorce action between the plaintiff and the decedent was pending
in state court. Id. ¶ 9. As part of the divorce action, the state court issued an injunction
preventing the plaintiff or decedent from transferring or disposing of any property,
including the decedent’s interest in the Majors Plastics’ 401(k). Id. ¶ 20. The plaintiff
alleges the decedent transferred $371,449.25 from the Majors Plastics’ 401(k) to
Rajendran in her capacity as personal representative or trustee on May 29, 2014, in
violation of the injunction. Id. ¶¶ 20-21. Additionally, the plaintiff alleges two days prior
to the decedent’s death, on September 12, 2014, the decedent “took steps” to transfer
the full value of the ESOP, $2,721,739.37, into an account held by the Trust. Id. ¶¶ 19,
21.1. The plaintiff alleges the ESOP Committee improperly transferred the ESOP funds
to Rajendran on September 15, 2014, subsequent to the decedent’s death. Id. ¶¶ 1822. The plaintiff alleges she was the proper beneficiary of the ESOP as the decedent’s
surviving spouse and made a demand for payment on the ESOP Committee pursuant to
the terms of the ESOP. Id. ¶ 39.

The plaintiff alleges her claim was denied and she

has exhausted her administrative remedies. Id.
On September 14, 2015, the plaintiff filed a complaint in state court against
Rajendran and the ESOP Committee to recover the funds transferred from the
decedent’s 401(k) and the ESOP under theories of breach of contract, conversion,
aiding and abetting, and unjust enrichment. See Filing No. 1-1 - Complaint. The parties
jointly removed the case to this court on October 8, 2015, agreeing the plaintiff’s claim
for ESOP funds is a claim for benefits arising under ERISA. See Filing No. 1 - Joint
Notice of Removal ¶¶ 7-16. On October 9, 2015, the plaintiff filed a demand for jury
trial. See Filing No. 3. On November 9, 2015, the ESOP Committee filed a motion to
dismiss (Filing No. 18) the plaintiff’s claim for benefits under the ESOP and the present
motion to strike (Filing No. 21) the plaintiff’s jury demand.
On December 15, 2015, the plaintiff filed a First Amended Complaint & Jury
Demand. See Filing No. 29. The amended complaint contains two groups of claims:
(1) against Rajendran for converted and unaccounted for funds (Claim I), and (2)
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against the ESOP Committee for benefits due to the plaintiff under the ESOP (Claim II).
Id. at 6-9. The plaintiff alleges her claims against the ESOP Committee arise under
ERISA. Id. ¶ 2.
In Claim I, the plaintiff alleges Rajendran breached her fiduciary duties as trustee
and personal representative by engaging in self-dealing, collusion, and strategies to
falsify documents, and by preventing the plaintiff from learning information about the
health, whereabouts, and death of the decedent. Id. ¶ 27. The plaintiff further alleges
the decedent lacked capacity to transfer the 401(k) and ESOP funds and Rajendran
unduly influenced the decedent to make such transfers. Id. ¶ 27.3-27.13. The plaintiff
seeks recovery of the decedent’s 401(k) and ESOP funds from Rajendran on theories of
breach of fiduciary duties, conversion, unjust enrichment, equitable estoppel, and aiding
and abetting. Id. ¶¶ 2, 29-35.
In Claim II, the plaintiff alleges the ESOP Committee breached its contractual
duties to the plaintiff as a beneficiary of the ESOP by distributing benefits to Rajendran
without the plaintiff’s consent and in violation of the state court’s temporary injunction.
Id. ¶ 37. The plaintiff alleges “no monetary judgment is sought against [the ESOP
Committee] except to the extent that Plaintiff seeks to require [Rajendran] to disgorge
and pay the [ESOP] funds sought as described in this Complaint, and to direct the
[ESOP Committee] to pay the funds to Plaintiff.” Id. ¶ 7. The plaintiff alleges the ESOP
Committee breached its fiduciary duty “to pay the sums in the [ESOP] account of the
Decedent to Plaintiff, and to avoid and refrain from consenting to or transferring these
sums to Rajendran in any capacity.” Id. ¶ 43. The plaintiff seeks recovery against the
ESOP Committee for benefits due under an ERISA-governed benefit plan pursuant to
29 U.S.C. § 1132(a)(1)(B) and breach of fiduciary duty under 29 U.S.C. § 1132(a)(3).
Id. ¶¶ 42-44. The plaintiff seeks a declaratory judgment directing the ESOP Committee
to distribute ESOP funds to the plaintiff once the funds are recovered from Rajendran.
Id. ¶ 41. The ESOP Committee filed a motion to dismiss Claim II of the amended
complaint on January 8, 2016. See Filing No. 34.
The ESOP Committee filed the present motion to strike the plaintiff’s jury demand
and brief in support prior to the date the plaintiff filed the amended complaint. However,
the parties’ subsequent briefing addresses the claims raised in the plaintiff’s amended
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complaint. See Filing No. 26 - Response p. 4 and Filing No. 30 - Reply p. 2. Thus the
court, like the parties, will consider whether the plaintiff’s jury demand should be
stricken for her claims against the ESOP Committee contained in her amended
complaint. The ESOP Committee asserts ERISA does not provide the plaintiff with a
right to a jury trial for any of her claims against the ESOP Committee. See Filing No. 30
- Reply p 2. The plaintiff concedes ERISA does not permit a jury trial for her breach of
contract and denial of benefits claims arising under 29 U.S.C. § 1132(a)(1)(B) against
the ESOP Committee, but argues ERISA does not bar a jury trial for her breach of
fiduciary duty claim. See Filing No. 26 - Response p. 3-4. The plaintiff further argues
she is entitled to a jury trial for her state law claims against Rajendran. Id. at 4.

ANALYSIS
When a plaintiff demands a jury trial, all issues must be tried to a jury unless “the
court, on motion or on its own, finds that on some or all of those issues there is no
federal right to a jury trial.” Fed. R. Civ. P. 39(a)(2). Federal Rule of Civil Procedure
38(a) states the right of trial by jury as declared by the Seventh Amendment, or as given
by federal statute, “is preserved to the parties inviolate.” The Seventh Amendment
provides for the right to a trial by jury in suits at common law where the value in
controversy exceeds twenty dollars. U.S. Const. amend VII. “The Seventh Amendment
question depends on the nature of the issue to be tried rather than the character of the
overall action.” Ross v. Bernhard, 396 U.S. 531, 538 (1970). In analyzing the Seventh
Amendment, a court “examine[s] the remedy sought and determine[s] whether it is legal
or equitable in nature.” Tull v. United States, 481 U.S. 412, 417 (1987). The Seventh
Amendment preserves the right to a jury trial in actions at law, not actions in equity.
See id. “The issue of whether a party is entitled to a jury trial under the Seventh
Amendment is a question of law.” Kampa v. White Consol. Indus., Inc., 115 F.3d 585,
586 (8th Cir. 1997).
“[T]here is no right to a jury trial of ERISA claims.” Houghton v. SIPCO, Inc., 38
F.3d 953, 957 (8th Cir. 1994) (citing In re Vorpahl, 695 F.2d 318 (8th Cir. 1982)); see
also Langlie v. Onan Corp., 192 F.3d 1137, 1141 (8th Cir. 1999) (“[T]here is no right to
a jury trial under ERISA.”); Boyan v. Coventry Healthcare of Neb., Inc., No.
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8:06CV245, 2007 WL 119163, at *6 (D. Neb. Jan. 10, 2007) (striking the plaintiff’s
demand for jury trial on its own initiative after concluding ERISA governs the plaintiff’s
claims).

This is so because claims for present and future pension benefits have been

viewed as equitable in nature and thus triable by a court. Vorpahl, 695 F.2d at 322.
The plaintiff’s claims against the ESOP Committee admittedly arise under ERISA. See
Filing No. 29 - Am. Compl. ¶ 2. The plaintiff concedes ERISA does not permit a jury trial
for her breach of contract and denial of benefits claims against the ESOP Committee
arising under 29 U.S.C. § 1132(a)(1)(B).

See Filing No. 26 - Response p. 3-4.

Therefore, the court will strike the plaintiff’s jury demand with respect to the claims
against the ESOP Committee arising under 29 U.S.C. § 1132(a)(1)(B).
The plaintiff asserts the Eighth Circuit has never explicitly held a jury trial is
unavailable for her claim for breach of fiduciary duty arising under 29 U.S.C.
§ 1132(a)(2) or (a)(3). See Filing No. 26 - Response p. 3.1 Although the plaintiff’s brief
cites to case law discussing § 1132(a)(2), her amended complaint alleges her breach of
fiduciary claim arises under § 1132(a)(3).

See Filing No. 29 - Am. Compl. ¶ 43.

Regardless of which section the plaintiff now alleges her claim for breach of fiduciary
duty arises under, “The right to a jury trial under the [S]eventh [A]mendment depends on
the nature of the issue to be tried.” Vorpahl, 695 F.2d 318 at 322. In Vorpahl, the
Eighth Circuit concluded there was no right to a jury trial under 29 U.S.C. §1132(a)(1)(b)
or (a)(3) on claims brought by plaintiff-employees seeking present and future benefits
under an ERISA-plan. Id. The employees alleged the plan failed to properly calculate
and pay pension benefits under the terms of the plan in violation of the plan and ERISA,
and in breach of the plan’s fiduciary duties.

Id. at 319-20.

The court in Vorpahl

characterized the employees’ claims as ones for present and future pension benefits,
which traditionally “have been viewed as equitable in nature and triable by a court.” Id.

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The plaintiff contends the Fifth, Seventh, and Ninth Circuits have held a trial by jury is not barred in all
ERISA actions. Id. The plaintiff cites to Transamerica Occidental Life Ins. Co. v. DiGregorio, 811
F.2d 1249 (9th Cir. 1987), Jefferson Nat’l Bank v. Cent. Nat’l Bank, 700 F.2d 1143 (7th Cir. 1983), and
Calamia v. Spivey, 632 F.2d 1235 (5th Cir. 1980). See Filing No. 26 - Response p. 3. However, these
cases do not support her contention. See DiGregorio, 811 F.2d at 1253 (holding the action did not fall
within 29 U.S.C. § 1132(a)(3)), Jefferson Nat. Bank, 700 F.2d at 1145 (not an ERISA action); Calamia,
632 F.2d at 1236-37 (concluding the plaintiff’s claims under both 29 U.S.C. § 1132(a)(1)(B) and (a)(3)
provide for equitable remedies for which there is no right to a jury trial).
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at 322.

The court concluded when monetary relief “turns on a determination of

entitlement to benefits,” such relief is an “integral part of an equitable action” for which
the Seventh Amendment provides no right to a jury. Id.
Similar to the employees’ claims in Vorpahl, the plaintiff’s breach of fiduciary
duty claim is a claim for failure to pay benefits under the terms of an ERISA-governed
plan. The plaintiff alleges the ESOP Committee breached its fiduciary duty “to pay the
sums in the [ESOP] account of the Decedent to Plaintiff, and to avoid and refrain from
consenting to or transferring these sums to Rajendran in any capacity.” See Filing No.
29 - Am. Compl. ¶ 43. The plaintiff further alleges “no monetary judgment is sought
against [the ESOP Committee]” and seeks an order directing the ESOP Committee to
pay the ESOP funds to the plaintiff. Id. ¶ 7. Although the plaintiff has styled her claim
as one for breach of fiduciary duty, in essence she is seeking “to recover benefits due to
[her] under the terms of [the] plan.” 29 U.S.C. § 1132(a)(1)(B). When any monetary
relief turns on a determination of entitlement to benefits, such relief is an integral part of
an equitable action for which the Seventh Amendment provides no right to a jury.
Vorpahl, 695 F.2d at 322. Because the plaintiff’s claim for breach of fiduciary duty
turns on a determination of her entitlement to benefits under the ESOP, she is not
entitled to a jury trial on that claim.
Moreover, the plaintiff’s amended complaint asserts her breach of fiduciary duty
claim arises under 29 U.S.C. § 1132(a)(3), which by its own terms pertains to claims for
equitable relief for which there is no right to a jury. Section 1132(a)(3) provides a
beneficiary may file an action “to obtain other appropriate equitable relief” to redress
violations of an ERISA plan’s terms or that ERISA subchapter or “to enforce any
provisions of this subchapter or the terms of the plan.” 29 U.S.C. § 1132(a)(3). The
United States Supreme Court has interpreted the term “appropriate equitable relief” as
“referring to those categories of relief that, traditionally speaking (i.e., prior to the merger
of law and equity) were typically available in equity.” CIGNA Corp. v. Amara, 563 U.S.
421, 439 (2011) (quotations omitted); see US Airways, Inc. v. McCutchen, 133 S. Ct.
1537, 1544, (2013); Mertens v. Hewitt Assoc., 508 U.S. 248, 256 (1993). The Eighth
Circuit

in

Vorpahl

concluded

“no

jury trial

is

required”

under

29

U.S.C.

§ 1132(a)(1)(b) or (a)(3) because such subsections create two categories of equitable
6

relief. Vorpahl, 695 F.2d 318 at 321; accord Phelps v. C.T. Enter., Inc., 394 F.3d
213, 222 (4th Cir. 2005) (concluding § 1132(a)(3) provides only for equitable remedies
and therefore provides no right to jury trial); Cox v. Keystone Carbon Co., 861 F.2d
390, 393 (3d Cir. 1988) (holding there is no right to jury trial under § 1132(a)(3) because
it only provides for equitable relief); see also Ibson v. United Healthcare Servs., Inc.,
776 F.3d 941, 945-47 (8th Cir. 2014) cert. denied, 135 S. Ct. 2351 (2015) (affirming
order striking jury demand for state law claims against insurance company as
preempted by ERISA); McKnight v. Brentwood Dental Grp., Inc., No. 8:04CV642,
2005 WL 2290326, at *3 (D. Neb. Sept. 20, 2005) (striking jury demand for breach of
fiduciary claim governed by ERISA). The court concludes the remedy sought by the
plaintiff against the ESOP Committee for its alleged breach of fiduciary duty arising
under ERISA is equitable in nature. Therefore, the court will strike the plaintiff’s jury
demand on her claim for breach of fiduciary duty against the ESOP Committee.
The plaintiff contends she is entitled to a jury trial on her claims against
Rajendran for aiding and abetting, conversion, lack of capacity, and unjust enrichment.
See Filing No. 26 - Response p. 4. The ESOP Committee’s motion to strike was limited
to striking the plaintiff’s jury demand against the ESOP Committee. See Filing No. 30 Reply p. 2 n.1. Rajendran did not join the motion to strike or participate in the briefing
on the current matter. Therefore, the court will not consider the plaintiff’s entitlement to
a jury for her claims against Rajendran. The court’s order is limited to striking the
plaintiff’s jury demand as to her claims against the ESOP Committee only.

Upon

consideration,

IT IS ORDERED:
The ESOP Committee’s Motion to Strike Plaintiff’s Request for Jury Trial (Filing
No. 21) is granted.
Dated this 2nd day of March, 2016.
BY THE COURT:
s/ Thomas D. Thalken
United States Magistrate Judge

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