Hugler v. DeWalt et al

Filing 23

ORDER denying Defendants' 12 Motion to Dismiss for Lack of Jurisdiction and Defendants' 15 Motion to Dismiss for Failure to State a Claim. Signed by Chief Judge Thomas O. Rice. (BF, Paralegal)

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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WASHINGTON

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R. ALEXANDER ACOSTA,
Secretary of Labor, United States
Department of Labor,

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Plaintiff,

NO: 2:17-CV-0082-TOR
ORDER DENYING DEFENDANTS’
MOTIONS TO DISMISS

v.
JAMES DEWALT; ROBERT G.
BAKIE; JACK L. FALLIS, JR.;
JEFFREY A. BARTON;
ASSOCIATED INDUSTRIES
MANAGEMENT SERVICES, INC.;
THE ASSOCIATED INDUSTRIES
OF THE INLAND NORTHWEST; and
THE ASSOCIATED EMPLOYERS
HEALTH AND WELFARE TRUST,
Defendants.
BEFORE THE COURT are Defendants’ Motion to Dismiss for Lack of

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Subject Matter Jurisdiction (ECF No. 12) and Defendants’ Motion to Dismiss for

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Failure to State a Claim (ECF No. 15). These matters were submitted for

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consideration with oral argument. The Court held a hearing on July 25, 2017. At

ORDER DENYING DEFENDANTS’ MOTIONS TO DISMISS ~ 1

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the hearing, Eirik J. Cheverud appeared on behalf of Plaintiff R. Alexander Acosta,

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Secretary of Labor, Department of Labor, and Amanda S. Amert, Christopher J.

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Rillo, and Thomas W. McLane appeared on behalf of Defendants James DeWalt,

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Robert G. Bakie, Jack L. Fallis, Jr., Jeffrey A. Barton, Associated Industries

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Management Services, Inc., Associated Industries of the Inland Northwest, and the

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Associated Employers Health and Welfare Trust (collectively, “Defendants”). The

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Court has reviewed the record and files herein, and is fully informed. For the

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reasons discussed below, Defendants’ Motion to Dismiss for Lack of Subject

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Matter Jurisdiction (ECF No. 12) and Motion to Dismiss for Failure to State a

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Claim (ECF No. 15) are denied.
BACKGROUND
Plaintiff R. Alexander Acosta, United States Secretary of Labor, Department

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of Labor (“Secretary”) brings this action under the Employment Retirement

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Income Security Act of 1974 (“ERISA”), as amended, 29 U.S.C. §§ 1001 et seq.,

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against Defendants for alleged breaches of their fiduciary duties committed in the

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course of managing the Associated Employers Health and Welfare Trust (“Trust”)

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and ERISA-covered employee benefit plans that participate in the Trust (“Plans”).

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Defendants move to dismiss the Complaint under Federal Rule of Civil

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Procedure 12(b)(1) for lack of subject matter jurisdiction. See ECF No. 12.

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Defendants also seek dismissal under Rule 12(b)(6) for Plaintiff’s failure to plead

ORDER DENYING DEFENDANTS’ MOTIONS TO DISMISS ~ 2

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sufficient facts to support the ERISA claims. See Fed. R. Civ. P. 12(b)(6); ECF

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No. 15.

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FACTS
The following facts are drawn from Plaintiff’s complaint, and are accepted

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as true for purposes of the instant motions. Defendant Associated Industries of the

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Inland Northwest (the “Association”), a Washington non-profit corporation,

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established the Trust to receive monetary contributions from more than 300

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participating employers (“Participating Employers”) and employees. ECF Nos. 1

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at 6, ¶ 14; 15-1 at 7, Art. I ¶ 2. In turn, the Participating Employers and their

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employees contributed to the Trust to fund various employee health and welfare

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benefit ERISA plans (the “Plans”) by paying (1) insurance premiums to an

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insurance company to provide insured medical benefits, and (2) the Plan’s

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administrative expenses. ECF No. 1 at 2, ¶ 1; 11, ¶ 28.

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The Association had the authority to and did appoint trustees (the

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“Trustees”) to administer the Plans for the participating employees. Id. The

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Association also had the authority to remove the Trustees. ECF No. 1, 4 at ¶ 5.

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The Trustees received the Participating Employers’ contributions, which were held

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by the Trust for the exclusive benefit of the participating employees and their

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beneficiaries. Id. at 2, ¶ 1. The Trustees also had the authority to and did maintain

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a reserve fund for future contingencies. Id. at 11, ¶ 28.

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Defendant Associated Industries Management Services, Inc. (“AIMS”), a

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for-profit corporation wholly owned by the Association, provided administrative

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services for the Plans. Id. at 2, ¶ 2; 4 at ¶ 5. Defendant James DeWalt was the

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President, CEO, and a director of AIMs, and the President and CEO of the

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Association; Defendant Robert G. Bakie was the CFO of AIMS. Id. at 5-6, ¶¶ 10-

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11. Both were Trustees, in addition to Defendants Jack L. Fallis, Jr. and Jeffrey A.

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Barton. Id.; 6, ¶¶ 12-13; 12, ¶¶ 31-32. The Trust paid AIMS a fee for its

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administrative services using contributions made by the Participating Employers.

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ECF No. 1 at 14, ¶ 38. In 2009, AIMS’s fee equaled 2% of the total insurance

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premiums paid through the Trust. Id.
Generally, from December, 31 2009, through February 2014, the Trustees

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purported to approve a series of increases in AIMS’s fees from the 2% fee to as

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high as 7% of paid insurance premiums, and caused the Trust to pay those

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increased fees. Id. at 15-22, ¶¶ 39-58. The Participating Employers and their

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employees were never informed about the increases or that the Trustees took

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money from the Trust’s reserve fund to pay the fee increases to AIMS. Id. at 17,

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19-20, 23, ¶¶ 44-45, 51-52, 61-62. The Trust paid AIMS over $3 million more in

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fees than the 2% fee rate would have allowed. Id. at 22, ¶ 59.

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The Secretary asserts that the Trustees and the Association were ERISA
fiduciaries who violated their duties of prudence and loyalty to the Plans by

ORDER DENYING DEFENDANTS’ MOTIONS TO DISMISS ~ 4

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engaging in prohibited transactions in violation of ERISA sections 406(a)(1)(C)

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and (D), 29 U.S.C. § 1106(a)(1)(C), (D), because the Trustees retained and paid

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AIMS, repeatedly increased those fees, and caused the Trust to pay such fees with

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the Plans’ assets. Id. at 24-27, ¶¶ 63-68. The Secretary also alleges that the

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Association failed to properly monitor the Trustees’ actions, and that the Trustees

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and the Association are liable as co-fiduciaries for each other’s violations. Id. at

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25-27, 29, ¶¶ 66, 67, 72-73. The Secretary further contends that the Trustees’

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conduct constituted prohibited self-dealing with the Plans’ assets and violated their

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ERISA fiduciary duties of loyalty, prudence, and fidelity to the Plans’ participants

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and beneficiaries. Id. at 3, ¶ 2. Similarly, the Secretary contends that AIMS is

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liable under ERISA section 502(a)(5), 29 U.S.C. § 1132(a)(5), for disgorgement of

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its unjust enrichment because it knowingly participated in these fiduciary breaches.

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Id. at 4, ¶ 5.

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DISCUSSION

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In their motions to dismiss the Complaint pursuant to Fed. R. Civ. P.

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12(b)(1) and 12(b)(6), Defendants factually challenge whether the Trust contains

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ERISA-covered assets and dispute that Defendants are fiduciaries with respect to

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the various Plans because—according to Defendants—they did not exercise control

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or discretionary authority over the Plans’ assets. ECF No. 12 at 10-11; 15 at 8-14.

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ORDER DENYING DEFENDANTS’ MOTIONS TO DISMISS ~ 5

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With respect to its Rule 12(b)(1) motion, Defendants argue that the Court

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lacks subject matter jurisdiction because the Secretary’s Complaint does not

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“present a federal question on [its] face.” ECF No. 12 at 5. Similarly, Defendants

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argue in their Rule 12(b)(6) dismissal motion that (1) the Secretary failed to state

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prohibited-transaction and knowing participation claims because the Trust’s assets

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were not ERISA-covered plan assets; (2) the Secretary failed to allege facts to

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support the failure-to-monitor claim against the Association; and (3) all claims

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arising before May 27, 2010, are time-barred. ECF No. 15 at 14–19.

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Defendants initially argued that the Court also lacks jurisdiction because the

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Trust is not itself an ERISA plan. See ECF No. 12 at 6-10. The Secretary’s

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responsive memorandum clarifies that this alternative position was pled based on

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Defendants’ position taken in other litigation. See ECF No. 18 at 8.

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A. Subject Matter Jurisdiction

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Federal courts have subject-matter jurisdiction over “all civil actions arising

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under the . . . laws . . . of the United States.” 28 U.S.C. § 1331. The Secretary

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asserts that this Court has subject matter jurisdiction pursuant to ERISA

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§ 502(e)(1), 29 U.S.C. § 1132(e)(1). ECF No. 1 at ¶ 7. ERISA section 502(e)(1)

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provides, in relevant part, that “the district courts of the United States shall have

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exclusive jurisdiction of civil actions under this subchapter brought by the

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Secretary . . . .” 29 U.S.C. § 1132(e)(1). Pursuant to ERISA section 502(a)(2) and

ORDER DENYING DEFENDANTS’ MOTIONS TO DISMISS ~ 6

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(5), 29 U.S.C. § 1132(a)(2) and (5), Congress cloaked the Secretary with the

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authority to enjoin acts that violate ERISA provisions, obtain other appropriate

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equitable relief, and enforce the fiduciary responsibility provisions of Title I of

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ERISA. The Secretary may also bring an action under ERISA section 502(a)(5)

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against a non-fiduciary that knowingly participates in an ERISA fiduciary

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violation. 29 U.S.C. § 1132(a)(5).

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Thus, the Secretary invoked federal-question jurisdiction under § 1331 and

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the case arises under a federal law, ERISA section 502(e)(1). 29 U.S.C.

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§ 1132(e)(1). However, as a preliminary matter, whether the Trust contains

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ERISA-covered plan assets and whether Defendants are subject to ERISA are

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“question[s] on the merits of the claim, not an issue of subject matter jurisdiction.”

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Daniels-Hall v. Nat’l Educ. Ass’n, 629 F.3d 992, 997 (9th Cir. 2010) (quoting Trs.

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of the Screen Actors Guild–Producers Pension & Health Plans v. NYCA, Inc., 572

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F.3d 771, 775 (9th Cir. 2009)). Because the Secretary alleges causes of action

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“arising under” ERISA, this Court unequivocally has subject matter jurisdiction.

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See 28 U.S.C. § 1331; 29 U.S.C. § 1132(e)(1), ERISA § 502(e)(1); Daniels-Hall,

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629 F.3d at 997.

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Accordingly, Defendants’ Motion to Dismiss for Lack of Subject Matter
Jurisdiction is denied. The Court will address whether the Secretary’s allegations

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ORDER DENYING DEFENDANTS’ MOTIONS TO DISMISS ~ 7

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properly state a claim under ERISA. Daniels-Hall, 629 F.3d at 998 (citation

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omitted).

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B. Failure to state a claim

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Fed. R. of Civ. P. 12(b)(6) provides that a defendant may move to dismiss

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the complaint for “failure to state a claim upon which relief can be granted.” To

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survive dismissal, a plaintiff must allege “sufficient factual matter, accepted as

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true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556

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U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570

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(2007)). This requires the plaintiff to provide “more than labels and conclusions,

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and a formulaic recitation of the elements[.]” Twombly, 550 U.S. at 555.
When deciding, the Court may consider the plaintiff’s allegations and any

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“documents incorporated into the complaint by reference . . . .” Metzler Inv.

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GMBH v. Corinthian Colleges, Inc., 540 F.3d 1049, 1061 (9th Cir. 2008) (citing

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Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007)). A

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plaintiff’s “allegations of material fact are taken as true and construed in the light

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most favorable to the plaintiff[,]” but “conclusory allegations of law and

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unwarranted inferences are insufficient to defeat a motion to dismiss for failure to

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state a claim.” In re Stac Elecs. Sec. Litig., 89 F.3d 1399, 1403 (9th Cir. 1996)

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(citation and brackets omitted). In addition, a federal court may dismiss a

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complaint for failure to comply with the statute of limitations where “the running

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of the statute is apparent on the face of the complaint.” Huynh v. Chase Manhattan

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Bank, 465 F.3d 992, 997 (9th Cir. 2006) (quoting Jablon v. Dean Witter & Co.,

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614 F.2d 677, 682 (9th Cir. 1980); citing Supermail Cargo, Inc. v. United States,

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68 F.3d 1204, 1206 (9th Cir. 1995)). “[A] complaint cannot be dismissed unless it

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appears beyond doubt that the plaintiff can prove no set of facts that would

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establish the timeliness of the claim.” Supermail Cargo, Inc., 68 F.3d at 1207

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(citation omitted).

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Defendants argue that the Secretary fails to sufficiently allege that
Defendants administered or exercised discretion or control over any of the

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Participating Employers’ Plans’ assets. ECF No. 12 at 11. Defendants contend

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that the Plans never had an ownership interest in any of the money remitted to the

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Trusts by the Participating Employers; therefore, as a notion of property rights law,

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the Trust did not contain the Plans’ assets. Id. at 9-10. In turn, Defendants argue

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that they had no fiduciary duties to the Plans. ECF No. 15 at 8-9. Defendants

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reason that because the Plans had no ownership interest in the Trust funds,

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Defendants could not have breached a fiduciary duty and, in tandem, cannot be

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liable as non-fiduciaries that knowingly participated in such violations. Id. at 10-

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13, 18. Defendants also contend that even if the Court finds that the Trust contains

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Plan assets, the Secretary fails to plausibly allege how Associated breached its duty

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to monitor the Trustees, which compels dismissal of that claim. Id. at 14.

ORDER DENYING DEFENDANTS’ MOTIONS TO DISMISS ~ 9

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The Secretary responds that when employers and/or employees contribute

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assets to a multiple-employer trust—like the Trust, here—the assets are plan assets

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in which the ERISA plans, and their participants and beneficiaries, have a

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beneficial interest under the terms of the governing trust agreement, even though

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the trustee possesses legal title. See ECF No. 15 at 7. The Secretary explains that

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Defendants are properly considered both service providers and fiduciaries because

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the Trust’s assets were Plan assets, and they possessed authority or control over

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those assets. Id.

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Here, the parties agree that the various Participating Employers each

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established and maintained an employee welfare benefit plan covered by ERISA.

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See ECF No. 1 ¶¶ 18–22. It is also undisputed that the Participating Employers

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paid contributions to the Trust, and the Trust used some of those contributions to

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pay insurance carriers to insure the medical benefits provided by the Plans’

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insurance coverage, to pay entities providing the Plans with administrative

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services, and to maintain the remaining funds in the Trust’s reserve fund. See id. at

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¶¶ 28, 38. To decide whether the Secretary has alleged sufficient factual matter to

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state a plausible claim to relief under ERISA, the Court must first determine

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whether the Secretary sufficiently pled that the Trust contained Plan assets. See

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Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570.

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ORDER DENYING DEFENDANTS’ MOTIONS TO DISMISS ~ 10

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i. The Secretary sufficiently alleges causes of action under
ERISA related to ERISA-covered Plan assets held by the
Trust.

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ERISA protects “the interests of participants in employee benefit plans and

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their beneficiaries.” 29 U.S.C. § 1001(b). ERISA applies to “any employee

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benefit plan if it is established or maintained . . . by any employer . . . or . . . by any

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employee organization . . . or by both.” Id. § 1003(a)(1)-(3). “Employee benefit

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plans” come in two types. Id. § 1002(3). The first category, the “employee

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welfare benefit plan,” provides medical benefits and any benefits “other than

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pensions on retirement or death.” Id. § 1002(1). The second category, the

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“employee pension benefit plan,” “provides retirement income” or “results in a

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deferral of income [until retirement].” Id. § 1002(2)(A)(i)-(ii). The first type of

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benefit plan is at issue here. See ECF No. 1 at ¶ 19. The Participating Employer

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Plans were a “multiple employer welfare arrangement.” See § 1002(40); ECF No.

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1 at ¶ 21.

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ERISA imposes strict fiduciary duties on persons who administer employee

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welfare benefit plans. See § 1002(21)(A) (defining persons qualifying as plan

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fiduciaries); see also id. § 1101 et seq. (establishing specific fiduciary duties and

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liability for breaches of these duties). Specifically, ERISA defines a fiduciary as

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anyone who:

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(i) . . . exercises any discretionary authority or discretionary control
respecting management of such plan or exercises any authority or

ORDER DENYING DEFENDANTS’ MOTIONS TO DISMISS ~ 11

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control respecting management or disposition of its assets, (ii) . . .
renders investment advice for a fee or other compensation, direct or
indirect, with respect to any moneys or other property of such plan, or
has any authority or responsibility to do so, or (iii) . . . has any
discretionary authority or discretionary responsibility in the
administration of such plan.

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§ 1002(21)(A). “[A] person’s actions, not the official designation of his role,

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determine whether he enjoys fiduciary status.” Acosta v. Pac. Enterprises, 950

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F.2d 611, 618 (9th Cir. 1991). Importantly, an ERISA plan cannot serve as its own

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fiduciary with respect to its own assets. Id.

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ERISA “plan assets” are defined “by such regulations as the Secretary may

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prescribe . . . .” 29 U.S.C. § 1002(42). Importantly, the relevant regulation

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provides that “[w]hen a plan acquires or holds an interest in any entity . . . which is

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established or maintained for the purposes of offering or providing any benefit . . .

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to the participants or beneficiaries of the investing plan, its assets will include its

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investment and an undivided interest in the underlying assets of that entity.” 29

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C.F.R. § 2510.3-101(h)(2) (emphasis added). Although the Ninth Circuit has yet

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“to delineate the precise boundaries” of the “plan assets” phrase, “ERISA’s

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legislative history makes clear that ‘the crucible of congressional concern was

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misuse and mismanagement of plan assets by plan administrators and that ERISA

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was designed to prevent these abuses in the future.’” Acosta, 950 F.2d at 620

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(quoting Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 140 n.8 (1985)

ORDER DENYING DEFENDANTS’ MOTIONS TO DISMISS ~ 12

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(citing 120 Cong. Rec. 29,932, 29,951, 29,954, 29,957, 29,961, 29,194, 29,196–97,

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29,206 (1974)). The Department of Labor interprets the phrase as “any property,

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tangible or intangible, in which the plan has a beneficial ownership interest.” U.S.

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Dep’t of Labor, Off. Pension & Welfare Benefit Programs, Advisory Opinion, 93-

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14A, 1993 WL 188473, at *4 (May 5, 1993). Defendants concede as much. ECF

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No. 15 at 9.

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Here, Defendants argue that the Secretary insufficiently pled ERISA claims

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because funds used to purchase insurance policies for the Plans are not ERISA plan

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assets. See id. at 9-10. However, Defendants’ reliance on Bos v. Bd. of Trs., 795

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F.3d 1006, 1010 (9th Cir. 2015) is unavailing because there, the Ninth Circuit

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merely held that “unpaid contributions to employee benefit funds are not plan

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assets[.]” Bos, 795 F.3d at 1012. This is not a case where the Participating

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Employers failed to remit contributions to the Trust. Defendants’ argument also

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ignores the fact that the Trust funds also included funds used to pay administrative

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costs and a reserve fund meant for the “exclusive purpose” of providing benefits to

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the participating employees and their beneficiaries for future contingencies. See

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ECF No. 15-1 at 13, Art. V ¶ 4.

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Defendants’ other argument, that because the Trustees held legal title to the

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Plans’ assets, the Trust held the entire ownership interest leaving no room for the

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Plans to hold a beneficial interest, is equally unpersuasive. The Ninth Circuit has

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counseled that “[t]o determine whether a particular item constitutes an ‘asset of the

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plan,’ it is necessary to determine whether the item in question may be used to the

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benefit (financial or otherwise) of the fiduciary at the expense of plan participants

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or beneficiaries.” Acosta, 950 F.2d at 620.

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Here, the Trust Agreement unambiguously provides that “the assets of the

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Trust Fund . . . shall be held for the exclusive purposes of providing benefits to

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participating employees and their beneficiaries and defraying expenses of

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administering the plan.” ECF No. 15-1 at 13, Art. V § 4 (emphasis added). As

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fiduciaries, “[t]he Trustees shall . . . administer the Trust Fund solely in the interest

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of the participating employees and their beneficiaries and for the exclusive purpose

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of (a) providing benefits to participating employees and their beneficiaries and (b)

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defraying reasonable expenses of benefit plan administration.” Id. § 5 (emphasis

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added).

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Simply because the Trust held the Plans’ assets does not mean that the Plans

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relinquished all interest in those assets. The Secretary’s Complaint explains that

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the Trust Agreement explicitly reflects that the Plans maintained a beneficial

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ownership interest in the Trust’s assets, exclusively intended to benefit the Plans’

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participants and beneficiaries, not the fiduciaries. See id.; see also Acosta, 950

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F.2d at 620; ECF No. 1 at 2, ¶ 1.

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ORDER DENYING DEFENDANTS’ MOTIONS TO DISMISS ~ 14

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Accordingly, the Court finds that the Secretary has sufficiently alleged that

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the Trust’s funds contained the Plans’ assets, which is sufficient to support the

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breach of fiduciary duty claims, if the Court accepts that allegation as true. Iqbal,

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556 U.S. at 678 (citing Twombly, 550 U.S. at 570). The Complaint contains far

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“more [than a] formulaic recitation of the elements” sufficient to survive dismissal.

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See Twombly, 550 U.S. at 555.

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ii. The Secretary sufficiently alleges causes of action under
ERISA related to Defendants’ alleged breaches of their
fiduciary duties.

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Defendants next argue that the Secretary’s breach of fiduciary duty claims

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must fail because the Secretary has failed to plead facts to support that Defendants

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were fiduciaries over the Plans. The Secretary argues that its Complaint alleges

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that the Trustees were ERISA fiduciaries under ERISA sections 3(21)(i) and (iii),

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29 U.S.C. § 1002(21)(i), (iii), because they (1) exercised discretionary authority or

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control respecting management of the Plans; (2) exercised authority or control

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respecting management or disposition of the Plans’ assets; and/or (3) had

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discretionary authority or discretionary responsibility for administration of the

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Plans. ECF Nos. 1 ¶ 33; 18 at 9. Defendant argues that the Complaint does not

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state a claim that is facially plausible, but Defendants’ sole bases for rebutting the

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Secretary’s allegations are that the assets in the Trusts were not the Plans’ assets

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ORDER DENYING DEFENDANTS’ MOTIONS TO DISMISS ~ 15

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and, therefore, they did not exercise discretionary managerial or administrative

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control over the Plans or the Plans’ assets. ECF No. 19 at 4.

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It is undisputed that the Trust Agreement governs the terms of the Trust.

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ECF No. 15-1. The Trust Agreement defines “employee welfare benefit plan” as

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any lawful employee benefit plan administered by the Trust’s Trustees. Id. at 7,

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Art. II § 3. The Association is identified as the “Plan Sponsor” for those plans. Id.

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at 8, Art. III, at § 3. Here, both the Trust and the Plans were to be administered by

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the Board of Trustees, which was to be comprised of six trustees identified as in

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the Trust Agreement “as ‘named fiduciaries’, ‘fiduciaries’, and the ‘plan

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administrator’, as those terms are used in [ERISA].” Id. at §§ 1-2. Regardless of

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whether the Trust acted as a “service provider” for the Plans, the Trust’s Trustees

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are explicitly considered fiduciaries as defined in the Trust Agreement and in

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harmony with the ERISA-defined fiduciary definition, 29 U.S.C. § 1002(21)(A).

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See ECF No. 15-1 at 7, Art. I ¶ 2 (purpose is to provide an entity to which

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contributions can be paid to the Trust and through which the Trustees can create

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and administer the Plans); 12, Art. V ¶¶ 1, 5 (Trustees’ fiduciary duties, as imposed

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by ERISA, require administration of the Trust to provide benefits and defray

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benefit plan administration expenses). The Secretary’s Complaint sufficiently

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alleges both contentions to support his claims. See also ECF No. 1 at 10, ¶ 23, 25.

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ORDER DENYING DEFENDANTS’ MOTIONS TO DISMISS ~ 16

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Notwithstanding, Defendants also argue that the Secretary fails to allege

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exactly how the Association breached its duty to monitor the Trustees. ECF No.

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15 at 14. The Secretary alleged that the Association knew about the Trustees’

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ERISA violations, had authority to remove the Trustees it appointed, yet failed to

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undertake action to remedy those known violations. See ECF Nos. 18 at 26; 1

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¶ 67. The Secretary further alleged that the Association “failed to properly monitor

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the Trustees’ actions” in violation of its fiduciary duties (loyalty, prudence and

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fidelity) under ERISA sections 404(a)(1)(A) and (B), 29 U.S.C. § 1104(a)(1)(A),

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(B), (id. ¶ 67), and that the Trustees and the Association are liable as co-fiduciaries

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for each other’s violations under ERISA section 405(a), 29 U.S.C. § 1105(a), (id.

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¶¶ 66, 67(c), 73).

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As such, the Secretary’s breach of fiduciary duty and duty-to-monitor claims

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are sufficiently pled to withstand the relatively low threshold to survive

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Defendants’ motion to dismiss for failure to state a claim. See Iqbal, 556 U.S. at

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678 (citing Twombly, 50 U.S. at 570).

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iii. The Secretary sufficiently alleges that his claims are within the
applicable statute of limitations period.

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The Court may dismiss a claim under Fed. R. Civ. P. 12(b)(6) on the ground

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that it is barred by a statute of limitations, but only when “the running of the statute

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is apparent on the face of the complaint.” Von Saher v. Norton Simon Museum of

ORDER DENYING DEFENDANTS’ MOTIONS TO DISMISS ~ 17

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Art at Pasadena, 592 F.3d 954, 969 (9th Cir. 2010) (internal quotation marks

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omitted). ERISA claims with respect to a fiduciary’s breach of any responsibility,

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duty, or obligation must be brought within six years of a breach of an ERISA

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violation. 29 U.S.C. § 1113(1)(A).

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Here, the Secretary filed his Complaint in this action on February 24, 2017.

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ECF No. 1. As part of Defendants’ Rule 12(b)(6) motion, Defendants argue that

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the Secretary’s claims arising from events before May 27, 2010, should be

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dismissed because those claims are untimely. See Fed. R. Civ. P. 12(b)(6); ECF

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No. 15 at 18. Even though the parties executed tolling agreements that apply to

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claims arising after May 27, 2010 (see ECF No. 1 at 7, ¶ 17), Defendants argue

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that ERISA’s six-year statute of limitations bars claims arising before that date.

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ECF No. 15 at 19.

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The Secretary responds that Defendants’ argument conflicts with ERISA, in

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that, the statute of limitation period runs “six years after . . . the date of the last

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action which constituted a part of the breach or violation.” ECF No. 18 at 23

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(citing 29 U.S.C. §1113(1) (emphasis added)). Although the initial act of the

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Trustees’ vote to increase the fees it paid to AIMS occurred on December 31,

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2009, it was not until June 28, 2010, when the Trustees “caused the Trust to pay”

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the fee increase to AIMS. See ECF No. 1 ¶ 39.

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ORDER DENYING DEFENDANTS’ MOTIONS TO DISMISS ~ 18

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In other words, it is apparent on the face of the Complaint that the “date of

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the last action which constituted a part of the breach or violation” relates to the first

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payment, which occurred on June 28, 2010. Id.; see also 29 U.S.C. §1113(1).

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Accordingly, based on a review of the Complaint on its face, the applicable statute

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of limitation does not bar the allegations.

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ACCORDINGLY, IT IS HEREBY ORDERED:

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1. Defendants’ Motion to Dismiss for Lack of Subject Matter Jurisdiction
(ECF No. 12) is DENIED.
2. Defendants’ Motion to Dismiss for Failure to State a Claim (ECF No. 15)
is DENIED.
The District Court Executive is directed to enter this Order and provide
copies to the parties.
DATED July 31, 2017.

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THOMAS O. RICE
Chief United States District Judge

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ORDER DENYING DEFENDANTS’ MOTIONS TO DISMISS ~ 19