Parsons v. Board of Trustees of the Nevada Resort Association-I.A.T.S.E. Local 702 Retirement Plan et al.

Filing 44

ORDER Granting 33 Motion to Dismiss. Granting 34 Motion to Dismiss. Denying as moot 41 Motion for Hearing. Signed by Judge Lloyd D. George on 9/20/2013. (Copies have been distributed pursuant to the NEF - SLR)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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ROB PARSONS,

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Plaintiff,

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v.

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Case No. 2:12-cv-00299-LDG (VCF)

BOARD OF TRUSTEES OF THE
NEVADA RESORT ASSOCIATION I.A.T.S.E. LOCAL 702 RETIREMENT
PLAN, et al.,

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ORDER

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Defendants.
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Rob Parsons was a participant in a retirement benefits plan administered by the
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Board of Trustees of the Nevada Resort Association – I.A.T.S.E Local 702 Retirement Plan
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(the “Trustees”). Zenith Administrators, Inc. (“Zenith”) provided administrative services for
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the Plan. On June 15, 2010, the Trustees sent notice (“Notice”) informing participants that
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the Plan had been modified, including a reduction in early retirement benefits, but that the
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modification would not affect those that qualified under a grandfather provision. Uncertain
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of whether he qualified for the grandfather provision, Parsons contacted Zenith. A Zenith
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employee represented to Parsons that he qualified and, based on that representation,

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Parsons applied for an early retirement pension and retired.

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After Parsons officially retired, the Zenith employee informed Parsons that he did not

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qualify for the grandfather provision and his benefit amount would be calculated under the

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new rule. Parsons appealed to the Trustees and was denied. Parsons returned to work, but

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was forced to accept a lower-paying position and a significant wage and benefit loss.

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Parsons filed a Complaint against the Trustees and Zenith, which complaint was dismissed

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with leave to amend. (#27). Parsons amended his complaint, alleging a claim against all

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defendants for a breach of fiduciary duty under 29 U.S.C. §1104(a)(1), a claim against the

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Trustees for breach of co-fiduciary duty under 29 U.S.C. § 1105, and an alternative claim

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against Zenith for negligence. (#30).

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The Trustees now move to dismiss (#33) for breach of fiduciary duty and breach of

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co-fiduciary duty. Zenith also moves to dismiss (#34) for breach of fiduciary duty and

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further for negligence. Parsons opposes both motions. (# 35, 36). Having read and

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considered the papers and complaint, the Court will GRANT the motions.

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Motion to Dismiss
A motion to dismiss under Federal Rules of Civil Procedure Rule 12(b)(6) requires

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courts to engage in a two-part analysis. Ashcroft v. Iqbal, — U.S. —, 129 S. Ct. 1937

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(2009); Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). First, the courts accept only

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non-conclusory allegations as true. Iqbal, 129 S.Ct. at 1949. “Threadbare recitals of the

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elements of a cause of action, supported by mere conclusory statements, do not suffice.”

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Id. (citing Twombly, 550 U.S. at 555). Federal Rule of Civil Procedure Rule 8 “demands

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more than an unadorned, the defendant-unlawfully-harmed-me-accusation.” Id. Federal

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Rule of Civil Procedure Rule 8 “does not unlock the doors of discovery for a plaintiff armed

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with nothing more than conclusions.” Id. at 1950. The Court must draw all reasonable
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inferences in favor of the plaintiff. Mohamed v. Jeppesen Dataplan, Inc., 579 F.3d 943, 949

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(9th Cir. 2009).

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After accepting as true all non-conclusory allegations and drawing all reasonable

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inferences in favor of the plaintiff, the Court must then determine whether the complaint

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“states a plausible claim for relief.” Iqbal, 129 S.Ct. at 1949 (citing Twombly, 550 U.S. at

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555). “A claim has facial plausibility when the plaintiff pleads factual content that allows the

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court to draw the reasonable inference that the defendant is liable for the misconduct

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alleged.” Id. at 1949 (citing Twombly, 550 U.S. at 556). This plausibility standard “is not

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akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a

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defendant has acted unlawfully.” Id. A complaint that “pleads facts that are ‘merely

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consistent with a defendant’s liability . . . ‘stops short of the line between possibility and

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plausibility of ‘entitlement to relief.’ ’ ” Id. (citing Twombly, 550 U.S. at 557).

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Background
Parsons has been a participant in the NEVADA ASSOCIAT ION’S THEATRICAL

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STAGE EMPLOYEES I.A.T.S.E. LOCAL 702 RETIREMENT PLAN (“Plan”) since he began

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employment as a “stagehand” with LV Theatrical Group, Inc. in 1974. The Trustees are the

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named fiduciaries of the Plan and are responsible for administering the Plan. Zenith

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provides “certain administrative services for the operation of the Trust, ” as per the

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Administrative Services Contract (“Contract”) between the Trustees and Zenith.

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On or about June 15, 2010, The Trustees sent notice (“Notice”) to the participants

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informing them that the Plan had been modified, including a reduction in benefits. However,

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the modification included a grandfather provision:

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This change will not apply to any Participant who satisfies all three of the following
requirements before August 1, 2010: is (A) eligible for early retirement, (B)
retires (a bona fide separation from Covered Employment), and (C) applies for an
early retirement pension.

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Uncertain of whether he qualified for the grandfather provision, Parsons contacted

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Zenith’s Pension Department for guidance and informed Henry Dobbs (“Dobbs”) that he

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would not be 55 until October 26, 2010. In response, Dobbs stated that he w ould have to

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wait until after the Trustees’ July 1, 2010 meeting to determine whether Parsons qualified

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under the grandfather provision. On July 2, 2010, Parsons met with Dobbs again to discuss

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whether he qualified for the grandfather provision. Parsons again informed Dobbs that he

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was currently 54 and would not be 55 until October 26, 2010. Dobbs represented to

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Parsons that he qualified regardless because Parson could apply for early retirement

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before August 1, 2010, obtain an allowed three-month deferral of his early retirement-

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pension-benefit-starting date, and be 55 in time to receive his first benefit check on

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November 1, 2010. Based on Dobb’s representation, Parsons subm itted his application for

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an early retirement pension, and retired July 31, 2010.

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A while after Parsons retired, Dobbs phoned and informed him that because he was

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not yet 55 when he had submitted his pension application, he did not qualify for the

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grandfather provision and his benefit amount would be calculated under the new rule. His

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benefits under the new rule would result in him receiving $1,900 per month, which is less

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than half of the $3,959.96 per month amount he had been led to believe he would receive.

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Parsons appealed to the Trustees and was denied. Parsons, thereafter, informed

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Zenith that he did not intend to continue with the retirement application process. When

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Parsons returned to work, he was forced to take a lower level position causing him to suffer

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significant wage loss.

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I. Whether the Lawsuit is Timely

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The Trustees move to dismiss Parsons’ Complaint for being untimely under the

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provisions of the Plan document. 29 U.S.C. § 1133 requires that ERISA plans provide a

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procedure for Plan beneficiaries to appeal denial of benefits. In this case, the Plan
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document states “the applicant will have ninety (90) days after completing the appeals

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process and being denied to file suit.” First Amended Complaint, Ex. 1 Part 2 at RP 50

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(15.10). The Trustees assert that where an ERISA plan contains a provision limiting time

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allowed to file a lawsuit following an appeal denying benefits, it is enforceable and binding

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on the participants. Northlake Regional Medical Center v. Waffle House Sys. Employee

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Benefit Plan, 160 F.3d 1301, 1303 (11 th Cir. 1998). Courts have found periods as short as

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45 and 90 days to be reasonable. Davidson v. Wal–Mart Assocs. Health & Welfare Plan,

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305 F.Supp.2d 1059 (S.D.Iowa 2004). Other District Courts in the Ninth Circuit have held

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that limitation periods specified by plans are valid and enforceable unless they are

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unreasonable. Spinedex Physical Therapy, U.S.A., Inc. v. United Healthcare of Arizona,

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Inc., CV-08-00457-PHX-ROS, 2012 WL 8169880 (D. Ariz. Oct. 19, 2012) (citing Sousa v.

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Unilab Corp. Class II (Non–Exempt) Members Group Benefit Plan, 252 F.Supp.2d 1046,

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1055 (E.D.Cal.2002)). However, the Ninth Circuit has yet to adopt the rule that limitation

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provisions in Plan documents are binding on the participants. Section 1113(b) of Title 29 of

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the U.S. Code allows Plan beneficiaries three years from the earliest date of knowledge of

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the breach of fiduciary duty to file a complaint.

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Parsons counters that his suit is not barred by the 90-day provision in the Plan

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because he is not appealing a decision of the Board, but is instead suing them for breach

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of a fiduciary duty. Parsons points out his assertion, in a footnote in his complaint, that he

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is not contesting the Trustees’ decision to deny him benefits under the grandfather

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provision.

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Whether Parsons’ complaint is timely presents a close question. Though Parsons

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asserts he is not appealing the decision of the Trustees, the underlying factual basis of his

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complaint concerns that very decision. But for the Trustees’ decision to deny Parsons an

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early retirement benefit under the grandfather provision, this suit could not have been

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brought.
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Nevertheless, the Court will not decide this question because, assuming the suit is
timely, the defendants are entitled to having this suit dismissed on the merits.

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II. Breach of Fiduciary Duty

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Congress enacted ERISA to protect participants and benef iciaries of employee

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benefit plans without discouraging employers from offering such plans. Bins v. Exxon Co.,

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220 F.3d 1042, 1047 (9 th Cir. 2000) (quoting (Varity Corp. v. Howe, 516 U.S. 489, 497

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(1996)). ERISA establishes “standards of conduct, responsibility, and obligations for

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fiduciaries,” and provides plan participants and beneficiaries with “appropriate remedies . .

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. and ready access to the Federal courts.” ERISA § 2(b), 29 U.S.C. § 1001(b)(quoted in

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Varity, 516 U.S. at 513). Pursuant to 29 U.S.C. § 1104(a)(1)(B), a statutory duty is created

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requiring that a “fiduciary shall discharge his duties . . . with the care, skill, prudence, and

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diligence under the circumstances then prevailing that a prudent man acting in a like

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capacity and familiar with such matters would use in the conduct of an enterprise of like

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character and with like aims.” Based largely on the statutory duty of loyalty, federal courts

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acting under ERISA have imposed a duty of truthfulness and completeness in

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communicating with participants and beneficiaries about the plan. 29 U.S.C. § 1104(a)(1);

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Varity, 516 U.S. at 504. A claim for misrepresentation against an ERISA fiduciary exists

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where the plaintiff establishes that: (i) the defendant was acting as a plan fiduciary; (ii) the

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defendant made misrepresentations; (iii) the misrepresentations were material; and (iv) the

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plaintiff relied on the misrepresentations to his detriment. Carr v. International Game

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Technology, 53 Employee Benefits Cas. 2354, 2 (D. Nev. March 16, 2012) (citing In re

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Computer Sciences Corp. Erisa Litigation, 635 F. Supp.2d 1128, 1140 (C.D. Cal. 2009)).

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The Ninth Circuit requires ERISA misrepresentation claims to be pleaded with particularity.

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Concha v. London, 62 F.3d 1493, 1502 (9 th Cir. 1995).

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(i) Whether Defendant Acted as a Plan Fiduciary

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Parsons has the burden of showing that Zenith was acting as a Plan fiduciary or

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delegated agent of the Trustees when Dobbs communicated with Parsons regarding

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retirement eligibility and that the Trustees breached a fiduciary duty by not interpreting

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ambiguous language. ERISA expressly limits liability for fiduciary breach to ERISA

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fiduciaries. Wright v. Or. Metallurgical Corp., 360 F.3d 1090, 1102 (9 th Cir. 2004). To qualify

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as an ERISA fiduciary, an individual or entity must either be named or designated as a

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fiduciary under the terms of an ERISA plan or act as a “functional” fiduciary with respect to

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an ERISA plan by exercising discretionary control over the management or administration

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of the plan or its assets. 29 U.S.C. §1102(a); 29 U.S.C. § 1002(2)(1)(A). ERISA f iduciaries

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may be held liable as such only “to the extent” that they exercise discretionary control over

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the management or administration of a plan or its assets. 29 U.S.C. §1002(21)(A); Pegram

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v. Herdrich, 530 U.S. 211, 225-26 (2000). Therefore, to qualify as a fiduciary, a plan

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administrator must have the discretion to interpret provisions of the plan document and to

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make final decisions, even in the face of dispute, as to eligibility and benefits. Chaganti v.

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Ceridian Benefits Services, Inc., 208 Fed.Appx. 541, 547 (9 th Cir. 2006) (citing IT Corp. v.

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General American Life Ins., 107 F.3d 1415 (9 th Cir. 1997)).

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Parsons alleges that Zenith had discretionary authority and responsibility by virtue of

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the Contract and the Plan description document (“Description”). As per the terms of the

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Contract, Zenith provided “certain administrative services for the operation of the Trust (and

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its associated benefit plan).” First Amended Complaint, Ex.2 at 1. The Contract provides

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that,

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“[t]he Administrator [Zenith Administrators, Inc.] shall have the authority and
responsibility for general administration and day to day operation of the Trust and
Plan, as specified in this Agreement . . . [s]pecifically, and not by way of limitation,
the Administrator shall receive and process employer contributions, pay benefits on
behalf of the Trust, and prudently and appropriately document and record all
transactions relating thereto.”

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The authority given to Zenith through the Contract was not a delegation of

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discretion to make final decisions. The Contract listed Zenith’s authority as managing

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the operations of the Trust such as accepting paperwork, distributing information, and

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managing files. While the Contract granted Zenith authority to perform administrative

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functions necessary to operating the Plan, it did not specifically delegate authority to

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make final decisions regarding eligibility or interpretation. However, Zenith does not

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controvert Parsons’ allegations that Dobbs was acting in a fiduciary function.

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(ii) Whether Defendant Made Misrepresentations

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To participate knowingly and significantly in deceiving a plan's beneficiaries in order

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to save the employer money at the beneficiaries' expense is not to act “solely in the interest

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of the participants and beneficiaries.” Varity, 516 U.S. at 506. Trust law imposes a duty,

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when dealing with the beneficiary on the trustee’s own account, “to communicate to the

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beneficiary all material facts in connection with the transaction which the trustee knows or

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should know.” Mathews v. Chevron Corp., 362 F.3d 1172, 1183 (9 th Cir. 2004)(citing

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Restatement (Second) of Trusts § 173 cmt. d (1959)(emphasis added)). The Ninth Circuit

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adopted a rule stating that a fiduciary “may not actively misinform its plan beneficiaries

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about the availability of future retirement benefits to induce them to retire earlier than they

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otherwise would. Wayne v. Pacific Bell, 238 F.3d 1048, 1051 (9 th Cir. 1999) (quoting

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Ballone v. Eastman Kodak Co., 109 F.3d 117, 124 (2 nd Cir. 1997)). However, the Ninth

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Circuit declined to take the duty further by creating liability for negligent misstatements.

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Mathews, 362 F.3d at 1183. Such a standard would be an oxymoronic command not to

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“negligently actively misinform” and would provide confusing guidance to ERISA fiduciaries.

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Id.

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Since Parsons’ claim is for breach of a fiduciary duty by misrepresentation, Parsons

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must show that the statement was a misrepresentation because Dobbs had a duty to know
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the correct interpretation of “eligible for early retirement.” Under Ninth Circuit precedent in

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Mathews, whether Dobbs actively misrepresented or negligently misstated depends on

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Dobbs’ duty to know the correct interpretation. The factual bases for Parsons’ allegations

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must show not just that Dobbs’ statement was incorrect, but that Dobbs had a duty to know

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the correct interpretation.

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The Plan Description names Zenith six times. The first two times, Zenith is named

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as the Administrative Office along with their contact information. First Amended Complaint,

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Ex. 1 Part 1 at RP 2-3. The third and fifth times, the Description directs Plan beneficiaries

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to contact Zenith to obtain an application f or benefits. Id. at RP 21 and 23. The fourth time,

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Zenith is named as an agent for service of legal process. Id. at RP 22. None of the

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previous mentions of Zenith in the Description indicate that Zenith has a duty to know or

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interpret the Plan. The controversy occurs with the sixth mention of Zenith in the

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Description. The Description instructs Plan beneficiaries to complete and return the

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application to the Administrative Office [Zenith], and “a person in the Administrative Office

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will review with you the different ways you may receive your retirement benefit.” Id. The

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Description then instructs Plan beneficiaries “if you have questions about your benefits or

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how to make the application, contact the Administrative Office.” Id. While this provision

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states that Zenith had the responsibility to answer questions and review options concerning

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Plan benefits, the controversy is whether this is sufficient to delegate a duty to know the

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correct interpretation. The Ninth Circuit has held that communicating with beneficiaries

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about “their rights and [] options under the plan” is not a f iduciary act. CSA 401(K) Plan v.

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Pension Professionals, Inc., 195 F.3d 1135, 1139n.2 (9 th Cir. 1999) (quoting Section

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2509.75-8 of the Department of Labor regulations). Since communicating with beneficiaries

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regarding their rights and options is not a fiduciary act, delegating the responsibility to

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communicate cannot be a delegation of fiduciary duty.

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Parsons offers the Contract as further evidence of Zenith’s or Dobbs’ duty to know.

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The Contract states that “[the] Administrator [Zenith] shall have the authority and

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responsibility for general administration and day to day operation of the Trust and Plan, . . .

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[s]pecifically, and not by way of limitation, the Administrator shall receive and process

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employer contributions, pay benefits on behalf of the Trust, and prudently and appropriately

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document and record all transactions relating thereto.” First Amended Complaint, Ex. 2 at

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Art. 2.1. This article of the Contract provides Zenith with authority and responsibility for

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managing the business of the Trust, but is not a delegation of authority to interpret the Plan

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or a duty to know the correct interpretation of the Plan. It only delegates the authority to

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manage the business of the Trust.
Parsons alleges that he met with Dobbs because he did not know what the Board

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meant by “eligible for early retirement” as used in the Notice. However, the last

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sentence of that Notice states, “if you have any questions about this [Notice], please

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write to the Trustees.” First Am. Complaint, Ex. 3 RP 63. The writing in the Notice

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granted only the Trustees the ability to answer questions regarding the Notice. The

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Notice does not indicate that Dobbs or Zenith would be able to interpret the Plan with

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authority.

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The Plan document does not establish that Dobbs or Zenith had any duty to know
the correct interpretation of the Plan. The Plan document states:
“The Trustees have the exclusive right, power[,] and authority in their sole and
absolute discretion, to administer, apply[,] and interpret the Plan and all other
documents that describe the Plan and Trust Fund.”

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First Amended Complaint, Ex. 1 Part 2 at RP 50, 15.2. The Plan document clearly names

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the Trustees as having sole discretion and authority to interpret the Plan. Neither Dobbs

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nor Zenith is named at all in the Plan document or given a duty to interpret or know the

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Plan.

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The plaintiff alleges in his First Amended Complaint ¶ 46 that Dobbs’ statement may

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have been mistaken. First Amended Complaint at ¶ 46. Mistaken implies that Dobbs was

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giving an opinion and did not have authority to interpret the Plan. Under Ninth Circuit

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precedent set forth in Mathews, without the authority to interpret, Dobbs’ statement would

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be, at most, a negligent misstatement The Ninth Circuit declined to extend liability for

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negligent misstatements. Parsons has failed to show that Zenith or Dobbs made an active

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misrepresentation.

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(iii) Whether the Misrepresentations were Material
ERISA has an elaborate scheme in place for enabling beneficiaries to learn their

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rights and obligations at any time, a scheme that is built around reliance on the face of

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written plan documents. Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 83 (1995).

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Because §1102 provides that “[e]very employee benefit plan shall be established and

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maintained pursuant to a written instrument,” courts have held that oral agreements or

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modifications cannot be used to contradict or supersede the w ritten terms of an ERISA

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plan. Richardson v. Pension Plan of Bethlehem Steel Corp., 112 F.3d 982, 986 (9 th Cir.

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1997). The ERISA writing requirement protects a plan’s actuarial soundness by precluding

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plan administrators from contracting to pay benefits to persons not entitled to them under

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the express terms of the plan. Greany v. W. Farm Bureau Life Ins. Co., 973 F.2d 812, 822

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(9th Cir. 1992). A plaintiff cannot avail himself of a federal ERISA estoppel claim based

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upon statements of a plan employee which would enlarge his rights against the plan

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beyond what he could recover under the unambiguous language of the plan itself. Id.

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Parsons alleges that Dobbs’ statement was material in his decision to retire early.

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Without Dobbs’ statement regarding his eligibility, Parsons would not have retired. Parsons

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never alleges that he referenced the Plan document in his decision. Under the precedent

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set by the Supreme Court and Ninth Circuit in previous ERISA cases, Dobbs could not
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make an oral agreement that superseded or contradicted the express written terms of the

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Plan document. Parsons alleges that Dobbs’ statement was a reasonable interpretation

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based on the Description and Notice. However, the Supreme Court has held that

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descriptions “provide communication about the plan, but that their statem ents do not

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themselves constitute the terms of the plan. CIGNA Corp. v. Amara, 131 S.Ct. 1866, 1878

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(2011). Parsons must present a factual basis showing that “eligible for early retirement” as

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used in the Plan document is ambiguous, and Dobbs’ statement was a reasonable

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interpretation. The Plan document defines eligible for early retirement as:

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“A Participant may retire on the first day of any month before the Normal
Retirement Date if the Participant has:
A. Attained at least age 55, and
B. Has ten years of Credited Past and Future Service of which at least two
years must be Credited Future Service.

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First Amended Complaint, Ex. 1 Part 2 at RP 33, 4.03. Later in the sam e article, the Plan

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document states that the early retirement date becomes the “Pension Benefit Starting

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Date.” Id. at RP 34. The express written terms of the Plan document clearly define early

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retirement not as a process but a date that is synonymous with the start of receiving

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benefits. Therefore, Parsons has not shown a factual basis that “eligible for early

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retirement” as written in the Plan document was ambiguous. As a result, he necessarily

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cannot show that Dobbs’ statement was a reasonable interpretation of the non-existent

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ambiguity.

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(iv) Whether Plaintiff Relied on the Representations to his Detriment

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The Ninth Circuit has established that a Plan benef iciary may recover benefits under

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the equitable estoppel only if they can show a reasonable and detrimental reliance on the

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representations of the fiduciary. Pisciotta v. Teledyne Industries, Inc., 91 F.3d 1326, 1331

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(9th Cir. 1996). However, the Supreme Court held that a fiduciary can be surcharged under

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§502(a)(3) only upon showing of actual harm – proved (under the default rule for civil

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cases) by a preponderance of the evidence. CIGNA, 131 S. Ct. at 1883.

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Parsons has shown that he was harmed by his reliance on Dobbs’ statement.

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Parsons terminated his employment as head flyman under the assumption that his benefits

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would be calculated under the old rule. Under the old rule, Parsons w ould have been

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entitled to a monthly pension of $3,959.96. Under the new rule, Parsons was entitled to a

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monthly pension of only $1,900 or less than half the amount calculated under the old rule.

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Parsons stated that he would not be financially able to live on the monthly pension

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calculated under the new rule. He returned to employment, but could not get a job at an

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equal level to his previous employment. He has shown financial harm. Defendants do not

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dispute that Parsons suffered harm as a result of his relying on the statement made by

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Dobbs.

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In conclusion, the Ninth Circuit requires that claims of misrepresentation be pleaded

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with particularity. Parsons has not shown a factual basis establishing all the elements

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necessary to a claim for misrepresentation. Parsons has failed to show that the statement

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by Dobbs was a misrepresentation or that the misrepresentation was material.

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As for Parsons’ allegation that the Trustees breached fiduciary duty by not informing

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him that he did not qualify for the grandfather clause, 29 USC §1140 makes it unlawful for

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the plan sponsor or any other person to discriminate against any person seeking to

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exercise their rights under the plan. Parsons can exercise his rights by applying for

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retirement at anytime. The Trustees do not have a duty to prevent Parsons from applying

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for retirement.

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In order for Parsons to show that the Trustees breached a co-fiduciary duty, he must

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show that Zenith was acting as a Plan fiduciary or delegated agent of the Trustees when

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Dobbs communicated with Parsons regarding retirement eligibility.

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Parsons must first state one or more valid claims for breach of fiduciary duty under

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ERISA before he may allege a claim for breach of duties and responsibilities as co-

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fiduciaries. Carr, 770 F.Supp.2d at 1096. ERISA expressly limits liability for fiduciary breach

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to ERISA fiduciaries. Wright, 360 F.3d at 1102. ERISA fiduciaries may be held liable as

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such only “to the extent” that they exercise discretionary control over the management or

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administration of a plan or its assets. 29 U.S.C. §1002(21)(A); Pegram, 530 U.S. at 225-26.

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Therefore, in the Ninth Circuit, to qualify as a fiduciary, a plan administrator must have the

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discretion to interpret provisions of the plan document and to make final decisions, even in

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the face of dispute, as to eligibility and benefits. Chaganti, 208 Fed.Appx. at 547 (citing IT

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Corp. v. General American Life Ins., 107 F.3d 1415 (9 th Cir. 1997)). Communicating with

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beneficiaries about “their rights and . . . options under the plan” is not a f iduciary act.

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Pension Professionals, 195 F.3d at 1139 n.2 (quoting Section 2509.75-8 of the Department

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of Labor regulations). Thus, in every case charging breach of ERISA fiduciary duty, the

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threshold question is not whether the actions of some person providing services under the

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plan adversely affected a beneficiary’s interest, but whether that person was performing a

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fiduciary function when taking the action subject to complaint. Pegram, at 226. A

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defendant’s fiduciary status under ERISA may be decided on a motion to dismiss. Wright,

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360 F.3d at 1101-02.

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To show that the Trustees breached a co-fiduciary duty, Parsons must show that

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Dobbs was performing a fiduciary function when he met with Parsons to discuss his

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eligibility. Neither Zenith nor Dobbs is named as a fiduciary by the Plan document. As

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previously discussed, Parsons has not shown that Dobbs had the duty to know the correct

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interpretation and also that Dobbs was performing a fiduciary act. Parsons’ allegation rests

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on the assertion that Dobbs was performing a fiduciary act when he advised Parsons that

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he met the eligibility requirement. If Dobbs was not performing a fiduciary act, Parsons

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cannot bring a claim for breach of co-fiduciary duty against the Trustees.
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III. Equitable Estoppel
Parsons prays for equitable relief pursuant to 29 USC § 1132(a)(3) and that Zenith

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and the Trustees be estopped from denying the oral representations made to Parsons.

4

Section 1132(a)(3) provides for a plan participant to bring a civil action “(A) to enjoin any

5

act or practice which violates any provision of this subchapter or the terms of the plan, or

6

(B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce

7

any provisions of this subchapter or the terms of the plan.” 29 U.S.C. § 1132(a)(3). The

8

Supreme Court has interpreted the term “appropriate equitable relief” in §1132(a)(3), as

9

referring to those categories of relief that, traditionally speaking (i.e., prior to the merger of

10

law and equity) were typically available in equity. CIGNA, 131 S. Ct. at 1878. Courts should

11

consider (A) whether surcharge and estoppel are remedies available under § 502(a)(3);

12

and (B) whether, based on the facts, the plaintiff can establish an equitable basis for

13

surcharge or estoppel. Amara v. CIGNA Corp., – F.Supp.2d --, 84 Fed.R.Serv.3d 422 (D.

14

Conn. Dec. 20, 2012).

15
16
17

(i) Surcharge and Estoppel Available
When considering equitable remedies in regard to the Supreme Court’s holding in

18

CIGNA, attention should be given to the argument raised by Justice Scalia in his

19

concurrence that the Supreme Court's pronouncement about the availability of surcharge,

20

reformation, and estoppel under ERISA § 502(a)(3) as “blatant dictum .” CIGNA, 131 S.Ct.

21

at 1884 (Scalia, J., concurring). Justice Scalia cautioned:

22
23

“The Court's discussion of the relief available under § 502(a)(3) and Mertens is
purely dicta, binding upon neither us nor the District Court. The District Court need
not read any of it—and, indeed, if it takes our suggestions to heart, we may very
well reverse.”

24
Id. at 1876; Mertens v. Hewitt Associates, 508 U.S. 248, 256 (1993). Other federal courts
25
citing CIGNA have tended to agree that the Supreme Court's discussion of the availability
26
15

1

of surcharge and estoppel under § 502(a)(3) is dicta. Amara, – F. Supp.2d at --; See, e.g.,

2

Sergent v. McKinstry, 472 B.R. 387, 412 (E.D.Ky.2012); Biglands v. Raytheon Emp. Sav. &

3

Inv. Plan, 801 F.Supp.2d 781, 786 (N.D.Ind.2011); N. Cypress Med. Ctr. Operating Co. v.

4

CIGNA Healthcare, No. 4:09–CV–2556, 2011 W L 5325785, at *9 (S.D.Tex. Nov. 3, 2011).

5

The Ninth Circuit also acknowledged that the discussion of estoppel and surcharge in

6

CIGNA is dicta. Skinner v. Northrop Grumman Retirement Plan B, 673 F.3d 1162, 1165 (9 th

7

Cir. 2012).

8

Normally, the doctrine of equitable estoppel is available to an ERISA plaintiff,

9

assuming the plaintiff can meet a five-pronged test. Greany, 973 F.2d at 821-22. However,

10

Ninth Circuit precedent states that an equitable estoppel argument is not available to an

11

ERISA plaintiff where the ERISA plan at issue is a trust fund, and recovery would contradict

12

the written terms of the plan. Kessler v. ADT Sec. Servs., Inc., 33 F. App’x 850, 852 (9 th Cir.

13

2002) (citing Greany, 973 F.2d at 822. Section §1132(a)(3) “does not, af ter all, authorize

14

‘appropriate equitable relief’ at large, rather, it countenances only such relief as will enforce

15

“the terms of the plan” or the statute. US Airways, Inc. v. McCutchen, 133 S. Ct. 1537,

16

1548 (2013)(quoting Mertens, 508 U.S. at 253). Also, the Supreme Court has held that a

17

plaintiff could seek restitution in equity, where money belonging to the plaintiff can be

18

traced to particular funds or property in the defendant’s possession. Great–West Life &

19

Annuity Ins. Co. v. Knudson, 534 U.S. 204, 213 (2002) (citing Restatement of Restitution §

20

160, Comment a, pp. 641-642 (1936)). Nevertheless, where “the property [sought to be

21

recovered] or its proceeds have been dissipated so that no product remains, [the plaintiff’s]

22

claim is only that of a general creditor.” Id.; Bilyeu v Morgan Stanley Long Term Disability

23

Plan, 683 F.3d 1083, 1095 (9 th Cir. 2012) (quoting CIGNA, 131 S. Ct. at 1879). The action

24

generally must seek not to impose personal liability on the defendant, but to restore to the

25

plaintiff particular funds or property in the defendant’s possession. Id. at 213-14. “[T]he fact

26
16

1

that this relief takes the form of a money payment does not remove it from the category of

2

traditionally equitable relief.” CIGNA, 131 S.Ct. at 1880.

3

Parsons’ prayer for equitable relief is to be made whole through compensation for

4

the losses he suffered to his future rights by surcharging the Trustees and Zenith for the

5

difference between what Parsons will earn and what he would have earned had he not

6

been induced into retiring. He also seeks the difference between what he will contribute to

7

the Plan and what he would have contributed had he not been induced to retire. Parsons

8

claims that this type of remedy is available because he is not seeking past damages, but to

9

be reinstated to a right that he would have possessed had he not been induced into

10

retirement. He cites CIGNA to show that, although he is asking for relief in the form of

11

money payment, this does not remove it from the category of equitable relief. However, the

12

discussion of equitable estoppel and surcharge in CIGNA has been considered dicta by the

13

Ninth Circuit and is not binding on this Court.

14

Parsons must show that his claim for equity is not in contradiction to the written

15

terms of the Plan. The Plan at issue is an ERISA plan and a trust f und, so under the

16

Supreme Court’s ruling in McCutchen, appropriate equitable relief is not available at large;

17

Parsons must show that this type of relief will enforce the written terms of the Plan. Further,

18

Parsons must show a factual basis that Zenith and the Trustees have possession of a

19

particular fund or property that is rightfully his. If Parsons’ claims are only to impose

20

personal liability on the defendants, then he seeks money damages. Parsons has made no

21

claim to a particular fund or property. His claim is for compensation for future losses. Since

22

there is no particular fund in Zenith’s or the Trustees’ possession to be transferred to

23

Parsons, this remedy imposes personal liability on Zenith and the Trustees. Further,

24

Parsons alleges “he does not contest in this litigation the Board’s interpretation of the Plan

25

or decision that Parsons is not entitled to have his benefits calculated under the old rule

26

pursuant to that interpretation.” First Amended Complaint, Doc. 30 at n.3. The relief that
17

1

Parsons seeks is not to enforce the written provisions of the Plan, but to compensate him

2

for wages that he will not earn. That is not proper equitable relief under ERISA.

3
4
5

(ii) Factual Basis for Estoppel or Surcharge
A beneficiary may recover benefits under ERISA based on an equitable estoppel

6

theory, if he shows: (1) a material misrepresentation; (2) reasonable and detrimental

7

reliance on the representation; (3) extraordinary circumstances; (4) the provisions of the

8

plan at issue are ambiguous, such that reasonable persons could disagree as to their

9

meaning or effect; and (5) the representations must have been made to the beneficiary

10

involving an oral interpretation of the plan. Pisciotta, 91 F.3d at 1331. Moreover, a

11

beneficiary cannot obtain recovery on the basis of estoppel “in the face of contrary, written

12

plan provisions.” Renfro, 686 F.3d at 1054 (citing Davidian v. S. California Meat Cutters

13

Union and Food Employees Ben. Fund, 859 F.2d 134, 134 (9 th Cir. 1988)).

14
15
16

(1) Material Misrepresentation
As discussed previously, §1102 provides that “[e]very employee benefit plan shall be

17

established and maintained pursuant to a written instrument,” and courts have held that

18

oral agreements or modifications cannot be used to contradict or supersede the w ritten

19

terms of an ERISA plan. Richardson, 112 F.3d at 986. A plaintiff cannot avail himself of a

20

federal ERISA estoppel claim based upon statements of a plan employee, which would

21

enlarge his rights against the plan beyond what he could recover under the unambiguous

22

language of the plan itself. Greany, 973 F.2d at 822. Parsons failed to present a factual

23

basis showing that “eligible for early retirement” as used in the Plan document is

24

ambiguous. The express written terms of the Plan document clearly define early retirement

25

not as a process but a date that is synonymous with the start of receiving benefits. Parsons

26
18

1

is not entitled to equitable relief in contradiction to the express written terms of the Plan

2

document.

3
4

(2) Reasonable and Detrimental Reliance

5

A fiduciary can be surcharged under §502(a)(3) only upon showing of actual harm –

6

proved (under the default rule for civil cases) by a preponderance of the evidence. CIGNA,

7

131 S. Ct. at 1883. That actual harm may sometimes consist of detrimental reliance, but it

8

might also come from the loss of a right protected by ERISA or its trust-law antecedents.

9

Id. To obtain relief by surcharge for violations of §§ 102(a) and 104(b), a plan participant or

10

beneficiary must show that the violation injured him or her. Id. But to do so, he or she need

11

only show harm and causation. Id. Although it is not always necessary to meet the more

12

rigorous standard implicit in the words “detrimental reliance,” actual harm must be shown.

13

Id. at 1883-84.

14

As previously discussed, Parsons has shown that he was harmed by his reliance on

15

Dobbs’ statement. Defendants do not dispute that Parsons suf fered harm as a result of his

16

relying on the statement made by Dobbs.

17
18

(3) Extraordinary Circumstances

19

Parsons has not shown any factual basis for extraordinary circumstances. The Ninth

20

Circuit does not have a set precedent on what constitutes extraordinary circumstances, and

21

this Court declines to find that the present set of facts as alleged by Parsons amounts to

22

extraordinary circumstances.

23
24

(4) Ambiguous Provisions

25

“[T]he validity of a claim to benefits under an ERISA plan is likely to turn on the

26

interpretation of terms in the plan at issue.” Firestone Tire & Rubber Co. v. Bruch, 489 U.S.
19

1

101, 115 (1989). The intended meaning of even the most explicit language can only be

2

understood in the light of the context that gave rise to its inclusion. McDaniel v. Chevron

3

Corp., 203 F.3d 1099 (9 th Cir. 2000). In order to allege a claim for equitable estoppel, the

4

provisions of the plan at issue must be ambiguous such that reasonable persons could

5

disagree as to their meaning or effect. Pisciotta, 91 F.3d at 1331 (citing Greany, 973 F.2d

6

at 821). Otherwise, courts assign meaning to the terms “in an ordinary and popular sense

7

as would a [person] of average intelligence and experience,” and will not “artificially create

8

ambiguity where none exists.” Deegan v. Continental Cas. Co., 167 F.3d 502, 507 (9 th Cir.

9

1999) (citing Evans v. Safeco Life Ins. Co., 916 F.2d 1437, 1441 (9 th Cir. 1985)). Whether

10

the terms of a plan are plain or ambiguous is a matter of law. McDaniel, 203 F.3d at 1110.

11

Parsons must show a factual basis indicating that “eligible for retirement” as used in

12

the Plan is ambiguous. Parson alleges that he did not know what the Trustees meant by

13

“eligible for retirement”. He further alleges that neither the Notice nor the Plan was specific

14

as to the whether “eligible for retirement” meant eligible to apply for retirement before

15

August 1, 2010 or whether it meant eligible to receive retirement benefits before August 1,

16

2010. Parsons offers two dictionary definitions for retirement – (1) the “act of retiring” or (2)

17

the “state of being retired.” Merriam Webster’s Collegiate Dictionary 1064 (Frederick C.

18

Mish ed., 11th ed., Merriam-Webster, Inc. 2003). The former indicates a process whereas

19

the latter indicates a state of being. Parsons alleges that the two definitions show that

20

“retirement” is dichotomous and that “eligible for retirement” could reasonably mean eligible

21

to apply for retirement within the “act of retiring” definition. However, as indicated by Ninth

22

Circuit precedent, the dictionary is a helpful tool of interpretation, but it is the context of the

23

Plan that gives the weightier definition.

24

Use of “retirement” within the written plan document is more consistent with the

25

“state of being” definition. As previously noted, the Plan document defines eligible for early

26

retirement:
20

1
2
3

“A Participant may retire on the first day of any month before the Normal
Retirement Date if the Participant has:
A. Attained at least age 55, and
B. Has ten years of Credited Past and Future Service of which at
least two years must be Credited Future Service.

4

First Amended Complaint, Ex. 1 Part 2 at RP 33, 4.03. Later in the sam e article, the Plan

5

document states that the early retirement date becomes the “Pension Benefit Starting

6

Date.” Id., at RP 34. According to the express written terms of the Plan document, early

7

retirement is not a process but a date that is synonymous with the start of receiving

8

benefits. The written terms of the plan are not ambiguous. Parsons’ dictionary definitions

9

are an artificial construction of ambiguity. Therefore, Parsons has not shown a factual

10

basis that “eligible for early retirement” was ambiguous and that Dobbs’ statement was a

11

reasonable interpretation.

12
13
14

(5) Oral Interpretation
ERISA equitable estoppel is limited to situations where the wronged party can prove

15

(a) the provisions of the plan at issue are ambiguous and (b) oral representations

16

interpreting the plan were made to the employee. Qualls By and Through Qualls v. Blue

17

Cross of California, Inc., 22 F.3d 839, 845-46 (9 th Cir. 1994). However, oral agreements or

18

modifications cannot be used to contradict or supersede the w ritten terms of an ERISA

19

plan. Richardson, 112 F.3d at 986.

20

Parsons failed to show that Dobbs’ oral statement was a reasonable interpretation of

21

the Plan document. Dobbs’ interpretation was based on the Notice and the Description.

22

Parsons’ arguments for ambiguity were negated by the express written terms of the Plan

23

document. Dobbs’ oral interpretation cannot supersede the written terms of the Plan

24

document.

25
26
21

1
2

IV. Negligence
Parsons’ second claim, in the event that Zenith is found not to be a fiduciary, is a

3

negligence claim against Zenith under Nevada law. ERISA includes “expansive pre-

4

emption provisions” that are designed to “ensure that employee benefit plan regulation

5

‘would be exclusively a federal concern.’” Aetna Health Inc. v. Davila, 542 U.S. 200, 208

6

(2004) (quoting Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523 (1981)).

7

Consequently, “any state-law cause of action that duplicates, supplements, or supplants

8

the ERISA civil enforcement remedy conflicts with the clear congressional intent to make

9

the ERISA remedy exclusive and is therefore pre-empted.” Id. Meaning, ERISA’s

10

preemptive provisions “defeat state-law causes of action on the merits.” Fossen v. Blue

11

Cross and Blue Shield of Mont., Inc., 660 F.3d 1102, 1107 (9 th Cir. 2011). Section 514(a) of

12

ERISA, generally “supersede[s] any and all State laws insofar as they may now or

13

hereafter relate to any employee benefit plan.” 29 U.S.C. § 1144(a). “A ‘law ‘relate[s] to’ a

14

covered employee benefit plan for purposes of § 514(a) ‘if it [1] has a connection with or [2]

15

reference to such a plan.’” California Div. of Labor Standards Enforcement v. Dillingham

16

Const., N.A., Inc., 519 U.S. 316, 324, (1997) (quoting District of Columbia v. Greater

17

Washington Bd. of Trade, 506 U.S. 125, 129 (1992)). It is well established that “[a] state

18

cause of action that would fall within the scope of this scheme of remedies is preempted as

19

conflicting with the intended exclusivity of the ERISA remedial scheme, even if those

20

causes of action would not necessarily be preempted by section 514(a).” Cleghorn v. Blue

21

Shield of Cal., 408 F.3d 1222, 1225 (9th Cir.2005). Any conflicting state-law claim that

22

could have been brought under section 502(a) and does not implicate a legal duty

23

independent of ERISA, is completely preempted. Marin Gen. Hosp. v. Modesto & Empire

24

Traction Co., 581 F.3d 941, 945 (9th Cir.2009) (citing Davila, 542 U.S. at 210, 124 S.Ct.

25

2488). The Supreme Court suggested, in Pilot Life Insurance Co. v. Dedeaux, that ERISA’s

26

civil enforcement provisions contained in §502 of the Act impliedly preempt all of a plan
22

1

participant’s state law remedies in any action asserting improper processing of a claim for

2

benefits. 481 U.S. 41, 57 (1987).The savings clause then exempts from preemption any

3

state law “which regulates insurance, banking, or securities.” 29 U.S.C. § 1144(b)(2)(A).

4

The Ninth Circuit provided the following guidance:

5
6
7
8
9

The key to distinguishing between what ERISA preempts and what it does not lies,
we believe, in recognizing that the statute comprehensively regulates certain
relationships: for instance, the relationship between plan and plan member,
between plan and employer, between employer and employee (to the extent an
employee benefit plan is involved), and between plan and trustee. Because of
ERISA’s explicit language, and because state laws regulating these relationships
(or the obligations flowing from these relationships) are particularly likely to
interfere with ERISA’s scheme, these laws are presumptively preempted.

10

General American Life Ins. Co. v. Castonguay, 984 F.2d 1518, 1521 (9th Cir.1993)

11

(internal citations omitted).

12

Parsons bears the burden of showing that his negligence claim against Zenith is not

13

pre-empted by ERISA. Parsons claims that his relationship with Zenith is the result of his

14

being a third-party beneficiary to the Contract between the Trustees and Zenith. He claims

15

that this relationship creates a legal duty independent of the ERISA. Zenith is not named or

16

mentioned in the Plan document, therefore, Parsons alleges that his relationship with

17

Zenith is not a part of the ERISA Plan. Parsons compares his relationship with Zenith to

18

that of a service provider. However, Parsons has offered no factual basis showing that his

19

claim could have arisen without a relationship to the Plan. Zenith did not hav e any

20

relationship with either Parsons or the Trustees outside ERISA regulation.

21

As previously ruled by this Court, Parsons’ reliance on Paulsen v. CNF Inc., 559

22

F.3d 1061 (9th Cir.2009) is misplaced. In Paulsen, the plan participants’ negligence claim

23

against the firm that provided actual services to the plan was not pre-empted. As stated by

24

the court: “The duty giving rise to the negligence claim [ran] from a third-party actuary, i.e.,

25

a non-fiduciary service provider, to the plan participants as intended third party

26

beneficiaries of the actuary’s service contract.” Id., at 1083 (emphasis added). The
23

1

provision of actuarial services to a plan is not a relationship regulated by ERISA. While the

2

actuarial firm was a non-fiduciary service provider, the duty arose from the actuary’s

3

service contract. Parsons has not alleged any facts suggesting that Zenith’s relationship to

4

himself is comparable to that of a third-party beneficiary to an actuarial services contract

5

between an actuarial firm and a plan. Rather, the facts alleged by Parsons in his complaint

6

expressly allege a relationship between Zenith and the plan arising from the management

7

or administration of the plan with respect to a plan participant.

8

Even assuming that Parsons’ allegations somehow raise a plausible inference of a

9

non-fiduciary relationship, those same allegations (which are the only allegations permitting

10

an inference of a relationship) require a determination that the relationship is nevertheless

11

regulated by ERISA. As Parsons’ negligence claim bears on an ERISA-regulated

12

relationship, it is pre-empted by § 514(a) and must be dismissed.

13
14

Accordingly,

15

THE COURT ORDERS that the Trustees’ Motion to Dismiss (#33) is GRANTED;

16

THE COURT FURTHER ORDERS that Zenith Administrators, Inc.’s Motion to

17

Dismiss (#34) is GRANTED.

18
19

THE COURT FURTHER ORDERS that the Motion for Hearing (#41) is DENIED as
moot.

20
21

DATED this ______ day of September, 2013.

22
23

Lloyd D. George
United States District Judge

24
25
26
24