Lipshires et al v. Behan Bros. Inc. Retirement Plan et al

Filing 14

MEMORANDUM AND ORDER denying 8 Motion to Dismiss for Failure to State a Claim- So Ordered by Chief Judge John J. McConnell, Jr. on 10/2/2020. (Barletta, Barbara)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND

JEFFREY LIPSHIRES; SARA
DONNELLY; and ANSELMO TONI
Plaintiffs,
v.

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BEHAN BROS., INC RETIREMENT
PLAN; BEHAN BROS., INC.;
MICHAEL J. BEHAN, JR.; and
WILLIAM P . BEHAN,
Defendant.
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C.A. No. 20-252-JJM-PAS

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MEMORANDUM AND ORDER1
JOHN J. MCCONNELL, JR., Chief United States District Judge.
Plaintiffs Jeffrey Lipshires, Sara Donnelly, and Anselmo Toni are retired
employees of Defendant Behan Bros., Inc. and former participants in Defendant
Behan Bros., Inc. Retirement Plan. They retired on different dates, but all in the
year 2018.

After the Plan-imposed one·year Break in Service, each sought to

withdraw their individual balances from the Plan, asking on January 3, 2019 for a
valuation date of December 31, 2019. 2 ECF No. 1 ,r 44. The Covid-19 pandemic hit

The facts of this case are extensive; for the purposes of this motion to dismiss,
the Court will keep its recitation of facts to a minimum, including only those
necessary to set the stage for its decision.
2 Plaintiffs had the option of taking their balances before December 31, but the
market was up, and they opted to keep their assets in the Plan through the end of the
year. They expected a December 31st valuation and specifically allege that John
Pursche, the Plan Administrator's email contact person, "represented to Lipshires
that a special valuation could not be issued under the terms of the Plan." ECF No. 1
,r 41.
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in early 2020, causing a substantial downturn in the stock market, which negatively
impacted the Plan's assets held in a pooled investment account. Despite Plaintiffs'
repeated requests for the payout numbers as of December 31st, the Plan
Administrator, through its third·party administrator Abacus, delayed giving them
the market valuation until March-when the Covid·19 pandemic had already had a
negative impact on the stock market. Id.

,r,r 45·57.

The Plan document gives the Plan Administrator deference to declare a Special
Valuation Date in "extraordinary situations" such as where there is "a significant
change in economic conditions or Market Value of the Trust Fund." Id.

,r 28.

The

Plan Administrator opted to set a Special Valuation Date of April 30, 2020 to
moderate Plaintiffs' losses. Id.

,r,r 58·61.

With the April 30, 2020 payout instead of

the December 31, 2019 payout date, Plaintiffs lost a combined $55,000.
appealed the Plan Administrator's decision and it was denied. Id.

,r,r 63·68.

They
They

took their 401k distributions without prejudice or waiver of their rights to seek the
additional amounts. Id.

,r 80.

Plaintiffs now sue under the Employee Retirement Income Security Act of
1974, as amended, 29 U.S.C. §§ 1001 et seq. (ERISA) for additional retirement
benefits from the Plan representing their respective market losses and for the Plan
Administrator's breach of fiduciary duty.

All Defendants move to dismiss the

complaint, arguing that it fails to state a claim because the pandemic market
downturn justified the Special Valuation Date and Plaintiffs' retirement account
balances have been paid in full. ECF No. 8. Defendants Michael J. Behan, Jr. and

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William P. Behan (the "Trustee Defendants") argue they should be dismissed because
they are not proper Defendants. Id. For the reasons set forth below, the Court
DENIES Defendants' motion.

I.

STANDARD OF REVIEW
Federal Rule of Civil Procedure 12(b)(6) tests the plausibility of the claims

presented in a plaintiff's complaint. "To avoid dismissal, a complaint must provide 'a
short and plain statement of the claim showing that the pleader is entitled to relief."'

Garcfa·Catalan v. United States, 734 F.3d 100, 102 (1st Cir. 2013) (quoting Fed. R.
Civ. P. 8(a)(2)). At this stage, "the plaintiff need not demonstrate that she is likely to
prevail, but her claim must suggest 'more than a sheer possibility that a defendant
has acted unlawfully."' Id. at 102-03 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009)). The "complaint must contain sufficient factual matter, accepted as true, to
'state a claim to relief that is plausible on its face."' Iqbal, 556 U.S. at 678 (quoting

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "In determining whether a
complaint crosses the plausibility threshold, 'the reviewing court [must] draw on its
judicial experience and common sense."' Garcfa·Catalan, 734 F.3d at 103 (alteration
in original) (quoting Iqbal, 556 U.S. at 679).
II.

DISCUSSION
Out of the gate, Defendants try to convince the Court to decide what the

applicable ERISA denial of benefits standard of review is in ultimately deciding
whether Plaintiffs' case survives their motion to dismiss. The caselaw is clear that it
is generally a de novo standard, but an arbitrary and capricious standard could apply

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in cases where the Plan document gives the Plan Administrator deference during
economic downturns, which it does in this case. Applying the lesser standard,
Defendants argue Plaintiffs' case should be dismissed because they have not pleaded
any facts to support that the decision to set a Special Valuation Date in light of the
Covid-19 pandemic was arbitrary and capricious.
While the arbitrary and capricious standard may well apply here, the
evaluation gets to the merits of Defendants' conduct and the Court must stay true to
the motion to dismiss standard where a plaintiff need not prove she can win her case,
but need only provide 'a short and plain statement of the claim showing that the
pleader is entitled to relief."' Garcia·Catalan, 734 F.3d at 102 (quoting Fed. R. Civ.
P. 8(a)(2)). On a motion to dismiss, the Court should not judge whether Defendants
in fact acted reasonably as opposed to arbitrarily and capriciously based on their view
of the facts. The Court must take the complaint's plausible allegations as true and
find that it "contain[s] sufficient factual matter ... to 'state a claim to relief that is
plausible on its face."' Iqbal, 556 U.S. at 678 (quoting Bell Atl. Corp., 550 U.S. at
570).
After reviewing the factual allegations in the complaint, the Court finds that
Plaintiffs' complaint sufficiently alleges the two counts- Count I for Wrongful Denial
of Benefits and Count II for Breach of Fiduciary Duty such that Defendants' motion
to dismiss is denied.
As to Count I, Plaintiffs allege that they requested their 401k distribution
valuations as of December 31, 2019 numerous times, ECF No. 1

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1 83,

Defendants

unreasonably delayed issuing the valuations until March 2020, id.

,r,r 84, 88, 89, and

then "preemptively declared a Special Valuation and applied it to reduce Plaintiffs'

,r 90.

401k account distributions." Id.

Mr. Lipshires lost $24,458; Ms. Donnelly lost

$22,168.85; Mr. Toni lost $7,670.92. Id.

,r,r 92·94.

These allegations, among others

buttressing them in the complaint, are sufficient to plead a claim under Count I.
As to Count II, Plaintiffs allege that the Trustee Defendants are fiduciaries of
the Plan and owed them a fiduciary duty. Id.

,r 115.

As fiduciaries of the Plan, they

must discharge their duties with respect to the Plan solely in the interest of the
participants and beneficiaries. Id.

,r 117.

Plaintiffs allege that Defendants breached

their duties in that their interests may have conflicted with Plaintiffs' because they
and several of their family members are also part of the Plan. Id.

,r,r 118,

119.

Plaintiffs allege that the Trustees have inconsistently issued Special Valuations and
may have declared the Special Valuation Date because paying the Plaintiffs out on
the pre·pandemic December 31, 2019 market rate would adversely affect their
family's finances.

Id.

,r,r 120,

128. In light of these allegations, Plaintiffs have

sufficiently pled a breach of fiduciary claim and that Michael and William Behan are
proper Defendants to this claim.
Finally, in response to Defendants' argument that Count II should be
dismissed because Count I provides an adequate remedy such that Plaintiffs cannot
recover on both counts, the Court cannot determine on a motion to dismiss whether
Plaintiffs will be able to recover on Count I so it is premature to dismiss Count II as
duplicative. Pleading in the alternative is appropriate.

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III.

CONCLUSION
For the reasons articulated above, Defendants' Motion to Dismiss is DENIED.

ECFNo. 8.

John J. McConnell, Jr.
Chief Judge
United States District Court
October 2, 2020

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