YVONNE GONZALEZ ROGERS, United States District Court Judge
Before the Court is a motion to dismiss the First Amended Complaint of Plaintiff
Twenty-two months later, in November 2011, a representative of the Kaiser Permanente Retirement Center notified Plaintiff that she had been overpaid by more than $240,000 and that she was obligated to repay the overage, with interest. The overpayment resulted solely from Hewitt's apparent data entry error.
Plaintiff has exhausted her administrative remedies and instituted this civil action. The FAC asserts three separate claims: as against Kaiser, (1) equitable estoppel, as provided under the Employee Retirement Income Security Act ("ERISA") at 29 U.S.C. § 1132(a)(3), and, as against Hewitt, (2) negligence and (3) negligent misrepresentation. Defendants have filed a motion to dismiss the FAC pursuant to Federal Rule of Civil Procedure 12(b)(6) on the grounds that federal law precludes Plaintiff's negligence claims and equitable principles provide no basis for relief.
Having carefully considered the parties' papers and argument in light of the applicable law of the Ninth Circuit, and for the reasons set forth below, the Court
Given the procedural posture of this case, the Court accepts as true the well-pleaded factual allegations of Plaintiff s FAC and construes them in the light most favorable to Plaintiff. The parties do not dispute that ERISA governs the subject Plan.
Plaintiff Ramona Groves began her permanent employment with Kaiser in May 1976. (FAC ¶ 7.) Kaiser provided its employees with the opportunity to participate in the Kaiser Permanente Salaried Retirement Plan, a defined benefit plan. (FAC ¶ 8.) Plaintiff participated in the Plan. (Id.)
In or about March of 2009, Kaiser sent a letter to its employees regarding changes to the calculation used to determine the
(FAC ¶ 12.) The booklet stated that an estimate of a pension benefit could be received over the phone by contacting the Kaiser Permanente Retirement Center. (Id.).
Plaintiff, who was 55 years old at the time, was eligible for early retirement in 2009. (FAC ¶ 13.) In reliance on materials provided by Kaiser, and particularly on the statement that "it may be in her best interest" to retire early, Plaintiff contacted Kaiser Permanente Retirement Center by phone on or about July 7, 2009 to discuss the possibility of early retirement. (FAC ¶¶ 13-14.) Plaintiff spoke with "Christopher," who represented himself as a Retirement Specialist. (FAC ¶ 14.) Christopher stated that the date of "early" retirement, prior to the implementation of retirement changes pursuant to the PPA would be November 30, 2009. (Id.) Christopher quoted Plaintiff an early retirement lump sum payout of $729,677.05. (Id.) In response to Plaintiff's inquiry about the amount she would receive if she chose to retire after January 1, 2010, Plaintiff was given a quote of $619,697.11. (Id.) Concerned about such a large difference in the quotes, Plaintiff sought assurances from Christopher about the correctness of figures given. (Id.) Christopher repeatedly stated that the quotes provided were correct. (Id.)
Plaintiff requested that Kaiser Permanente Retirement Center provide her with a written statement of pension benefit estimates for both options — early retirement effective November 30, 2009, and retirement effective January 1, 2010. (FAC ¶ 15.) Kaiser, through statements "delivered by Hewitt," provided Plaintiff with the requested information. The figures in the written statements matched the verbal information provided by Kaiser Permanente Retirement Center during the telephone conversation on July 7, 2009. (Id.)
After obtaining the written quotes from Kaiser, Plaintiff, as suggested by Kaiser's materials received in March 2009, sought the services of a professional financial adviser. (FAC ¶ 17.) Plaintiff provided the adviser with all relevant documents sent by Kaiser and/or Hewitt reflecting the final figures of pension benefit payouts for the years of 2009 ($729,677.05) and 2010 ($619,697.11) and all relevant information concerning Plaintiff's personal financial situation. (FAC ¶ 18.) Plaintiff explained
After significant consideration and in reliance on the information provided by Defendants, Plaintiff decided to retire early from her 35-year career with Kaiser. (FAC ¶ 21.) In August 2009, Plaintiff notified her manager of her intent to retire effective November 30, 2009. (Id.) Had Plaintiff been properly informed by the Plan of the correct calculations, she would have immediately withdrawn her resignation and remained as a full-time employee of Kaiser. (Id.).
After she gave notice of intent to retire early, Plaintiff began the process of completing the required paperwork. (FAC ¶ 22.) During the process, which lasted several months, she made multiple calls to Kaiser Permanente Retirement Center to discuss various topics, including the payout amount. (Id.) During each of these telephone calls, the payout amount was confirmed, notwithstanding minor modifications. (Id.) Defendants provided Plaintiff with documents indicating that the amount calculated was "final." (Id.)
The amount of payout was recalculated by Kaiser and/or Hewitt numerous times. (FAC ¶ 23.) The total pension benefit payout sum increased to $748,740.93, reflecting Plaintiff's unused paid time off and accrued extended sick leave. (Id.) In October 2009, Plaintiff was notified that her payout amount increased to $748,961.97. (Id.)
In January 2010, prior to receiving the payout, Plaintiff received the final correspondence concerning her payout, dated January 11, 2010. The letter stated:
(FAC ¶ 24 (emphases in FAC).)
The Plan provides that it is a duty of the Administrative Committee (the Plan) to assure prompt and correct payment of all Plan benefits. (FAC ¶ 25 (emphasis in FAC).) Plaintiff assumed that the amounts cited to her by Kaiser and/or Hewitt were correct. (Id.) The Plan also provides that a "Single Sum" method of payment means "An amount equal to the present value of the Participant's Pension as of the Benefit Starting Date is provided to him in a single payment." (FAC ¶ 26 (emphasis in FAC).)
On January 15, 2010, the Plan issued a final check in the amount of $766,889.54. Plaintiff has since commingled these funds with others and has incurred and paid substantial taxes as a result of the amount of the lump sum payout as described above and having accessed portions of these funds. (FAC ¶ 27.)
Roughly 22 months later, on or about November 16, 2011, Plaintiff received a call from a person identifying himself as "Christopher" of the Kaiser Permanente Retirement Center, stating that, as a result of an audit, it was determined that Plaintiff's early retirement payout was overpaid in excess of $257,000.00. (FAC ¶ 29.) Plaintiff was not given any further explanation as to the reason for the miscalculation. (Id.) The Kaiser Permanente Retirement Center representative informed Plaintiff that a letter with further explanation was forthcoming. (Id.)
Subsequently, Plaintiff received the "Overpayment Notice" from Kaiser and/or Hewitt dated November 15, 2011. (FAC ¶ 31.) The Notice stated:
(Id. (ellipsis and emphasis in FAC).)
On or about December 14, 2011, Plaintiff filed a Claim Initiation Form with Kaiser Permanente Human Resource Service Center disputing the alleged overpayment of her pension benefit payout. (FAC ¶ 32.) On or about January 24, 2012, Plaintiff received a "Notice of Denial." The Notice stated:
(FAC ¶ 33 (emphases in FAC).)
Plaintiff timely appealed the Denial of Benefit Claim for overpayment of pension benefit. (FAC ¶ 34.) On or about June 11, 2012, Kaiser and/or the Plan denied Plaintiff's Appeal. (Id.) Plaintiff has exhausted all of the requisite administrative remedies. (Id.)
A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the claims alleged in the complaint. Ileto v. Glock, Inc., 349 F.3d 1191, 1199-1200 (9th Cir. 2003). "Dismissal can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.1990). All allegations of material fact are taken as true and construed in the light most favorable to the plaintiff. Johnson v. Lucent Techs., Inc., 653 F.3d 1000, 1010 (9th Cir.2011). To survive a motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)).
Plaintiff's first claim is for equitable estoppel and is asserted against Kaiser and the Plan only. She brings this claim under ERISA's civil enforcement provision, 29 U.S.C. § 1132(a)(3)(B). Section 1132(a)(3) provides that a civil action may be brought:
29 U.S.C. § 1132(a)(3) (emphasis supplied). Plaintiff bases her equitable estoppel claim on subsection (B)'s authorization of "appropriate equitable relief." (FAC ¶ 37.) As set forth below, Plaintiff's claim does not satisfy the Ninth Circuit's stringent test for pleading an equitable estoppel claim under federal law.
ERISA preempts state-law equitable estoppel claims. See 29 U.S.C. § 1144(a); Ellenburg v. Brockway, Inc., 763 F.2d 1091, 1095 (9th Cir.1985) ("ERISA preempts common law theories of breach of contract implied in fact, promissory estoppel, estoppel by conduct, fraud and deceit, and breach of contract."). However, the Ninth Circuit, unlike some other circuits, "has recognized that federal equitable estoppel principles can, in certain circumstances, apply to some claims arising under ERISA." Greany v. W. Farm Bureau Life Ins. Co., 973 F.2d 812, 821 (9th Cir.1992) (citing Davidian v. S. California Meat Cutters Union & Food Employees Ben. Fund, 859 F.2d 134, 136 (9th Cir.1988); Ellenburg, 763 F.2d at 1096).
Though such claims are permissible, the range of circumstances under which they may succeed is narrow. ERISA plaintiffs generally may not prevail on an equitable estoppel theory unless they can plead and prove (1) material misrepresentation, (2) reasonable and detrimental reliance thereupon, and (3) "extraordinary circumstances." Pisciotta v. Teledyne Indus., Inc., 91 F.3d 1326, 1331 (9th Cir.1996) (citing In Re Unisys Corp. Retiree Medical Benefit "ERISA" Litigation, 58 F.3d 896, 907 (3d Cir.1995)). In addition, and unlike the law of other Circuits, the Ninth Circuit imposes "two additional prerequisites":
Id. (citing Greany, 973 F.2d at 821) (internal quotation marks omitted); see also Watkins v. Westinghouse Hanford Co., 12 F.3d 1517, 1527 (9th Cir.1993) (same standard).
These additional prerequisites rest on the premise that "[a] plaintiff cannot avail himself of a federal ERISA estoppel claim based upon statements of a plan employee which would enlarge his rights against the plan beyond what he could recover under the unambiguous language of the plan itself." Greany, 973 F.2d at 822. The requirements of an ambiguous plan provision and an oral interpretation of the plan are intended to vindicate ERISA's requirement that plan terms be written and amended only in a manner consistent with the statute: "where the equitable estoppel claim would result in a payment of benefits that would be inconsistent with the written plan and where an oral amendment or modification would be the practical result of a successful estoppel claim," the claim must be denied because "both outcomes would contradict the writing and amendment requirements of 29 U.S.C. § 1102(a)(1) and (b)(3)." Id.
Kaiser and the Plan argue that Plaintiff's claim fails because it would have the effect of expanding her rights beyond those provided by the Plan's unambiguous language. (Mot. at 6; Reply at 2-3.) The Court agrees. Plaintiff's claim, if successful, would have the effect of enlarging Plaintiff's rights against the Plan by estopping Kaiser and the Plan from attempting to recoup the nearly $250,000 overpayment they made to her after Hewitt allegedly miscalculated Plaintiff's benefit and then repeatedly reported its miscalculation as a correct and final determination of her benefit. Plaintiff, in claiming that she is entitled to keep the overpayment, does not argue that it is the terms of the Plan which so entitle her. Rather, she contends that it would be unjust to permit the Plan to recoup such a considerable sum from her given her blamelessness for the overpayment, the degree of care with which she planned her retirement, Defendants' considerable delay in discovering the overpayment, and the fact that Plaintiff, by the time Defendants apprised her of their mistakes, had long since commingled the funds with her personal finances and had even paid taxes on them. (See Opp'n at 14; Pl. Supp. Brief at 2.) That argument runs contrary to the law of the Ninth Circuit.
Plaintiff argues that she can satisfy the Ninth Circuit test for equitable estoppel, but she also urges the Court to apply the decisional law of other circuits due to the "unique circumstances" of this case. As to the first argument, the Court disagrees that the Ninth Circuit test has been met. While Plaintiff has adequately alleged a material representation, reasonable and detrimental reliance thereon, and "extraordinary circumstances," Plaintiff has not identified an ambiguous plan provision and, consequently, is unable to allege an "oral interpretation" of such a provision. Pisciotta, 91 F.3d at 1331; Renfro v. Funky Door Long Term Disability Plan, 686 F.3d 1044, 1054 (9th Cir.2012).
Plaintiff's key contention on this point is that the plan term "present value" is ambiguous in both meaning and effect "when it interacts with the information provided
Second, the Court determines that, while the Plan documents do not expressly define the term "present value," they do provide a mechanism by which it may be calculated. (See Dkt. No. 27, Art. C, at 8-10.) That the formula provided is complicated does not necessarily render it ambiguous. Plaintiff's failure to address the particulars of the formula or articulate a competing, reasonable explanation of the Plan language itself renders the FAC without an adequately pled ambiguity. See McDaniel v. Chevron Corp., 203 F.3d 1099, 1110 (9th Cir.2000) ("An ambiguity exists when the terms or words of a pension plan are subject to more than one reasonable interpretation.").
The Court turns now to Plaintiff's alternative argument, which invites the Court to follow the precedents of certain other circuits that do not impose the two additional Ninth Circuit prerequisites. (See Opp'n at 13-15 (urging application of Third Circuit and Sixth Circuit tests).) As compelling as Plaintiff's allegations are, the Court must decline the invitation. See Zuniga v. United Can Co., 812 F.2d 443, 450 (9th Cir.1987) ("District courts are, of course, bound by the law of their own circuit[.]"); Hart v. Massanari, 266 F.3d 1155, 1170 (9th Cir.2001) ("If a court must decide an issue governed by a prior opinion that constitutes binding authority, the
The Whitman case exemplifies the correct application of Ninth Circuit authority to facts similar to this case. Whitman v. Hawaiian Tug & Barge Corp./Young Bros., Ltd. Salaried Pension Plan, 27 F.Supp.2d 1225 (D.Haw.1998). In Whitman, an ERISA beneficiary received an incorrect determination of benefits due to a keypunch error, retired in reliance thereon, and was asked to return the overpayment when the plan discovered its error six months later. He sued to estop the recoupment effort. Id. at 1227-28. At the outset of that litigation, the plaintiff there sought a temporary restraining order and preliminary injunction. See id. at 1228-29. The district court denied the request, finding that the plaintiff was unlikely to succeed on the merits. Id. at 1229. As the district court explained:
Id. at 1229-30 (quoting Watkins v. Westinghouse Hanford Co., 12 F.3d 1517, 1523 (9th Cir.1993)).
While the Court is not convinced that allowing an opportunity to amend will yield a different result, the Court is cognizant of Plaintiff s request for such an opportunity. (Opp'n at 22.) Pursuant to the admonition of Federal Rule of Civil Procedure 15(a) that courts "should freely give leave when justice so requires," leave to amend is given with extreme liberality. In re Korean Air Lines Co., Ltd., 642 F.3d 685, 701 (9th Cir.2011); Petersen v. Boeing Co., 715 F.3d 276, 282 (9th Cir.2013). Without a showing of prejudice, or a "strong showing" of undue delay, bad faith, or futility of amendment, Rule 15(a) imposes a presumption in favor of granting leave to amend. Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003); Kaplan v. Rose, 49 F.3d 1363, 1370 (9th Cir.1994). Where a defendant asserts futility of amendment as the reason to deny leave to amend, such denial is improper unless it is clear that no amendment could save the pleading. United States v. Corinthian Colleges, 655 F.3d 984, 995 (9th Cir.2011); Harris v. Amgen, Inc., 573 F.3d 728, 737 (9th Cir.2009); see also Chappel v. Lab. Corp. of Am., 232 F.3d 719, 725-27 (9th Cir.2000) (holding that district court abused its discretion in denying ERISA beneficiary leave to amend complaint to add previously unpleaded but cognizable theory of relief). Here, Defendants request dismissal with prejudice. They do not state the basis of their request, though the nature of their arguments suggests that the ground may be futility. Weighing these considerations, the Court dismisses Plaintiff's equitable estoppel claim without prejudice to further amendment consistent with counsel's Rule 11 obligations.
Plaintiff asserts a negligence claim against Hewitt alone for negligently calculating her lump-sum benefit, as well as a negligent misrepresentation claim for telling her the result of its incorrect calculation. Hewitt contends that these common-law claims are barred by ERISA's sweeping preemptive effect and thus, as a matter of law, must be dismissed with prejudice. Plaintiff responds by citing a handful of cases which, she says, stand for the proposition that ERISA does not preempt state-law professional malpractice claims against "non-fiduciary actuaries," and asserts, without support, both that Hewitt is such an entity and that her negligence claims against Hewitt "amount[] to" a professional malpractice action. (Opp'n at 15.) As set forth below, neither side is entirely correct. The Court concludes that Plaintiff's negligence claims, as presently pled, are subject to dismissal, but that leave to amend is warranted.
"There are two strands to ERISA's powerful preemptive force." Cleghorn v. Blue Shield of California, 408 F.3d 1222, 1225 (9th Cir.2005). First, ERISA preempts state laws that "relate to" an ERISA plan. Id.; 29 U.S.C. § 1144(a). Though the limiting principle in this expansive language can be difficult to identify, precedent teaches that the statute "is to be read practically, with an eye toward the action's actual relationship to the subject plan." Providence Health
The second strand of ERISA preemption bars state-law causes of action that fall within the scope of ERISA's "comprehensive scheme of civil remedies to enforce ERISA's provisions ... even if those causes of action would not necessarily be preempted" by § 1144(a). Cleghorn, 408 F.3d at 1225. "[A]ny state-law cause of action that duplicates, supplements, or supplants the ERISA civil enforcement remedy conflicts with the clear congressional intent to make the ERISA remedy exclusive and is therefore pre-empted." Aetna Health Inc. v. Davila, 542 U.S. 200, 209, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004). Said another way, ERISA preempts state-law claims that merely would supply "alternative enforcement mechanisms" for ERISA provisions. Dishman v. UNUM Life Ins. Co. of Am., 269 F.3d 974, 982 (9th Cir.2001). Accordingly, ERISA plaintiffs "cannot obtain relief by dressing up an ERISA benefits claim in the garb of a state law tort." Id. at 983. "The Ninth Circuit has applied a `but for' standard to assess the relationship between the harm alleged and the ERISA-governed plan for purposes of determining whether a plaintiff is seeking such an alternate enforcement mechanism." Serpa v. SBC Telecommunications, Inc., 318 F.Supp.2d 865, 871 (N.D.Cal.2004) (citing Dishman, 269 F.3d at 983). "To avoid ERISA preemption, [a plaintiff's] claim must exist even without the defendants' failure to pay her benefit." Id. Thus, in Dishman, the Ninth Circuit found no preemption of a plaintiff s claim for invasion of privacy stemming from surveillance by a private investigator hired by a defendant ERISA plan to verify the plaintiff's disability claim. The Dishman court found that the alleged intrusions on plaintiff's privacy did not "depend on or derive from his claim for benefits in any meaningful way." 269 F.3d at 983. Thus, under Dishman, the mere fact that the conduct at issue allegedly occurs in the course of administering an ERISA plan does not necessarily result in preemption: where the state-law claim has only a "tenuous, remote, or peripheral connection" to the ERISA plan, it is not preempted. 269 F.3d at 984 (quoting Travelers, 514 U.S. at 661, 115 S.Ct. 1671); accord Darcangelo v. Verizon Commc'ns, Inc., 292 F.3d 181, 191-92 (4th Cir.2002) ("[T]he simple fact that a defendant is an ERISA plan administrator does
Hewitt raises a preemption challenge to both Plaintiff's negligence and negligent misrepresentation claims. Because Plaintiff's negligence claims self-evidently "relate to" an ERISA plan in some sense, they are presumptively preempted. Cf. Castonguay, 984 F.2d at 1521 (presuming preemption by ERISA of state laws that regulate "relationships" regulated by ERISA "or the obligations flowing from these relationships"). Even taking Plaintiff's pleading in the light most favorable to her, she falls short of meeting her obligation to provide the grounds of her entitlement to relief, Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), and establishing that she has put forth a "cognizable legal theory" that could so entitle her, Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir.2008). As articulated in her Opposition, Plaintiff's theory appears to be that ERISA does not preempt her claims because certain cases have found that ERISA did not preempt certain professional malpractice claims brought against outside, non-fiduciary providers of services to an ERISA plan. Plaintiff reasons that Hewitt, in this case, served as such a provider — specifically, an "actuary" — and that Plaintiff's negligence claims against Hewitt "amount to" a professional negligence claim. (Opp'n at 15-21; FAC ¶ 52 (alleging that Hewitt "served as a non-fiduciary actuary" to the Plan).) Taking Plaintiff's allegation of Hewitt's status as an actuary as true for present purposes, though the description of the acts performed by Hewitt in the context of this case strain the normal understanding of an actuary as a risk-management professional, it still does not follow that Plaintiff's negligence claims are tantamount to professional malpractice claims or that the circumstances that caused other courts to decline to find preemption of the professional malpractice claims asserted there are present here. On the contrary, as Defendant accurately notes, the cases upon which Plaintiff relies involved instances where an ERISA plan itself sued its third-party service provider on behalf of and for the benefit of the plan, as opposed to, here, where a beneficiary sues a plan's third-party service provider for failures related to its calculation of benefits. Plaintiff fails to articulate a cognizable legal theory animating her claims. For that reason, the Court finds that dismissal is warranted.
The next question, then, is whether the negligence claims must be dismissed with prejudice. As the Court previously explained, leave to amend is granted with extreme liberality and will be granted in the absence of a showing of prejudice to a defendant or strong showing of futility, undue delay, or bad faith. Here, Hewitt argues that Plaintiff's negligence claims must be dismissed with prejudice as preempted because (i) they are "premised on and would not exist without the plan," (ii) "would not exist without reference to the Plan's payment of benefits," and (iii)
For the foregoing reasons, the Court
This Order terminates Docket No. 17.
