Cash v. Country Trust Bank, et al
Filing
67
ORDER granting in part and denying in part 31 32 Motions to Dismiss. All of Cashs claims are dismissed except his breach of employment contract claim against Turner for failure to compensate Cash for 16 hours of work. Signed by Judge Samuel H. Mays, Jr on 7/10/2018. (Mays, Samuel)
IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION
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KEVIN CASH,
Plaintiff,
v.
COUNTRY TRUST BANK and TURNER
HOLDINGS, LLC,
Defendants.
No. 17-cv-2611-SHM-tmp
ORDER
Before the Court are two motions.
The first is Defendant
Turner Holdings, LLC’s (“Turner”) December 13, 2017 Motion to
Dismiss Plaintiff’s First Amended Complaint (“Turner’s Motion
to Dismiss”).
(ECF No. 31.)
December 27, 2017.
Plaintiff Kevin Cash responded on
(ECF No. 33.)
The second is Defendant Country Trust Bank’s (“Country
Trust”) December 21, 2017 Supplemental Motion to Dismiss
(“Country Trust’s Motion to Dismiss”).
responded on December 28, 2017.
replied on January 11, 2018.
(ECF No. 32.)
(ECF No. 34.)
Cash
Country Trust
(ECF No. 40.)
For the following reasons, Turner’s Motion to Dismiss and
Country Trust’s Motion to Dismiss (collectively, “Motions to
Dismiss”) are GRANTED in part and DENIED in part.
I.
Background
This case arises from an attempt to obtain a loan from a
401(k) plan, the repayment of a previous loan obtained from
that plan, an IRS levy, and a failure to compensate for labor.
Cash brings state law claims for fraud, unjust enrichment,
breach of contract, conversion, negligence, intentional
infliction of emotion distress, and negligent infliction of
emotional distress.
In the alternative, he brings a claim
under the Employee Retirement Income Security Act of 1974
(“ERISA”) as amended, 29 U.S.C. §§ 1001, et. seq.
A. Factual and Procedural Background
At all relevant times, Cash was an employee of Turner.
(See Amend. Compl., ECF No. 29 ¶¶ 3, 5, 36.)
Turner is an Adopting Employer of the Prairie Farms Dairy,
Inc. 401(k) Plan (the “401(k) Plan”) through a Participation
Agreement for Prairie Farms Dairy, Inc. 401(k) Plan (the
“Participation Agreement”).
(See 401(k) Plan, ECF No. 32-1;
Participation Agreement, ECF No. 32-3.)
The 401(k) Plan allows
plan participants to secure loans from a trust fund.
Plan, ECF No. 32-1 at 424.) 1
(401(k)
Country Trust is the Trustee of
the 401(k) Plan under the Prairie Farms Dairy, Inc. 401(k) Plan
Trust Agreement (the “Trust Agreement”).
(Trust Agreement, ECF
No. 10-3.)
1
Unless otherwise noted, all pin cites for record citations are to
the “PageID” page number.
2
As a Turner employee, Cash was afforded retirement
benefits under the 401(k) Plan.
(See Amend. Compl., ECF No. 29
¶¶ 5, 10; see generally 401(k) Plan, ECF No. 32-1.)
On June 24, 2011, Turner secured a $4,000 loan under the
401(k) Plan.
(See Amend. Compl., ECF No. 29 ¶ 9; 401(k) Plan
Loan Issuance Confirmation, ECF No. 32-5.)
The loan was to be
repaid through monthly payments deducted from Cash’s paycheck.
(Amend. Compl., ECF No. 29 ¶ 13; 401(k) Plan Loan Issuance
Confirmation, ECF No. 32-5 at 491.)
The promissory note
evidencing the loan became “due and payable on the maturity
date June 26, 2014. . . .”
(401(k) Plan Loan Issuance
Confirmation, ECF No. 32-5 at 491.)
Some time before June 2016, a Turner representative told
Cash his first loan had been paid in full.
No. 29 ¶ 19.)
(Amend. Compl., ECF
In June 2016, Cash sought a second loan under
the 401(k) Plan.
(Id. ¶¶ 16-18.)
Country Trust informed Cash
that he had a remaining balance of $1,162.37 on his first loan.
(Id. ¶ 20.)
Country Trust’s representative told Cash that its
records reflected that Cash had made payments from June 2011 to
December 2013, and that six payments Cash had made in 2014 had
not been credited.
(Id. ¶¶ 20-21, 23-24.)
Cash was also told
that he could obtain a second loan once his first loan had been
3
(Id. ¶ 27.) 2
paid.
Country Trust directed Cash to make his
second loan request directly to Turner, which would determine
Cash’s eligibility to secure a second loan.
(Id. ¶ 30.)
The same month, Cash spoke with a Turner representative
who told Cash that “he could not have another loan, and that he
did not qualify for another loan.”
(Id. ¶¶ 30-31.)
Between September 10, 2016, and June 22, 2017, $1,162.37
was removed from Cash’s paychecks as repayment for his 2011
loan.
(Id. ¶¶ 36-37.)
On July 20, 2017, $26.42 was removed
from Cash’s paycheck as repayment for his 2011 loan.
(Id. ¶
39.)
On March 13, 2017, the Internal Revenue Service (“IRS”)
sent Turner a notice of levy on Cash’s wages to pay unpaid
taxes.
(Id. ¶ 48.)
The notice instructed Turner to give the
letter to Cash “immediately.”
(Id. ¶ 49.)
Turner gave Cash the letter on April 10, 2017.
54.)
(Id. ¶
The same day, Turner removed $903.37 from Cash’s paycheck
in accordance with the levy.
Cash contacted the IRS.
(Id. ¶¶ 55, 57-58, 60.)
The IRS told Cash that Turner had
miscalculated the amount of money to be removed from Cash’s
paycheck to satisfy the levy.
(Id. ¶ 63.)
2
Cash also alleges that another employee was able to secure a second
loan after that employee paid his first loan. (Amend. Compl., ECF No. 29 ¶
33.)
4
On April 20, 2017, the IRS released the levy on Cash’s
wages.
(Id. ¶ 66; ECF No. 31-4.)
On or about April 27, 2017, Turner failed to pay Cash for
16 hours of work.
(Amend. Compl., ECF No. 29 ¶ 68.)
After
that, Turner removed $1 from Cash’s paychecks as an “ADMFEE.”
(Id. ¶ 69.)
On July 20, 2017, Cash filed a complaint against Turner
and Country Trust (collectively, “Defendants”) in the Shelby
County Circuit Court for the Thirtieth Judicial District at
Memphis.
(ECF No. 1-1 at 9.)
Cash brought claims of fraud,
unjust enrichment, breach of contract, conversion, negligence,
intentional infliction of emotional distress (“IIED”), and
negligent infliction of emotional distress (“NIED”).
(Id. at
9-17.)
On August 23, 2017, Defendants removed to this Court on
the basis of diversity jurisdiction and subject matter
jurisdiction.
(Notice of Removal, ECF No. 1 at 2-6.)
On August 30, 2017, Defendants separately moved to dismiss
Cash’s complaint.
(ECF Nos. 8-10.)
November 5, 2017.
Cash responded on
(ECF Nos. 19-20.)
On November 6, 2017, Cash moved to amend the complaint.
(ECF No. 21.)
23.)
Turner responded on November 16, 2017.
Country Trust responded on November 20, 2017.
24.)
5
(ECF No.
(ECF No.
The Court granted leave to amend the complaint on December
5, 2017.
(ECF No. 28.)
same day.
Cash filed the Amended Complaint the
(Amend. Compl., ECF No. 29.)
In the Amended
Complaint, Cash brings state law claims of fraud, unjust
enrichment, breach of contract, conversion, negligence, IIED,
and NIED.
ERISA.
(Id.)
In the alternative, he brings a claim under
(Id.)
On December 8, 2017, the Court dismissed as moot
Defendants’ August 30, 2017 motions to dismiss.
(ECF No. 30.)
On December 13, 2017, Turner filed its Motion to Dismiss.
(ECF No. 31.)
On December 21, 2017, Country Trust filed its
Motion to Dismiss.
Nos. 33-34.)
(ECF No. 32.)
Cash timely responded.
Country Trust replied on January 11, 2018.
(ECF
(ECF
No. 40.)
B. Plan Documents
1. Prairie Farms Dairy, Inc. 401(k) Plan
The 401(k) Plan provides in relevant part:
The purpose of this Plan is to provide retirement
benefits to Employees. This Plan is designated as a
40l(k) profit sharing plan.
This Plan is for the exclusive benefit of the
Participants and their Beneficiaries, and it shall be
interpreted and administered in a manner consistent
with the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA) and the Internal Revenue
Code of 1986, as amended.
(401(k) Plan, ECF No. 32-1 at 379.)
6
Under the 401(k) Plan, participants may obtain loans
secured by the 401(k).
Those loans are subject to the
following provisions:
Loans to Participants.
Subject to any rules or
procedures set forth in a written loan policy that
may be established by the Administrator or elected in
the Participation Agreement, the Trustee may permit
loans to be made from the Trust Fund to Participants
and Beneficiaries, and subject to any such rules or
procedures, all loans will be made in accordance with
the following provisions:
(a) Availability of Loans.
The Administrator
will have the sole right to approve or
disapprove a loan application, but loans will be
made
available
to
all
Participants
on
a
reasonably equivalent basis.
. . .
(d) Written Loan Agreement.
All loans must be
evidenced by a legally enforceable agreement
(which may include more than one document) set
forth in writing or in such other form as may be
approved by the Internal Revenue Service, and
the terms of such agreement must specify the
amount and term of the loan, and the repayment
schedule.
. . .
(h) Loans Must Bear Reasonable Interest.
Any
loan must bear interest at a rate reasonable at
the time of application, considering the purpose
of the loan and the rate being charged by
representative commercial banks in the local
area
for
a
similar
loan,
unless
the
Administrator sets forth a different method for
determining loan interest rates in its loan
procedures such as using the prime rate or some
other rate based on the prime rate.
The loan
agreement will also provide for the payment of
principal and interest not less frequently than
quarterly.
Such interest will be credited
either directly to the Participant's Account, or
in the alternative to the general Trust Fund, as
set forth in the loan policy.
7
(i) Loans Must be Secured.
If a Participant’s
loan
application
is
approved
by
the
Administrator, such Participant will be required
to execute a note, a loan agreement and an
assignment of his Vested Aggregate Account as
collateral for the loan. The Administrator, on
a
nondiscriminatory
basis,
may
permit
a
Participant to pledge outside security in lieu
of pledging his Vested Aggregate Account as
collateral.
The Participant must obtain the
consent of his Spouse, if any, within the 180day period before the Participant's Vested
Aggregate Account is used as security for the
loan.
. . .
(n) Establishment of Administrative Procedures.
The Administrator may, in a separate written
loan policy, establish rules or procedures
regarding the conditions under which the Trustee
can make loans to Participants.
Such separate
written document, when properly executed, will
be deemed incorporated in this Plan. The rules
or procedures therein may be modified or amended
by the Administrator without the necessity of
amending
this
Section,
but
any
such
modifications
must
be
communicated
to
Participants.
(Id. at 424-26.)
The claim procedure under the 401(k) Plan is:
(a) Each Participant (or Beneficiary) may make
application to receive a benefit under the Plan by
filing such form as the Administrator prescribes.
Within 60 days of the date that the application is
received,
the
Administrator
will
inform
the
Participant (or Beneficiary), in writing, of the
amount of benefit due, if any, or of the denial of
the claim for benefit.
(b) Any denial of a claim for benefit will include a
statement of the reasons for the denial, specific
references to Plan provisions on which the denial is
based, a description of any additional information
the Administrator needs to make a decision under the
Plan, an explanation of why such information is
8
necessary and an explanation of the Plan's claims
procedure.
. . .
(g) Where a Participant (or Beneficiary) does not
comply with the provisions of this Section within the
time prescribed (including extensions), the action of
the committee shall then be final and conclusive and
shall not be subject to further appeal or review.
(Id. at 431.)
The 401(k) Plan defines the “Administrator” and “Plan
Administrator” as “the committee or the person or group of
persons designated by the Sponsor as Administrator of the Plan,
but if no committee or no other Administrator is specifically
designated, the Sponsor shall be considered the Administrator.
The Administrator shall be the named fiduciary of the Plan.”
(Id. at 380, 430.)
The “Sponsor” is defined as “Prairie Farms Dairy, Inc.
Any action or determination of the Sponsor under the Plan shall
be by its Directors.”
(Id. at 390.)
The 401(k) Plan defines the “Trustee” as the “Trustee
named in a separate trust document which is used in conjunction
with the Plan.”
(Id. at 391.)
The “Trust Fund” is “the fund
as defined in the separate trust agreement which is used in
conjunction with the Plan.”
(Id.)
The 401(k) Plan contemplates that third-party employers
will adopt its provisions.
Those third-party employers are
“Adopting Employers,” defined as “any entity which adopts this
9
Plan with the consent of the Sponsor.
In addition to all other
terms and conditions in the Plan, Adopting Employers will be
subject to, and must comply with, the terms and conditions set
forth in the separate trust agreement.”
(Id. at 380.)
An
Adopting Employer adopts the 401(k) Plan by a “Participation
Agreement,” which is an “agreement whereby an entity becomes an
Adopting Employer and designates its elections with regard to
specific provisions of this Plan.”
(Id. at 389.)
2. Prairie Farms Dairy, Inc. 401(k) Plan Loan Policy
The Loan Policy was adopted by the Plan Administrator of
the 401(k) Plan. 3
(Loan Policy, ECF No. 32-4 at 486.)
It
requires participants to “apply for each loan in writing with
an application which specifies the amount of the loan desired,
the requested duration for the loan and the source of security
for the loan.”
(Id.)
The Loan Policy also limits the number
of loans available to participants to one loan outstanding at a
time.
(Id. at 486.)
Under the Loan Policy, the Plan Administrator may charge a
participant’s account three fees for each loan: (1) $150 Loan
set-up fee deducted from the participant's account balance; (2)
monthly loan maintenance fee set at 0.70% of market value
deducted from the participant’s account; and (3) annual loan
3 The documents provided by the parties do not identify the Plan
Administrator. The documents refer to the Plan Administrator as “[t]he
Plan Administrator of the Prairie Farms Dairy, Inc. 401(k) Plan[.]” (ECF
No. 32-4 at 486.)
10
maintenance fee for each calendar year the loan is outstanding.
(Id. at 489.)
3. Prairie Farms Dairy, Inc. 401(k) Plan Trust Agreement
The Trust Agreement establishes Country Trust as the
Trustee for the 401(k) Plan.
168.)
(Trust Agreement, ECF No. 10-3 at
The Trustee’s responsibilities include: “At the
direction of the Administrator, to pay benefits required under
the Plan to be paid to Participants . . . and [t]o maintain
records of receipts and disbursements and furnish to the
Employer and/or Administrator for each Plan Year a written
annual report. . . .”
Addressing loans to participants, the Trust Agreement
provides, in relevant part:
(a) The Trustee may, in the Trustee’s discretion,
make loans to Participants and Beneficiaries under
the following circumstances: (l) loans shall be made
available to all Participants and Beneficiaries on a
reasonably equivalent basis; (2) loans shall not be
made available to Highly Compensated Employees in an
amount greater than the amount made available to
other Participants and Beneficiaries; (3) loans shall
bear a reasonable rate of interest; (4) loans shall
be adequately secured; and (5) loans shall provide
for periodic repayment over a reasonable period of
time.
. . .
(d) Any loans granted or renewed shall be made
pursuant to a Participant loan program.
. . .
Such Participant loan program shall be contained in a
separate written document which, when properly
executed, is hereby incorporated by reference and
made a part of the Plan.
11
(Id. at 174-76.)
4. Participation Agreement for Prairie Farms Dairy, Inc.
401(k) Plan
The Participation Agreement designates Turner as “an
Adopting Employer of the [401(k) Plan] . . . subject to the
provisions of this Participation Agreement and the Plan.”
(Participation Agreement, ECF No. 32-2 at 460.)
The Participation Agreements establishes that Turner
adopted the 401(k) Plan as of July 1, 2007, and elected to
provide loans to participants.
(Id. at 460, 466.)
5. 401(k) Plan Loan Issuance Confirmation
The 401(k) Plan Loan Issuance Confirmation describes the
$4,000 loan Cash obtained through the 401(k) Plan in 2011.
(ECF No. 32-5.)
The terms of the loan, in relevant part, are
as follows:
For value received, KEVIN D CASH, the undersigned
Borrower, promises to pay COUNTRY Trust Bank, Trustee
of the PRAIRIE FARMS DAIRY 40l(K) PLAN, or order, the
sum of $4,000.00 together with interest on the unpaid
balance at the rate of 5.25% per annum, payable in
equal biweekly payments of $55.53 each, including
interest.
The first payment is due on July 14, 2011, with like
payments due each pay period thereafter until the
Borrower has made all payments under this Note. So
long as the Holder is a retirement plan and the
Borrower is an employee of the plan sponsor, the
Borrower shall make payments by payroll withholding.
If not paid sooner, this Note in any event is due and
payable on the maturity date June 26, 2014 or the
date the Borrower terminates employment with the
Employer, if earlier.
12
The Borrower is responsible for making certain that
the employer is withholding the proper loan payments.
. . .
The Borrower secures this loan by a pledge and
irrevocable assignment of his/her vested interest in
the above referenced Plan.
(Id. at 491.)
II.
Jurisdiction & Choice of Law
A. Jurisdiction
Cash’s original complaint, removed to this Court, alleges
multiple state law claims.
This Court has diversity
jurisdiction under 28 U.S.C. § 1332 over Cash’s state law
claims.
Cash is a resident and citizen of Memphis, Tennessee.
(Amend. Compl., ECF No. 29 ¶ 2.)
Turner is a limited liability
corporation, which is a citizen of every state where its
members are citizens.
See Delay v. Rosenthal Collins Grp.,
LLC, 585 F.3d 1003, 1005 (6th Cir. 2009).
At the time of
filing, Turner’s members were citizens of Illinois and Kansas.
(Notice of Removal, ECF No. 1 ¶¶ 14-16.)
of Illinois and Kansas.
Turner is a citizen
Country Trust is a federal savings
association, which is a citizen of “the State in which [it] has
its home office.”
12 U.S.C. § 1464(x).
office is in Illinois.
Country Trust’s home
(Notice of Removal, ECF No. 1 ¶ 13.)
Country Trust is an Illinois citizen.
diversity.
13
There is complete
Cash seeks damages in excess of $75,000.
ECF No. 29 at 326-27.)
(Amend. Compl.,
“[T]he sum claimed by the plaintiff
controls if the claim is apparently made in good faith.”
St.
Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288
(1938); see Mass. Cas. Ins. Co. v. Harmon, 88 F.3d 415, 416
(6th Cir. 1996).
The requirements of diversity jurisdiction
are satisfied.
In his Amended Complaint, Cash reasserts his state law
claims and brings an alternative claim under ERISA.
The Court
has federal question jurisdiction over Cash’s ERISA claim.
Under 28 U.S.C. § 1331, United States district courts have
original jurisdiction “of all civil actions arising under the
Constitution, laws, or treaties of the United States.”
The
Amended Complaint alleges that Defendants violated ERISA.
That
claim arises under the laws of the United States.
B. Choice of Law
A federal court exercising diversity jurisdiction applies
the choice-of-law rules of the forum state to a plaintiff’s
state law claims.
Standard Fire Ins. Co. v. Ford Motor Co.,
723 F.3d 690, 692 (6th Cir. 2013).
Cash implicitly invokes Tennessee tort and contract law.
(See ECF No. 1-1; see also Amend. Compl., ECF No. 29.)
Defendants do not challenge the application of Tennessee law.
To the extent Cash’s state law claims are not preempted by
14
ERISA, the Court will apply Tennessee substantive law.
See GBJ
Corp. v. E. Ohio Paving Co., 139 F.3d 1080, 1085 (6th Cir.
1998) (finding courts need not analyze choice of law questions
sua sponte).
III. Legal Standard
In addressing a motion to dismiss for failure to state a
claim under Federal Rule of Civil Procedure 12(b)(6), the Court
must construe the complaint in the light most favorable to the
plaintiff and accept all well-pled factual allegations as true.
League of United Latin Am. Citizens v. Bredesen, 500 F.3d 523,
527 (6th Cir. 2007).
A plaintiff can support a claim “by
showing any set of facts consistent with the allegations in the
complaint.”
(2007).
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 563
This standard requires more than bare assertions of
legal conclusions.
Bovee v. Coopers & Lybrand C.P.A., 272 F.3d
356, 361 (6th Cir. 2001).
Any claim for relief must contain “a
short and plain statement of the claim showing that the pleader
is entitled to relief.”
(2007) (per curiam).
Erickson v. Pardus, 551 U.S. 89, 93
“Specific facts are not necessary; the
statement need only ‘give the defendant fair notice of what the
. . . claim is and the grounds upon which it rests.’”
(citing Twombly, 550 U.S. at 555.)
Id.
Nonetheless, a complaint
must contain sufficient facts “to ‘state a claim to relief that
is plausible on its face’” to survive a motion to dismiss.
15
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly,
550 U.S. at 570).
Ordinarily, a court’s consideration of a motion to dismiss
under Rule 12(b)(6) is limited to the pleadings.
Reference to
materials outside the pleadings may convert the motion into one
for summary judgment.
Jones v. City of Cincinnati, 521 F.3d
555, 562 (6th Cir. 2008).
However, “when a document is
referred to in the pleadings and is integral to the claims, it
may be considered without converting a motion to dismiss into
one for summary judgment.”
Commercial Money Ctr., Inc. v. Ill.
Union Ins. Co., 508 F.3d 327, 335–36 (6th Cir. 2007).
A court
may also consider public records without converting the motion
to one for summary judgment.
Rondigo, L.L.C. v. Twp. of
Richmond, 641 F.3d 673, 680-81 (6th Cir. 2011).
When addressing ERISA claims, courts may consider ERISA
plan documents not attached to a complaint where a plaintiff’s
claims are “based on rights under plans which are controlled by
the plans’ provisions as described in the plan documents” and
where the documents are “incorporated through reference to the
plaintiff’s rights under the plans, and they are central to
plaintiff’s claims.”
Weiner v. Klais & Co., Inc., 108 F.3d 86,
89 (6th Cir. 1997); see City of Monroe Employees Ret. Sys. v.
Bridgestone Corp., 399 F.3d 651, 659 n.6 (6th Cir. 2005).
16
IV.
Analysis
Defendants seek to dismiss all of Cash’s state law claims
as preempted by ERISA and to dismiss Cash’s ERISA claims for
failure to state a claim.
(See ECF Nos. 31-32.)
Cash contends
that additional discovery is required, that his state law
claims are not preempted, and that he has sufficiently pled an
ERISA claim.
(See ECF Nos. 33-34.)
A. Conversion to Motion for Summary Judgment
Cash argues that “no legitimate basis [exists] to dismiss
Plaintiff’s complaint against Defendant Turner, because genuine
disputes to material facts exist” for which further discovery
is necessary.
(ECF No. 33 at 509; see ECF No. 34 at 522.)
The
Court understands Cash to contend that Defendants’ Motions to
Dismiss should be converted to motions for summary judgment.
That argument lacks merit.
Defendants have attached the following documents to their
Motions to Dismiss: the 401(k) Plan (ECF No. 32-1), Turner’s
Participation Agreement (ECF No. 32-2), the 401(k) Plan Trust
Agreement (ECF No. 32-3), the 401(k) Plan Loan Policy (ECF No.
32-4), Cash’s 2011 401(k) Plan Loan Issuance Confirmation (ECF
No. 32-5), Cash’s state court complaint (ECF No. 31-2), 2017
Internal Revenue Service (“IRS”) Tables for Figuring Amount
Exempt from Levy on Wages, Salary, and Other Income (ECF No.
17
31-3), and a Release of Levy/Release of Property Levy for Cash
(ECF No. 31-4).
In his Amended Complaint, Cash refers to the 401(k) Plan,
the 401(k) Plan Loan Policy, the levy and release of levy on
Cash’s wages, and the state court action.
(Amended Compl., ECF
No. 29 ¶¶ 5, 10, 18, 36, 39, 49, 66-67, 87 129, 134, 161, 175.)
The 401(k) Plan and loan, the state court action, and the levy
on Cash’s wages are integral to Cash’s state and ERISA claims.
(See id.)
Those documents may be considered without converting
the Motions to Dismiss to motions for summary judgment.
Commercial Money, 508 F.3d at 335–36.
The 2017 Internal Revenue Service (“IRS”) Tables for
Figuring Amount Exempt from Levy on Wages, Salary, and Other
Income (ECF No. 31-3) are public records and may be considered
without converting the Motions to Dismiss to motions for
summary judgment.
Rondigo, 641 F.3d at 680-81.
Because the documents attached to Defendants’ Motions to
Dismiss are referenced in the Amended Complaint, are crucial of
Cash’s claims, or constitute public records, Cash’s request to
convert the Motions to Dismiss to motions for summary judgment
is DENIED.
B. ERISA & Preemption
ERISA applies only where there is an “employee benefit
plan.”
ERISA defines “employee benefit plan” as “an employee
18
welfare benefit plan or an employee pension benefit plan or a
plan which is both an employee benefit plan and an employee
pension benefit plan.”
29 U.S.C. § 1002(3).
Courts in this
circuit have found that 401(k) plans are employee benefit plans
under 29 U.S.C. §§ 1002(3) and 1002(37).
See, e.g., Perez v.
Eye Centers of Tennessee, LLC, No. 2:14-CV-0115, 2016 WL
6648854, at *1 (M.D. Tenn. Nov. 10, 2016); USW Indus. 401(k)
Fund v. Detroit Box Co., No. 3:12-CV-833, 2014 WL 2765680, at
*2 (M.D. Tenn. June 18, 2014); see also In re Regions Morgan
Keegan Sec., Derivative & ERISA Litig., No. 2:09-MD-02009-SHM,
2012 WL 13072082, at *1 (W.D. Tenn. Mar. 30, 2012) (analyzing
401(k) plan as an ERISA plan).
The parties do not dispute that the 401(k) Plan is
governed by ERISA.
ERISA governs plans like the 401(k) Plan,
which are enacted “to ‘protect . . . the interests of
participants in employee benefit plans and their beneficiaries’
by setting out substantive regulatory requirements for employee
benefit plans and to ‘provide for appropriate remedies,
sanctions, and ready access to the Federal courts.’”
Aetna
Health, Inc. v. Davila, 542 U.S. 200, 208 (2004) (quoting 29
U.S.C. § 1001(b)).
The 401(k) Plan was adopted by Turner for
the benefit of its employees and qualifies as an “employee
benefit plan” under ERISA Section 3(3).
19
It is subject to Title
I of ERISA pursuant to ERISA Section 4(a).
See 29 U.S.C. §§
1002, 1003.
The parties dispute whether the 401(k) Plan loan provision
and supplemental documentation are governed by ERISA.
Turner
argues that Cash’s “breach of contract, fraud, conversion and
unjust enrichment claims based on alleged misrepresentations
regarding and misappropriation of funds earmarked for the
repayment of Plaintiff’s 401(k) loan and Turner’s alleged
failure to provide Plaintiff with a second 401(k) loan upon
[Plaintiff’s] request must be dismissed because they are
preempted by ERISA.”
(ECF No. 31-1 at 338.)
Cash argues that ERISA does not apply because “the loan
was simply secured by Plaintiff’s 401(k), but that is not
enough to take Plaintiff’s claims out of state law, and into
ERISA.”
(ECF No. 34 at 522.)
Cash contends that, “[a]t best,
Plaintiff’s loan would be classified as a separate excess
benefit plan.”
(Id. at 523.)
ERISA provides a uniform regulatory regime governing
employee benefit plans and includes expansive preemption
provisions intended to ensure that employee benefit plan
regulation is “exclusively a federal concern.”
Alessi v.
Raybestos-Manhattan, Inc., 451 U.S. 504, 523 (1981).
The
express preemption clause provides that ERISA “supersede[s] any
and all State laws insofar as they may now or hereafter relate
20
to any employee benefit plan.”
29 U.S.C. § 1144(a).
“A law
relates to an employee benefit plan ‘if it has a connection
with or reference to such a plan.’”
Crabbs v. Copperweld
Tubing Products Co., 114 F.3d 85, 90 (6th Cir. 1997) (quoting
Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 87 (1983));
Metropolitan Life Ins. Co. v. Mass., 471 U.S. 724, 730, 732-33,
(1985).
A law has a connection with an employee plan under
ERISA “‘even if the law is not specifically designed to affect
such plans, or the effect is only indirect, and even if the law
is consistent with ERISA's substantive requirements.’”
Thiokol
Corp. v. Roberts, 76 F.3d 751, 754 (6th Cir. 1996) (quoting
District of Columbia v. Greater Wash. Bd. of Trade, 506 U.S.
125, 130 (1992)).
The Sixth Circuit generally finds that ERISA
preempts “most state law claims” that relate to an employeebenefit plan, particularly where those claims “explicitly refer
to such a plan.”
See Zuniga v. Blue Cross & Blue Shield of
Mich., 52 F.3d 1395, 1401 (6th Cir. 1995) (internal citations
and quotation marks omitted).
The Supreme Court has articulated a two-prong test to
determine whether a claim is completely preempted under
§ 1132(a) of ERISA.
Davila, 542 U.S. at 210.
A claim is
completely preempted when it satisfies both prongs of the test:
(1) the plaintiff complains about the denial of
benefits to which he is entitled only because of the
terms of an ERISA-regulated employee benefit plan;
21
and (2) the plaintiff does not allege the violation
of any legal duty (state or federal) independent of
ERISA or the plan terms.
Gardner v. Heartland Indus. Partners, LP, 715 F.3d 609, 613
(6th Cir. 2013) (quoting Davila, 542 U.S. at 210).
An
independent legal duty exists for purposes of ERISA preemption
where the legal duty “would exist whether or not an ERISA plan
existed,” Marin Gen. Hosp. v. Modesto & Empire Traction Co.,
581 F.3d 941, 950 (9th Cir. 2009), or where there is no need
“to interpret the plan to determine whether that duty exists,”
Gardner, 715 F.3d at 614.
Since Davila, the Sixth Circuit has articulated three
categories of state laws that are preempted by ERISA:
state
laws
that
(1)
mandate
employee
benefit
structures or their administration; (2) provide
alternate
enforcement
mechanisms;
or
(3)
bind
employers or plan administrators to particular
choices or preclude uniform administrative practice,
thereby functioning as a regulation of an ERISA plan
itself.
Penny/Ohlmann/Nieman, Inc. v. Miami Valley Pension Corp.
(“PONI”), 399 F.3d 692, 698 (6th Cir. 2005).
1. Excess Benefit Plan
ERISA does not apply to “excess benefit plans,” which are
unfunded.
29 U.S.C. §§ 1003(b)(5).
An “excess benefit plan”
is a plan established for the sole purpose of avoiding the
benefit and contribution limits established by 26 U.S.C. § 415.
“Whether a plan meets the requirements for the ‘excess benefit
22
plan’ exemption may be determined through an examination of the
surrounding circumstances and an analysis of the stated purpose
of the plan as determined by its plain language.”
Hutchison v.
Crane Plastics Mfg., Ltd., No. 2:06-CV-297, 2006 WL 3346117, at
*4 (S.D. Ohio Sept. 28, 2006) (citations omitted).
Courts
generally look for explicit and specific language stating that
the only purpose of the plan is to avoid the limitations
imposed by § 415 to conclude the plan is an “excess benefit
plan.”
See Gamble v. Group Hospitalization & Med. Serv., Inc.,
38 F.3d 126, 129-131 (4th Cir. 1994); Isko v. Engelhard Corp.,
367 F.Supp.2d 702, 710 (D.N.J. 2005).
If avoiding § 415 is not
the sole purpose of the plan, even explicit language may fall
short of exempting the plan from ERISA.
Hutchison, 2006 WL
3346117, at *5 (collecting cases).
Cash contends that “[his] loan [sh]ould be classified as a
separate excess benefit plan.”
(ECF No. 34 at 523.)
To the
extent Cash argues that the loan can be considered separately
from the Plan, his argument is unsustainable given the
allegations of the Amended Complaint.
To the extent Cash
argues that the Plan itself is an excess benefit plan, his
argument is refuted by the language of the Plan.
The 401(k)
Plan and supplemental documents do not state that the sole
purpose of the 401(k) Plan is to avoid § 415.
The 401(k) Plan
reads, “[t]he Plan shall be construed, enforced and
23
administered and the validity determined in accordance with
ERISA. . . .”
(ECF No. 32-1 at 438; see id. at 379 (“This Plan
is for the exclusive benefit of the Participants and their
Beneficiaries, and it shall be interpreted and administered in
a manner consistent with the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA) and the Internal
Revenue Code of 1986, as amended.”))
Cash points to no
surrounding circumstances or additional language that suggests
the 401(k) Plan’s sole purpose is to avoid § 415.
The 401(k) Plan is not an excess benefit plan.
The loan
provision derives from the ERISA-qualifying 401(k) Plan and is
subject to ERISA.
See 29 U.S.C. §§ 1002, 1003.
2. Fraud – Preemption
Cash alleges claims of fraud against Country Trust for
misrepresenting the amount of money Cash owed on his loan and
against Turner for informing Cash that he did not qualify for a
second loan.
(Amend. Compl., ECF No. 29 ¶¶ 72, 80.)
State law claims for fraud and misrepresentation are
preempted if they provide “alternative enforcement mechanisms”
to the ERISA enforcement scheme.
478, 498 (6th Cir. 2006).
See Briscoe v. Fine, 444 F.3d
For example, if a fraud claim
asserts that “ERISA plan participants [have] rights to
24
information by virtue of their status as participants in the
plan[,] [that claim] conflicts with ERISA's existing disclosure
requirements and enforcement mechanisms.”
Loffredo v. Daimler
AG, 500 F. App’x 491, 496 (6th Cir. 2012) (citation omitted).
Cash’s claims of fraud are preempted by ERISA.
In
essence, Cash’s fraud claim against Country Trust alleges that
as an “ERISA plan participant[] [he has] rights to information
by virtue of [his] status as participant[] in the plan[.]”
Id.
Cash alleges that Defendants mispresented the balance on his
first loan and his eligibility to obtain a second loan.
(Amend. Compl., ECF No. 29 ¶¶ 72-85.)
He alleges that he was
entitled to correct information and an explanation for his
denial.
(Id. ¶¶ 74, 84.)
Those allegations are inconsistent
with ERISA’s existing disclosure requirements and enforcement
mechanisms.
Loffredo, 500 F. App’x at 496.
Cash’s claims of fraud are also preempted by ERISA’s
requirement to make accurate reports to the plan administrator.
See 29 U.S.C. § 1059(a)(1).
Cash alleges that “Defendant
Turner was not the qualified, or the appropriate party to make
any representations to Plaintiff that he did not qualify for a
second loan and the statement was a clear misrepresentation of
a material fact.”
(Amend. Compl., ECF No. 29 ¶ 83.)
Agreement states the requirement.
25
It is the Trustee’s
The Trust
responsibility to furnish the Employer or Administrator with
accurate financial records. (Trust Agreement, ECF No. 10-3 at
168.)
Cash’s fraud claim against Country Trust is preempted
because it is based on state law that provides alternatives to
EIRSA’s enforcement mechanisms.
See PONI, 399 F.3d at 689.
Cash’s fraud claim against Turner is preempted because it
seeks recovery of a benefit from the 401(k) Plan and would be
an alternate mechanism to enforce ERISA.
Briscoe, 444 F.3d at
498; see Ramsey v. Formica Corp., 398 F.3d 421 (6th Cir. 2005).
The 401(k) Plan offers participants the opportunity to obtain
loans, and provides that “[t]he Administrator will have the
sole right to approve or disprove a loan application. . . .”
(401(k) Plan, ECF No. 32-1 at 424.)
Loan applications must be
made in writing and participants are limited to one outstanding
loan at a time.
486.)
(Id. at 431; Loan Policy, ECF No. 32-4 at
Cash’s fraud claim against Turner, that it falsely
informed him he did not qualify for a second loan, is a claim
for a benefit under the 401(k) Plan and would provide an
alternative means of enforcing ERISA.
That claim is preempted.
Defendants’ Motions to Dismiss are GRANTED on Cash’s
claims of fraud against Country Trust for misrepresenting the
amount of money Cash owed on his loan and against Turner for
informing Plaintiff he did not qualify for a second loan.
26
3. Unjust Enrichment & Conversion – Preemption
Cash alleges unjust enrichment and conversion because
Country Trust directed Turner to remove funds from Cash’s
paycheck to repay his loan.
20.)
(Amend. Compl., ECF No. 29 ¶¶ 110-
Cash contends that he owed less on the loan than
Defendants reported and that Defendants have failed to return
the excess funds.
(Id.)
Cash’s unjust enrichment and conversion claims are
dependent on an ERISA plan.
They would not exist if the 401(k)
Plan and the loan provision did not exist.
The removal of
funds from Cash’s paycheck was a term of the 401(k) Plan and
supplemental loan documents.
(See 401(k) Plan, ECF No. 32-1 at
424 (“All loans must be evidenced by a legally enforceable
agreement (which may include more than one document) set forth
in writing. . . .”); ECF No. 32-5 at 491 (“[T]he Borrower shall
make payments [on the loan] by payroll withholding.”).)
Cash’s
claims implicate “plan assets” of the 401(k) Plan and the
related loan.
“Plan assets” include “amounts that a
participant has withheld from his wages by an employer[] for .
. . repayment of a participant loan to the plan. . . .”
C.F.R. § 2510.3-102.
29
Cash’s unjust enrichment and conversion
claims are directly connected to the 401(k) Plan and loan.
27
Those claims are preempted.
Defendants’ Motions to Dismiss
those claims are GRANTED.
4. Breach of Contract – Preemption
Cash alleges five claims of breach of contract.
First, he
alleges that Country Trust breached the 401(k) Plan loan
agreement by removing funds from Cash’s paycheck to repay the
loan.
(Amend. Compl., ECF No. 29 ¶¶ 126-27.)
Second, Cash
alleges that Turner breached the 401(k) Plan by removing funds
from Cash’s paycheck to repay the loan.
(Id.
¶¶ 129-31.)
Third, Cash alleges that Turner breached the 401(k) Plan by
denying Cash a second loan, providing no basis for the denial,
and failing to put the denial in writing.
(Id.
¶¶ 134-36).
Fourth, Cash alleges that Turner breached the 401(k) Plan by
treating Cash differently than other employees, who were able
to receive a second loan after paying off their first loan.
(Id. ¶¶ 33, 137.)
Fifth, Cash alleges that Turner breached
Cash’s employment contract by failing to compensate Cash for 16
hours of work.
(Id. ¶¶ 138-40.)
Breach of contract claims that relate to ERISA plans are
generally preempted by ERISA.
See, e.g., Cromwell v. Equicor-
Equitable HCA Corp., 944 F.2d 1272, 1276 (6th Cir. 1991)
(finding that breach of contract and bad faith claims arising
from a failure to provide benefits under the insurance contract
28
are preempted by ERISA); Girl Scouts of Middle Tenn., Inc. v.
Girl Scouts of the U.S.A., 770 F.3d 414, 419 (6th Cir. 2014)
(state law claims based on breach of contract and fiduciary
duty were preempted by ERISA).
Cash’s first four breach of contract claims arise from a
denial of benefits to which he asserts he is entitled under the
401(k) Plan and the loan provision.
Cash “does not allege the
violation of any legal duty (state or federal) independent of
ERISA or the plan terms.”
Gardner, 715 F.3d at 613.
The
401(k) Plan explicitly incorporates future documents relating
to a loan secured by the 401(k) Plan.
(401(k) Plan, ECF No.
32-1 at 424 (“All loans must be evidenced by a legally
enforceable agreement (which may include more than one
document) set forth in writing . . . .”).)
The 401(k) Plan and
the supporting documents contemplated the duties of Country
Trust as Trustee and Turner as Adopting Employer to remove
funds from Cash’s paycheck to repay the loan, to provide a
denial on receipt of a written application, and not to
discriminate.
(See 401(k) Plan, ECF No. 32-1 at 380, 384, 391,
424 (defining “Adopting Employer” and “Trustee,” and giving
Administrator “sole right to approve or disapprove a loan
application”); Participation Agreement, ECF No. 32-2; Trust
Agreement, ECF No. 10-3 at 174-76; Loan Policy, ECF No. 32-4
29
(limiting number of outstanding loans to each participant to
one); ECF No. 32-5 (Cash’s loan issuance with terms of
repayment from payroll).)
Cash’s breach of contract claims directly reference Plan
documents.
His claims would “result in mandating a specific
employment benefit structure, providing an alternate
enforcement mechanism of an ERISA plan, [and] regulating an
ERISA plan itself,” as well as “implicate relations among the
traditional ERISA plan entities.”
PONI, 399 F.3d at 700
(internal citations and quotation marks omitted).
Cash’s first
four breach of contract claims are preempted by ERISA.
Cash’s fifth claim is based on his employment contract.
(Amend. Compl., ECF No. 29 ¶¶ 138-40.) 4
Defendants do not
contend that Cash’s employment contract is subject to ERISA.
Cash’s hourly compensation is not preempted by ERISA because it
is not a future benefit under an ERISA plan.
Cf. Melton v.
Physicians in Emergency Med., P.S.C., No. CIV.A.3:04-CV-183-S,
2006 WL 581009, at *6 (W.D. Ky. Mar. 3, 2006) (finding breach
4 Turner argues, in a footnote, that its “alleged failure to pay
[Cash] for 16 hours for which he worked” will be refuted by discovery,
which “will show that this was nothing more than a clerical error which
Turner corrected as soon as it was brought to its attention by paying
[Cash] for the hours missing from his paycheck.” (ECF No. 31-1 at 342
n.2.) The Court can consider only the allegations in the Amended Complaint
and in referenced documents. The Court must construe the Amended Complaint
in the light most favorable to Cash and accept all well-pled factual
allegations as true. League of United Latin Am. Citizens v. Bredesen, 500
F.3d 523, 527 (6th Cir. 2007). The Court cannot consider Turner’s
representation.
30
of employment contract claim not preempted by ERISA because it
did not seek to enforce or assert rights to future benefits
under an ERISA plan).
Turner’s Motion to Dismiss the breach of
contract claim is DENIED.
C. Remaining State Law Claims
Cash’s remaining state law claims are for: (1) workers’
compensation; (2) negligence, IIED, and NIED – based on
Turner’s withholding Cash’s pay in response to an IRS levy; (3)
fraud, unjust enrichment, and conversion – based on Turner’s
removing “a $1 ADMFEE” from Cash’s paychecks and failure to
compensate Cash for 16 hours of work; (4) fraud – based on
Turner’s misrepresenting the date by which it received the IRS
levy letter; and (5) negligence – based on Turner’s failure to
compensate Cash for 16 hours of work.
1.
Worker’s Compensation
Turner argues that, to the extent Cash brings a worker’s
compensation claim for a work-related injury, a worker’s
compensation claim is “barred by the prior suit pending
doctrine. . . .”
(ECF No. 31-1 at 339.) 5
Cash asserts that he
5 In Tennessee, the prior suit pending doctrine generally allows “a
party [to] have an action barred on procedural grounds if there was a prior
suit pending against him in the same jurisdiction for the same cause of
action.” West v. Vought Aircraft Indus., Inc., 256 S.W.3d 618, 622 (Tenn.
2008).
31
“does not allege a cause of action for Worker’s Compensation in
this case.”
(ECF No. 33 at 512.)
He represents that reference
to his Worker’s Compensation state claim was used as “factual
background” to “provide[] some history between himself, and
Defendant Turner.”
(Id.)
Because Cash does not allege a worker’s compensation
claim, Defendants’ Motions to Dismiss that claim are DENIED as
MOOT.
2.
Negligence, IIED, and NIED -- IRS Levy
Cash brings negligence, IIED, and NIED claims against
Turner for withholding an improper amount pursuant to the IRS
levy and for failing to notify Cash of the IRS levy promptly.
(Amend. Compl., ECF No. 29 at 319-24.)
Turner contends that
Cash’s claims for negligence, IIED, and NIED arising from
Turner’s handling of Cash’s IRS levy should be dismissed
because “[t]he Internal Revenue Code specifically immunizes
employers, like Turner, of any and all liability arising from a
garnishment in compliance with an IRS Levy.”
(ECF No. 31-1 at
339.)
The Sixth Circuit has held that the prior suit pending doctrine does
not apply in federal court. Central Bank v. Jerrolds, 2015 WL 1486368 at
*6 n.7 (W.D. Tenn. March 31, 2015) (citing Laney Brentwood Homes, LLC v.
Town of Collierville, 144 F. App'x 506, 511 (6th Cir. 2005)); see also City
of Newport v. Masengill Auction Co., 19 S.W.3d 789, 794 (Tenn. Ct. App.
1999).
32
To state a claim for negligence under Tennessee law, a
plaintiff must allege: (1) a duty of care owed by the defendant
to the plaintiff, (2) conduct by the defendant breaching that
duty, (3) an injury or loss to the plaintiff, (4) causation in
fact, and (5) proximate or legal cause.
Giggers v. Memphis
Hous. Auth., 277 S.W.3d 359, 364 (Tenn. 2009).
To state a claim for NIED under Tennessee law, a plaintiff
must establish the essential elements of a general negligence
claim and the existence of a serious or severe emotional injury
that is supported by expert medical or scientific evidence.
Lourcey v. Estate of Scarlett, 146 S.W.3d 48, 52 (Tenn. 2004).
To state a claim for IIED under Tennessee law, a plaintiff
must allege that (1) the conduct complained of was intentional
or reckless; (2) the conduct was so outrageous that it is not
tolerated by civilized society; and (3) the conduct complained
of resulted in serious mental injury.
Bain v. Wells, 936
S.W.2d 618 (Tenn. 1997).
Turner argues that, under 26 U.S.C. § 6332(a), it is
immune from Cash’s negligence, IIED, and NIED claims insofar as
they relate to Cash’s IRS levy.
(ECF No. 33-1 at 339.)
When a taxpayer is delinquent in paying taxes, the IRS may
collect the tax by issuing a levy on the taxpayer's “property
33
and rights to property.”
26 U.S.C. § 6331(a).
A third party
“in possession of (or obligated with respect to) property or
rights to property upon which a levy has been made” must
surrender the property in accordance with the levy.
§ 6332(a).
26 U.S.C.
Payment on demand of an IRS notice of levy
discharges that third party from liability with respect to
those funds.
26 U.S.C. § 6332(e).
“until such levy is released.”
That immunity continues
26 U.S.C. § 6331(e), (h).
On March 13, 2017, the IRS mailed Turner a notice of levy
on Cash’s wages.
(Amend. Compl., ECF No. 29 ¶ 49.) 6
The
letter instructed Turner to “give the letter to Plaintiff
immediately.”
(Id. ¶ 50.)
April 10, 2017.
Turner provided Cash the letter on
(Id. ¶ 54.)
released on April 20, 2017.
The IRS levy against Cash was
(ECF No. 29; ECF No. 31-4.)
Cash
represents that, before April 12, 2017, Turner took $900 from
Cash’s paycheck, reducing his paycheck to $400.
Compl., ECF No. 29 ¶¶ 57-58, 60.)
(Amend.
Turner represented to Cash
that it was instructed by the IRS to “only leave Plaintiff with
$400 per paycheck.”
(Id. ¶¶ 60-61.)
To the extent Cash’s claims arise from Turner’s
withholding his wages pursuant to the IRS levy, that argument
fails to state a claim.
6
Turner is entitled to immunity.
The parties do not attach the letter or describe its contents.
34
An
administrative levy was issued on Cash’s earned income, and
pursuant 26 U.S.C. § 6332(a), Turner received a Notice of Levy.
(Amend. Compl., ECF No. 29 ¶ 49.)
Turner withheld Cash’s wages
under the compulsion of the levy.
(Id. ¶¶ 57-61.)
Turner is
immune from suit arising from honoring the levy.
To the extent Cash’s claims arise from Turner’s failure to
notify Cash of the levy immediately, he fails to state a claim.
Turner has no legal duty to notify Cash.
It is the IRS’ duty
to notify Cash of the levy against him, and the IRS has the
undoubted power to levy without a delinquent taxpayer’s
authorization.
26 U.S.C. § 6331(d).
Cash’s negligence and
NIED claims fail.
Turner’s honoring of the levy and failure to notify Cash
of the levy immediately are not so outrageous that Turner’s
conduct would not be tolerated by civilized society.
Cash’s
IIED allegations fail to state a claim.
Cash’s negligence, NIED, and IIED claims relating to the
IRS levy fail to state a claim.
Turner’s Motion to Dismiss
those claims is GRANTED.
3.
Fraud, Unjust Enrichment, and Conversion
Cash brings claims for fraud, unjust enrichment, and
conversion based on Turner’s removing $1 from Cash’s paychecks
35
“since April 27, 2017 under the representation that it is an
‘ADMFEE’” and on Turner’s failure to compensate Cash for 16
hours of work, amounting to $298.88.
(Amend. Compl., ECF No.
29 ¶¶ 100-101, 118, 121.)
Cash has failed to plead sufficient facts to establish
that Turner made any representations about the $1 fee or the
failure to compensate Cash for 16 hours of work.
A plaintiff
asserting a claim for fraud under Tennessee law must establish
six elements:
(1) the defendant made a representation of an
existing or past fact; (2) the representation was
false when made; (3) the representation was in regard
to a material fact; (4) the false representation was
made either knowingly or without belief in its truth
or recklessly; (5) plaintiff reasonably relied upon
the misrepresented fact; and (6) plaintiff suffered
damage as a result of the misrepresentation.
PNC Multifamily Capital Institutional Fund v. Bluff City
Community Development Corp., 387 S.W.3d 525, 548 (Tenn. Ct.
App. 2012).
Cash has failed to state a plausible claim for fraud on
which relief can be granted.
Turner’s Motion to Dismiss Cash’s
fraud claims is GRANTED.
Cash has failed to plead sufficient facts to establish
unjust enrichment.
A plaintiff asserting a claim for unjust
36
enrichment under Tennessee law must prove three elements: (1) a
benefit conferred on the defendant by the plaintiff; (2)
appreciation by the defendant of such benefit; and (3)
acceptance of such benefit under circumstances that would make
it inequitable for the defendant to retain the benefit without
payment.
Freeman Indus., LLC v. Eastman Chem. Co., 172 S.W.3d
512, 525 (Tenn. 2005).
Cash fails to establish that it would be inequitable for
Turner to retain the $1 fee.
The Loan Policy sets out three
fees the Plan Administrator may charge the participant’s
account for each loan: (1) $150 Loan set-up fee deducted from
the participant's account balance; (2) monthly loan maintenance
fee set at 0.70% of market value deducted from the
participant’s account; and; (3) annual loan maintenance fee for
each calendar year the loan is outstanding.
No. 32-4 at 489.)
(Loan Policy, ECF
Turner was permitted to charge
administrative fees on Cash’s outstanding loan.
Turner’s
Motion to Dismiss that claim is GRANTED.
Cash’s claim for unjust enrichment arising from his
unrecouped wages is not cognizable.
An unjust enrichment claim
is not cognizable where there is an express contract.
Durkin
v. MTown Constr., LLC, No. W201701269COAR3CV, 2018 WL 1304922,
at *7 (Tenn. Ct. App. Mar. 13, 2018).
37
Cash represents that he
has an enforceable employment contract with Turner.
Compl., ECF No. 29 ¶¶ 138-40.)
(Amend.
Cash may not bring an unjust
enrichment claim arising from his employment contract.
Cash
has failed to state a plausible claim for unjust enrichment on
which relief can be granted.
Turner’s Motion to Dismiss that
claim is GRANTED.
Cash has failed to plead facts to establish conversion as
it relates to Turner’s failure to compensate Cash for 16 hours
of work or Turner’s removal of the $1 administrative fee from
Cash’s paycheck.
“The elements of a conversion claim include:
(1) an appropriation of another's tangible property to one’s
use and benefit; (2) an intentional exercise of dominion over
the chattel alleged to have been converted; and (3) defiance of
the true owner’s rights to the chattel.”
White v. Empire Exp.,
Inc., 395 S.W.3d 696, 720 (Tenn. Ct. App. 2012).
"While the
Tennessee Courts do not appear to have addressed the issue,
past decisions in this jurisdiction and others have found that
an employer’s alleged failure to pay wages promised does not
constitute conversion.”
Bacon v. Subway Sandwiches & Salads
LLC, No. 3:14-CV-192-PLR-HBG, 2015 WL 729632, at *3 (E.D. Tenn.
Feb. 19, 2015) (internal quotation marks omitted) (collecting
cases).
38
Because Cash does not have a property right in unpaid
wages, his conversion allegations fail to state a claim on
which relief can be granted.
Turner’s Motion to Dismiss that
claim is GRANTED.
4.
Fraud -- IRS Levy Letter
Cash brings a claim of fraud against Turner for
“misrepresenting to [Cash] the date it received a letter from
the I.R.S. regarding a levy to [Cash’s] income.”
87.)
(ECF No. 29 ¶
Cash alleges that Turner represented to him that it
received the notice letter on April 10, 2017, when it actually
received it on March 13, 2017.
(Id. ¶ 88.)
Cash alleges that
he “was injured by Defendant Turner’s conduct because it placed
him in a position to not be able to address the levy until
after over $900 was deducted from his paycheck.”
(Id. ¶ 91.)
Cash has failed to plead a plausible claim for fraud based
on Turner’s alleged misrepresentation.
Cash alleges that his
monetary injury “would have been completely avoided had [Cash]
received the levy information which Defendant Turner was
instructed to give to [Cash] immediately.”
(Id. ¶ 93.)
Cash
fails to allege that he “suffered damage as a result of the
misrepresentation” that Turner received the letter in April.
Bluff City, 387 S.W.3d at 548.
Cash instead claims it was the
delay in receiving the letter, rather than the representation
39
about when Turner received the letter that caused his injuries.
Cash has failed to state a plausible claim for fraud on which
relief can be granted.
is GRANTED.
Turner’s Motion to Dismiss that claim
Cash’s fraud claim based on Turner’s alleged
misrepresentation as to the IRS levy is DISMISSED.
5.
Negligence -- Failure to Compensate
Cash argues that Turner was negligent by breaching its
“duty to pay [Cash] for the hours in which he worked.”
(Amend.
Compl, ECF No. 29 ¶¶ 153-54.)
Under Tennessee law, the duty alleged in a negligence
claim must be independent of a contractual duty.
Wright Bros.
Constr. Co., Inc. v. State, No. M201500610COAR9CV, 2015 WL
9437288, at *9 (Tenn. Ct. App. Dec. 22, 2015); Am.'s
Collectibles Network, Inc. v. Sterling Commerce (Am.), Inc.,
No. 3:09-CV-143, 2016 WL 9132294, at *19 (E.D. Tenn. Sept. 7,
2016).
Cash does not allege that Turner’s duty to pay arises
apart from any duty created by Cash’s employment contract.
Cash cites no binding authority, and the Court finds none, that
creates a common law duty to pay wages.
Cash’s negligence
allegations based on Turner’s failure to compensate him for 16
40
hours of work fails to state a claim.
Turners’ Motion to
Dismiss that claim is GRANTED.
D. ERISA Claims
Although Cash contends that ERISA does not apply, he
argues that if it did apply, “both Defendants . . . have
violated ERISA.”
(Amend. Compl., ECF No. 29 ¶¶ 184-85.)
Cash
alleges that Country Trust and Turner breached their fiduciary
duty under ERISA by denying Cash a second loan without
justification; failing to provide Cash the denial in writing,
an appeal or review process, or a reasonable interest rate; and
treating Cash differently from other employees.
205.)
(Id. ¶¶ 186-
Cash also contends that Country Trust breached its
fiduciary duty under ERISA by “collect[ing] more money from
Plaintiff th[a]n it was authorized or allowed to collect,” and
by “receiv[ing] payments from Plaintiff, but never credit[ing]
them to [Plaintiff’s] account. . . .”
(Id. ¶¶ 200-01.)
Although the Amended Complaint cites no specific statutory
or regulatory provision, Cash does cite specific sections of
ERISA in his response, contending that Defendants violated 29
U.S.C. §§ 1104, 1106, 1108, 1109, 1132, and 1133.
(ECF No. 34
at 524, 528.) 7
7
Cash also refers to § 1006.
does not exist.
(ECF No. 34 at 524.)
41
That provision
Turner argues that Cash’s breach of fiduciary duty claims
are not cognizable because 29 U.S.C. § 1109 “allows relief only
for an entire plan and not for individual participants or
beneficiaries, like Plaintiff here.”
(ECF No. 31-1 at 345
(citing Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S.
134, 139-143 (1985)).)
Turner also argues that “mere failure
to provide Plaintiff with an additional 401(k) loan at his
request and having different information regarding the balance
of Plaintiff’s outstanding loan . . . do not violate any
fiduciary duty owed to a plan participant under ERISA.”
(ECF
No. 31-1 at 345-46.)
Country Trust argues that Cash fails to state a claim
under ERISA because “he does not identify a Plan, he does not
identify either his own or Country Trust Bank’s relationship to
the Plan, he does not identify which provisions of the Plan and
its related documents are at issue, and he does not relate any
of his allegations to any specific provision of ERISA.”
No. 32 at 367.)
(ECF
Country Trust contends that Cash “fails to
identify what fiduciary duty was allegedly breached or why
Country Trust Bank was subject to that duty.”
(Id.)
Country
Trust represents that it is not the 401(k) Plan administrator
and thus has no “right to approve or disapprove a loan
application” and no obligation to provide a written denial.
42
(Id. at 367-68 (quoting ECF No. 32-1 §7.11(a).)
Country Trust
also argues that Cash’s allegations are insufficient to support
relief under ERISA because Cash does not allege that he
formally applied for a second loan or what unreasonable
interest rate he received.
(Id. at 368-69.)
Under 29 U.S.C. § 1132, “anyone who qualifies as a
‘participant or beneficiary’ of an employee benefit plan may
sue under ERISA to enforce various rights conferred by ERISA.”
An ERISA plaintiff may assert a claim for wrongful denial of
benefits under § 1132(a)(1)(B) or breach of fiduciary duty
under § 1132(a)(3), but he may not assert both.
Donati v. Ford
Motor Co., Gen. Ret. Plan, Ret. Comm., 821 F.3d 667, 674 (6th
Cir. 2016).
Section 1132(a)(1)(B) authorizes a plan participant or
beneficiary to bring an action “to recover benefits due to him
under the terms of his plan, to enforce his rights under the
terms of the plan, or to clarify his rights to future benefits
under the terms of the plan[.]”
Section 1132(a)(3) is
applicable “to beneficiaries who may not avail themselves of
§ 1132’s other remedies.”
Wilkins v. Baptist Healthcare Sys.,
Inc., 150 F.3d 609, 615 (6th Cir. 1998).
Thus, if Ҥ
1132(a)(1)(B) provides a remedy for [the plaintiff’s] alleged
injury that allows him to bring a lawsuit to challenge the Plan
43
Administrator’s denial of benefits to which he believes he is
entitled, he does not have a right to a cause of action for
breach of fiduciary duty pursuant to § 1132(a)(3).”
Id.
A plaintiff may not assert claims for individual benefits
that are not actual fiduciary-duty claims.
See Wilkins, 150
F.3d at 615–16 (“Because § 1132(a)(1)(B) provides a remedy for
[the plaintiff's] alleged injury that allows him to bring a
lawsuit to challenge the Plan Administrator's denial of
benefits to which he believes he is entitled, he does not have
a right to a cause of action for breach of fiduciary duty
pursuant to § 1132(a)(3). . . .
To rule in [the plaintiff's]
favor would allow him and other ERISA claimants to simply
characterize a denial of benefits as a breach of fiduciary
duty, a result which the Supreme Court expressly rejected.”)
(citing Varity Corp. v. Howe, 516 U.S. 489, 512, 515 (1996)).
A fiduciary breach claim under § 1132(a)(3) is permissible when
it “is based on an injury separate and distinct from the denial
of benefits or where the remedy afforded by Congress under §
[1132](a)(1)(B) is otherwise shown to be inadequate.”
Rochow
v. Life Insurance Co. of North America, 780 F.3d 364, 372-74
(6th Cir. 2015).
Cash alleges that Defendants breached their fiduciary
duty.
The Amended Complaint, however, seeks to recover and
44
enforce benefits due to Cash under the terms of the 401(k)
Plan.
It alleges that “Country Trust, by allowing Defendant
Turner to deny Plaintiff a second loan, operated contrary to
the written agreements involving the loan;” that “Defendant
Country Trust did not follow the written claim procedures for
written denials, or review of the denials, when Plaintiff was
denied a second loan;” and that “Defendant Country Trust did
not provide Plaintiff with a fair or reasonable interest rate”
as required by the loan documents.
(Amend. Compl., ECF No. 29
¶¶ 191-92, 196, 198 (emphasis added).)
Cash also seeks
“clarification of his right to future loans from his 401(k).”
(Id. at 328.)
Cash’s fiduciary duty claims are an
impermissible attempt to recharacterize individual benefits
claims for which § 1132(a)(1)(B) would provide a remedy.
They
are DISMISSED.
To the extent Cash has alleged claims for breach of
fiduciary duty that are separate and distinct from his denial
of benefits claims, those allegations also fail to state a
claim.
Section 1132(a)(2) authorizes a plan participant or
beneficiary to bring an action against a fiduciary who is
45
liable for a breach of fiduciary duty under Section 1109. 8
If
a fiduciary duty is breached, ERISA permits plan participants
and beneficiaries to sue for equitable relief.
1109.
29 U.S.C. §
“To be actionable under § 1132(a)(2), an alleged breach
of fiduciary duty must result in a loss to the plan.”
Wolf v.
Causley Trucking, Inc., 719 F. App’x 466, 476 (6th Cir. 2017)
(citing LaRue v. DeWolff, Boberg & Assocs., Inc., 552 U.S. 248
(2008)); Loren v. Blue Cross & Blue Shield of Mich., 505 F.3d
598, 608 (6th Cir. 2007) (“Plaintiffs cannot bring suit under §
1132(a)(2) to recover personal damages for misconduct, but
rather must seek recovery on behalf of the plan.”).
To state a
fiduciary duty claim, plaintiffs must also state “which
specific fiduciary duty or specific right owed to them was
infringed.”
Soehnlen v. Fleet Owners Ins. Fund, 844 F.3d 576,
585 (6th Cir. 2016).
The Amended Complaint does not allege the denial of a
specific right or the breach of a specific fiduciary duty.
It
does not allege that the denial of a right or the breach of a
8
Under ERISA, a plan “fiduciary” is one who “exercises any
discretionary authority or discretionary control respecting the management
of [an ERISA] plan or exercises any authority or control respecting the
management or disposition of its assets” or who “has any discretionary
authority or discretionary responsibility in the administration of such
plan.” 29 U.S.C. § 1002(21)(A). For purposes of ERISA, a “fiduciary” not
only includes persons specifically named as fiduciaries by the benefit
plan, but also anyone else who exercises discretionary control or authority
over a plan’s management, administration, or assets. See Mich. Affiliated
Healthcare Sys., Inc. v. CC Sys. Corp. of Mich., 139 F.3d 546, 549 (6th
Cir. 1998). Under ERISA, a person is a fiduciary only with respect to
those aspects of the plan over which he or she exercises authority or
control. See Grindstaff v. Green, 133 F.3d 416, 426 (6th Cir. 1998).
46
duty resulted in a loss to the 401(k) Plan.
Complaint cites no provision of ERISA.
The Amended
It alleges that
“Defendant Country Trust, if considered a trustee, has breached
its fiduciary duty to Plaintiff[;]” and “Defendant Turner has
also breached a fiduciary duty to Plaintiff.”
ECF No. 29 ¶¶ 186-87.)
(Amend. Compl.,
The Amended Complaint seeks individual
relief for Cash, not relief on behalf of the 401(k) Plan:
10. If it is determined that ERISA applies to any of
the claims, Plaintiff requests a review as to whether
Defendant Country Trust is an appropriate party over
Plaintiff’s 401(k).
11. Plaintiff requests that he be provided with all
documents identifying the process regarding the
review of denials of benefits, and for the Court to
make a determination if the process is proper.
12. Plaintiff seeks a determination as to whether
Defendant Country Trust has violated its duties based
on the written language giving them authority to act
as a trustee or fiduciary.
13. Plaintiff is seeking a clarification of his right
to future loans from his 401(k).
14. Plaintiff is seeking to be reimbursed for the
money improperly withdrew [sic] and taken from him.
15. Plaintiff is seeking clarification of what
Defendant Turner’s role is according to the plan and
written agreement, and if it violated that role.
16. To the extent Defendant Turner has violated its
role, Plaintiff is seeking reimbursement.
(Id. at 328 (emphasis added).)
Cash has not alleged that a
specific breach of fiduciary duty injured the 401(k) Plan and
has not sought relief on behalf of the 401(k) Plan itself.
47
Defendants’ Motions to Dismiss Cash’s fiduciary claims are
GRANTED.
V.
Those claims are DISMISSED.
Conclusion
For the foregoing reasons, Defendants’ Motions to Dismiss
are GRANTED in part and DENIED in part. All of Cash’s claims
are dismissed except his breach of employment contract claim
against Turner for failure to compensate Cash for 16 hours of
work.
So ordered this 10th day of July, 2018.
/s/ Samuel H. Mays, Jr.
SAMUEL H. MAYS, JR.
UNITED STATES DISTRICT JUDGE
48
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