Searls et al v. Sandia Corporation et al

Filing 46

MEMORANDUM OPINION in re 37 Motion to Dismiss. Signed by District Judge James C. Cacheris on 12/15/2014. (jlan)

IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF VIRGINIA
Alexandria Division
NANCY SEARLS
and CRAIG SEARLS,

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Plaintiffs,
v.
SANDIA CORPORATION,
Defendant.

M E M O R A N D U M

1:14cv578 (JCC/TCB)

O P I N I O N

This matter is before the Court on Defendant Sandia
Corporation’s (“Sandia’s”) Motion to Dismiss Ms. Nancy Searls
and Mr. Craig Searls’s (collectively “Plaintiffs”) Second
Amended Complaint [Dkt. 37].

For the reasons set forth below,

the Court will deny the motion.
I. Background1
A. Procedural Background
On September 25, 2014, the Court granted in part
Sandia’s motion to dismiss Plaintiffs’ first amended complaint.
(See Mem. Op. [Dkt. 34]; Order [Dkt. 35].)

The Court held that

Plaintiffs’ Virginia law claims were preempted by the Employee
Retirement Income Security Act of 1974 (“ERISA”), sections

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In ruling on a motion to dismiss, the “court accepts all well-pled facts as
true and construes these facts in the light most favorable to the
plaintiff[s].” Nemet Chevrolet, Ltd. V. Consumeraffairs.com, Inc., 591 F.3d
250, 255 (4th Cir. 2009) (citations omitted).

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514(a) and 502(a), codified at 28 U.S.C. §§ 1144(a), 1132(a).
(Memp. Op. at 8-17.)

The Court also dismissed Plaintiffs’ claim

for equitable relief under ERISA section 502(a)(3)(B) as to
then-Defendant Jane Farris, but held the claim was sufficient
for Rule 12(b)(6) purposes as to Sandia.

(Mem. Op. at 21-24.)

The Court granted Plaintiffs leave to file a second amended
complaint.

(Order [Dkt. 35] at 1-2.)

On October 14, 2014,

Plaintiffs filed their second amended complaint, wherein they
raise one claim for equitable relief under ERISA [Dkt. 36].
Sandia now moves to dismiss the second amended complaint in its
entirety.
B. Factual Background
The facts giving rise to this litigation remain
unchanged.

(See Mem. Op. at 1-4 (detailing the factual

background of this case).)

In short, Plaintiffs were former

employees of Sandia, which is located in New Mexico.
Compl. [Dkt. 36] ¶¶ 6, 8-9, 16.)

(2d Am.

During their employment,

Plaintiffs accepted Sandia’s offer to take a Special Leave of
Absence (“SLOA”) for a period of two years to work for the
Central Intelligence Agency in Virginia as full-time employees
while maintaining their connection to Sandia.
14.)

(Id. at ¶¶ 10-

This SLOA period was renewed twice and Plaintiffs

ultimately worked at the CIA for eight years before returning to
full-time employment with Sandia.

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(Id. at ¶¶ 14-15.)

Under the terms of the SLOA agreement, Plaintiffs
employment at Sandia was inactive during the eight-year period,
but Plaintiffs continued to earn time-of-service credit with
Sandia for purposes of future pension benefit calculations, so
long as Plaintiffs returned to employment with Sandia after the
SLOA expired.

(2d Am. Compl. ¶¶ 10-13.)

Plaintiffs returned to

work at Sandia and shared their institutional knowledge of the
CIA, which was very beneficial to Sandia.

(Id. at ¶ 12.)

Specifically, because of “information obtained from the
plaintiffs, Sandia was able to develop a broadly integrated data
analytics initiative that provided the basis for substantial
revenue.”

(Id. at ¶ 47.)
After Plaintiffs retired, pension payments from Sandia

initially included the bargained-for time-of-service credit
during their eight-year SLOA period with the CIA.
Compl. ¶ 17.)

(2d Am.

Eventually, however, Sandia decreased Plaintiffs’

pension payments to reflect a reduced time-of-service credit
that excluded the eight-year SLOA period because Plaintiffs were
also accruing time-of-service credit for their federal
government pension at the same time, which violated the nonduplication provision of Sandia’s Retirement Income Plan (“the
Plan”).

(Id. at ¶¶ 19, 20, 36.)

Sandia later amended the Plan

to provide a pension amount for the SLOA period that was offset
by the pension amount provided by the CIA.

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(Def.’s Mem. [Dkt.

38] at 6-7.)

After exhausting their administrative remedies

with Sandia, Plaintiffs filed suit.
Plaintiffs now bring one claim for equitable relief
under ERISA, 29 U.S.C. § 1132(a)(3)(B).
51.)

(2d Am. Compl. ¶¶ 25-

Pursuant to the equitable remedy of estoppel, Plaintiffs

ask the Court to prevent Sandia from excluding their bargainedfor time-in-service credit for the eight-year period of the
SLOA.

(Id. at 9.)

Specifically, Plaintiffs ask the Court to

compel Sandia to (1) disgorge the full value of the benefit it
received from Plaintiffs return to Sandia, (2) reimburse
Plaintiffs for amounts expended in reliance on Sandia’s false
promises, (3) compensate or restore pension payments improperly
withheld, and (4) make no future reductions in pension payments
on the basis of reinterpreting the Plan.

(Id. at 9-10.)

Sandia moves to dismiss this matter again pursuant to
Rule 12(b)(6) of the Federal Rules of Civil Procedure, and to
strike the allegations in the second amended complaint that were
previously dismissed by the Court.

(Def.’s Mem. at 5.)

II. Standard of Review
When ruling on a Rule 12(b)(6) motion, the Court
accepts as true all factual allegations contained in the
complaint.

E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc.,

637 F.3d 435, 440 (4th Cir. 2011) (citations omitted).

These

factual allegations must be sufficient, when taken as true, to

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show a plausible claim for relief that is more than just
conceivable or speculative. Vitol, S.A. v. Primerose Shipping
Co., 708 F.3d 527, 543 (4th Cir. 2013) (quoting Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 555, 570 (2007)).

Stated differently,

the facts as alleged in the complaint must “raise a reasonable
expectation that discovery will reveal evidence of the alleged
activity,” US Airline Pilots Ass’n v. Awappa, LLC, 615 F.3d 549,
554 (4th Cir. 2010) (quoting Twombly, 550 U.S. at 556), meaning
there are sufficient facts alleged to support an inference that
plaintiff is entitled to the relief he seeks.

Francis v.

Giacomelli, 558 F.3d 186, 196-97 (4th Cir. 2009) (citing
Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) (citation omitted)).
III. Analysis
Sandia now brings another Rule 12(b)(6) motion, its
second, this time challenging Plaintiffs’ claim for equitable
relief under 29 U.S.C. § 1132(a)(3)(B).

Plaintiffs pled this

claim for equitable relief in their first amended complaint, but
Sandia only challenged its status as a “plan fiduciary” under
this claim, and did not raise any of the arguments now pending
in Sandia’s second 12(b)(6) motion.

(Compare Defs.’ Mem. in

Supp. of Mot. to Dismiss Pls.’ First Am. Compl. [Dkt. 21] at 2425, with Def.’s Mem. in Supp. of Mot. to Dismiss. Pls.’ Second
Am. Compl. [Dkt. 38].)

Stated differently, Sandia now raises

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12(b)(6) arguments that were available but omitted from its
earlier motion.
This inefficient practice is expressly barred by the
Federal Rules of Civil Procedure.

See Fed. R. Civ. P. 12(g)(2)

(“Except as provided in Rule 12(h)(2) or (3), a party that makes
a motion under this rule must not make another motion under this
rule raising a defense or objection that was available to the
party but omitted from its earlier motion.”); see also Flame
S.A. v. Indus. Carriers, Inc., --- F. Supp. 2d ---, No. 2:13-cv658, 2014 WL 3544847, at *4 (E.D. Va. July 17, 2014) (holding
the defendant “must have placed all of its objections under
12(b)(6) in its first 12(b)(6) motion, if those defenses were
available to it.”) (citation omitted).
Regardless, the Court finds Sandia’s substantive
arguments unpersuasive for the following reasons.
Sandia argues that Plaintiffs’ claim for equitable
relief under ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3)(B),
should be dismissed for two reasons: First, Sandia contends
relief under ERISA § 502(a)(3) is foreclosed because ERISA §
502(a)(1)(B) provides adequate relief.

(Def.’s Mem. at 10-17.)

Second, Sandia argues that even if Plaintiffs state a claim
under ERISA § 502(a)(3), it should nonetheless be dismissed
because the relief Plaintiffs seek is not available in equity

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under that section of ERISA.

(Id. at 17-26.)

Both arguments

fail.2
A civil action may be brought “by a participant or
beneficiary 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.”

ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B).

Otherwise, a participant or beneficiary may also file suit “(A)
to enjoin any act or practice which violates any provision of
this subchapter or the terms of the plan, or (B) to obtain other
appropriate equitable relief (i) to redress such violations or
(ii) to enforce any provisions of this subchapter or the terms
of the plan.”

ERIRSA § 502(a)(3)(B), 29 U.S.C. § 1132(a)(1)(B).

The former provision is colloquially known as ERISA’s “recoveryof-benefits-due provision,” while the latter is known as the
“catch all provision.”

CIGNA Corp. v. Amara, --- U.S. ---, 131

S. Ct. 1866, 1871 (2011).
In Amara, “the Supreme Court expanded the relief and

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As a preliminary matter, Sandia also asks the Court to strike Plaintiffs’
factual allegations that were initially pled to support the state law claims
in the first amended complaint, but are now pled again in the second amended
complaint to support Plaintiffs’ claim for equitable relief under ERISA.
Sandia argues the allegations should be struck under Rule 12(f) of the
Federal Rules of Civil Procedure as “redundant, immaterial, impertinent, or
scandalous matter.” (Def.’s Mem. at 9-10.) There is no basis for the Court
to strike Plaintiffs’ factual allegations. Plaintiffs have not attempted to
plead state law counts that were already dismissed. Instead, Plaintiffs
simply include the same factual allegations to now support their claim for
equitable relief under ERISA. Sandia’s request to strike these allegations
will be denied.

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remedies available to plaintiffs asserting breach of fiduciary
duty under Section 1132(a)(3) and therefore seeking make-whole
relief such as equitable relief in the form of surcharge.”
McCravy v. Metro. Life Ins. Co., 690 F.3d 176, 180-81 (4th Cir.
2012) (“In sum, the portion of Amara in which the Supreme Court
addressed Section 1132(a)(3) stands for the proposition that
remedies traditionally available in courts of equity, expressly
including estoppel and surcharge, are indeed available to
plaintiffs suing fiduciaries under Section 1132(a)(3).”).

In

suing Sandia for breach of fiduciary duty under the Plan, the
Court cannot find that Plaintiffs’ enforcement mechanism lies
solely in ERISA § 502(a)(1)(B), nor can it find that the
remedies they seek are foreclosed under ERISA § 502(a)(3).
Sandia’s first argument misses the mark in light of
Amara and McCravy.

In Sandia’s view, Plaintiffs complaint was

more properly brought under ERISA § 502(a)(1)(B) because
Plaintiffs simply seek to recover pension benefits that were
supposedly due as a result of the eight-year SLOA period.
e.g., Def.’s Mem. at 14.)
litigation.

(See,

But that argument oversimplifies this

Plaintiffs indeed seek to recoup the value of

pension benefits they claim they are owed, but they also ask the
Court for estoppel, or to be put “in the same position [they]
would have been in had [Sandia’s] representations been true.”
Amara, 131 S. Ct. at 1880.

In other words, Plaintiffs ask for

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equitable relief to not only disgorge any value Sandia
improperly and unfairly received because of Plaintiffs’
institutional knowledge of the CIA, but they also seek “makewhole relief” such that they would be in the same position had
Sandia not denied term-of-service credit for the eight years of
SLOA.

McCravy, 690 F.3d at 181 (citing Amara, 131 S. Ct. at

1880) (“As the Supreme Court announced in Amara, ‘surcharge,’
i.e., ‘make-whole relief,’ constitutes ‘appropriate equitable
relief’ under Section 1132(a)(3).”).
purest form.

This is equity in its

Amara, 131 S. Ct. at 1879 (discussing equity’s

development of “a host of other ‘distinctively equitable’
remedies--remedies that were ‘fitted to the nature of the
primary right’ they were intended to protect.”).

Thus, Sandia’s

first argument fails.
Sandia’s second argument is also not persuasive.
Sandia argues that Plaintiffs’ seek relief that is unavailable
under ERISA § 502(a)(3) and therefore the claim should be
dismissed.

(Def.’s Mem. at 17-26.)

Sandia contends that

payment of additional pension benefits under the Plan,
disgorgement or restitution of any value received by Sandia, and
reimbursement of relocation expenses are all legal remedies not
properly awarded in equity under ERISA § 502(a)(3).
18.)

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(Id. at 17-

This argument might have withstood criticism preAmara.

But now, as Sandia acknowledges in its brief, “[t]he

Supreme Court’s decision in Amara arguably expanded the relief
available to plaintiffs under ERISA § 502(a)(3) to include
certain forms of monetary relief[.]”

(Id. at 22.).

Notably,

the Supreme Court expressly recognized “the fact that this
relief takes the form of a money payment does not remove it from
the category of traditionally equitable relief.”
Ct. at 1880.

Amara, 131 S.

Moreover, Sandia’s second argument fails because

Plaintiffs partially seek “relief in the form of monetary
‘compensation’ for a loss resulting from a [fiduciary’s] breach
of duty, or to prevent the [fiduciary’s] unjust enrichment[,]”
in addition to other equitable relief, including estoppel as
discussed above, which equity courts have always possessed the
power to provide.

Id.

(citing Restatement (Third) of Trusts §

95, and Comment a (Tent. Draft No. 5, Mar. 2, 2009); J. Eaton,
Handbook of Equity Jurisprudence §§ 211-212, at 440 (1901)); see
also Tatum v. RJR Pension Inv. Comm., 761 F.3d 346, 357 (4th
Cir. 2014) (“ERISA’s fiduciary duties draw much of their content
from the common law of trusts, the law that governed most
benefit plans before ERISA’s enactment.”) (internal quotation
marks and additional citations omitted).

Thus, Plaintiffs have

sufficiently stated a proper claim for equitable relief under
ERISA.

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Although the plaintiff in McCravy sought benefits
under her daughter’s life insurance policy, the circumstances
are similar to those presented here.
80.

McCravy, 690 F.3d at 177-

Ms. McCravy paid premiums on life insurance coverage for

her daughter for approximately six years until she was
tragically murdered.

Id. at 177.

After filing a claim for

benefits, the insurance company initially denied the claim
because her daughter had “aged out” and was no longer eligible
under the policy, but nonetheless, the insurance company
attempted to settle her claim by refunding the multiple years of
premiums she had paid.

Id.

Ms. McCravy sued, pleading inter

alia, breach of fiduciary duty and estoppel.

Id. at 179.

The

district court held that Ms. McCravy’s recovery was limited to
the amount of the premiums wrongfully withheld, but acknowledged
that her claims “present[ed] a compelling case for the
availability of some sort of remedy for the breach of fiduciary
duty above and beyond the mere refund of wrongfully retained
premiums.”

Id. at 179.

The Fourth Circuit reversed, and

expanded the relief available in equity pursuant to Amara under
ERISA § 502(a)(3).

Id. at 183.

Here, just like in McCravy, “it was represented to
Plaintiff[s] by Defendant” that they would continue to accrue
time-of-service credit during the eight-year SLOA period as long
as Plaintiffs returned to employment with Sandia.

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Id. at 178.

In fact, it is alleged that Plaintiffs moved across the country
to work for the CIA in exchange for this continued time-ofservice credit accrual, and when the SLOA period expired,
resumed work at Sandia and shared their institutional knowledge
of the CIA.

“Nevertheless, per the complaint, unbeknownst to

[Plaintiffs],” they were not eligible to ultimately receive
pension payments that included credit for the SLOA period, due
to a non-duplication provision in the Plan.

Id. at 178.

Without the equitable relief of surcharge and estoppel, “the
stifled state of the law interpreting Section 1132(a)(3) would
encourage abuse by fiduciaries . . . . [Indeed], fiduciaries
would enjoy essentially risk-free windfall profits from
employees who paid premiums [or otherwise acted] on, [or in
exchange for], non-existent benefits[.]”

Id. at 183.

ERISA §

504(a)(3), 29 U.S.C. § 1132(a)(3), is designed to avoid such an
inequitable outcome.
IV. Conclusion
For the foregoing reasons, the Court will deny
Sandia’s motion to dismiss the second amended complaint.
An appropriate Order will issue.

December 15, 2014
Alexandria, Virginia

/s/
James C. Cacheris
UNITED STATES DISTRICT COURT JUDGE

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