Bush v. Liberty Life Assurance Co. of Bos.

130 F.Supp.3d 1320

James L. Bush, Plaintiff,

v.Liberty Life Assurance Company of Boston, et al., Defendants.

Case No. 14–cv–01507–YGR

United States District Court, N.D. California.

Signed September 16, 2015

Michelle Lee Roberts, Cassie Springer Ayeni, Springer & Roberts LLP, Alameda, CA, R. Joseph Barton, Matthew Alexander Smith, Cohen Milstein Sellers & Toll PLLC, Washington, DC, for Plaintiff.

Robert James Guite, Sheppard Mullin Richter & Hampton LLP, R. Bradford Huss, Virginia H. Perkins, Trucker Huss, APC, San Francisco, CA, for Defendants.

ORDER RE: MOTIONS TO DISMISS FIRST AMENDED COMPLAINT

YVONNE GONZALEZ ROGERS, UNITED STATES DISTRICT COURT JUDGE

Plaintiff James L. Bush brings this Employee Retirement Income Security Act of 1974, as amended ("ERISA")¹ putative class action against defendants Liberty Life Assurance Company of Boston ("Liberty Life"), Hyundai Motor America ("Hyundai"), and the proposed "Administrator Class."² The dispute arises from Liberty Life's decision to decrease the long-term disability benefits it paid to plaintiff by the amount he received from the Department of Veterans Affairs ("VA").

Plaintiff filed his initial complaint on April 1, 2014. (Dkt. No. 1 ("Complaint").) On January 2, 2015, the Court granted in part and denied in part a motion to dismiss filed by Liberty Life and joined, in part, by Hyundai. Bush v. Liberty Life Assurance Co. of Boston, 77 F.Supp.3d 900, 902 (N.D.Cal.2015) ("Bush I"). On April 20, 2015, plaintiff filed a First Amended Complaint, asserting twelve claims for: (1) disability benefits under section 502(a)(1)(B), against Liberty Life; (2) equitable relief pursuant to sections 102 and 502(a)(3), against Hyundai and the Administrator Class; (3) equitable relief and disgorgement pursuant to section 502(a)(3), against Liberty Life; (4) breach of fiduciary duty under section 404, against Liberty Life; (5) breach of fiduciary duty under section 404, against Hyundai and the Administrator Class; (6) co-fiduciary liability under section 405(a), against Liberty Life; (7) prohibited transactions under section 406(a) and (b), against Liberty Life; (8) violations of sections 104 and 402 and monetary penalties under sections 502(a)(1)(A) and 502(c), against Hyundai; (9) violation of section 503, against Liberty Life and Hyundai; (10) declaratory and injunctive relief under section 502(a)(3), against Liberty Life; (11) declaratory and injunctive relief and restitution under sections 2201–02, against Liberty Life; and (12) knowing participation in a fiduciary breach by a non-fiduciary under section 502(a)(3), against Liberty Life. (Dkt. No. 77 ("FAC").)

Liberty Life and Hyundai again moved to dismiss. (Dkt.Nos.87, 90.) Having carefully considered the papers submitted, the record in this case, and the arguments of counsel presented at the July 21, 2015 hearing, and good cause shown, the Court hereby DENIES Hyundai's motion and GRANTS IN PART and DENIES IN PART Liberty Life's motion.

I. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff's allegations center around Liberty Life's decision to offset the long-term disability benefits he was otherwise owed by the amount he received in VA disability payments.³ The relevant background was detailed in the Court's January 2, 2015 Order. See Bush I, at 90203. Those underlying facts, as pled in the FAC, are largely unchanged. However, the FAC, as noted, added a proposed defendant class—termed the "Administrator Class"—and doubled the number of counts asserted, from six to twelve. Certain additional facts are asserted to support the newly alleged ERISA violations, as noted below.

II. LEGAL STANDARD

"Federal Rule of Civil Procedure 8(a)(2) requires only a ‘short and plain statement of the claim showing that the pleader is entitled to relief,’ in order to ‘give the defendant fair notice of what the ... claim is and the grounds upon which it rests.’ " Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 554, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957) ) (alteration in original). Even under the liberal pleading standard of Rule 8(a)(2), "a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (citing Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986) (internal brackets and quotation marks omitted)). The Court will not assume facts not alleged, nor will it draw unwarranted inferences. Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ("Determining whether a complaint states a plausible claim for relief [is] a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.").

Pursuant to Rule 12(b)(6), a complaint may be dismissed for failure to state a claim upon which relief may be granted. Dismissal for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) is proper if there is a "lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." Conservation Force v. Salazar, 646 F.3d 1240, 1242 (9th Cir.2011) (citing Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.1988) ). The complaint must plead "enough facts to state a claim [for] relief that is plausible on its face." Twombly, 550 U.S. at 570, 127 S.Ct. 1955. A claim is plausible on its face "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. If the facts alleged do not support a reasonable inference of liability, stronger than a mere possibility, the claim must be dismissed. Id. at 678–79, 129 S.Ct. 1937 ; see alsoIn re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir.2008) (holding a court is not required to accept as true "allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences").

III. DISCUSSION

A. Hyundai's Motion

Pursuant to Federal Rule of Civil Procedure 12(b)(6), Hyundai filed a motion to dismiss Counts II, V, and VIII on multiple grounds. (Dkt. No. 87 ("Hyundai Mot.").) As to Counts II and V, Hyundai argues: (1) the claims are improperly pled in the alternative to Count I in such a way that it would be "logically impossible" for plaintiff to prevail on those claims; and (2) plaintiff has no available remedy under those claims as to Hyundai. (Id . at 6–7.) As to Count VIII, Hyundai argues that, as a matter of law, the FAC establishes that the plan at issue was maintained pursuant to a "written instrument," undercutting this claim. (Id . at 7.)

As a threshold matter, the Court addresses plaintiff's contention that Hyundai's arguments have been waived due to its failure to argue them in connection with its original motion to dismiss (a joinder, in part, in Liberty Life's motion). Federal Rule of Civil Procedure 12(g)(2) provides that "a party that makes a motion under this rule [including for failure to state a claim] 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." One treatise describes the rule as follows:

Simply stated, the objective of the ... rule is to eliminate unnecessary delay at the pleading stage. Subdivision (g) contemplates the presentation of an omnibus pre-answer motion in which the defendant advances every available Rule 12 defense and objection he may have that is assertable by motion. The defendant cannot delay the filing of a responsive pleading by interposing these defenses and objections in piecemeal fashion, but must present them simultaneously. Any defense that is available at the time of the original motion, but is not included, may not be the basis of a second pre-answer motion.

Fed. Prac. & Proc. Civ. § 1384 (3d ed.). Certain defenses or objections, such as those relating to lack of subject-matter jurisdiction or failure to state a claim, will not be permanently waived. Instead, while the defendant may be precluded from raising them in a pre-answer motion, they may be subsequently raised in a motion for judgment on the pleadings or on summary judgment. See Fed. R. Civ. P. 12(h).

Hyundai claims its arguments in the instant motion were not available as to the original complaint, but only arose in connection with changes made in the FAC. This argument does not persuade. First, in moving to dismiss Counts II and V, Hyundai contends it is "logically impossible" for the plaintiff to ever prevail on these counts. This argument flows, in broad strokes, as follows: (1) Count I alleges the offset provision of the plan does not permit VA benefits offsets; (2) Counts II and V, pled in the alternative, allege that even if VA offsets are permitted under the plan language, insufficient disclosure of those terms renders the provision unenforceable; (3) because the verbatim offset language from the plan was included in the Summary Plan Description ("SPD"), as a matter of law such disclosure would have been sufficient if the plaintiff loses on Count I; and (4) if the plaintiff prevails on Count I, these "alternative" counts necessarily fail. To the extent Hyundai argues new, unidentified allegations in the FAC describe, for the first time, the inclusion of this offset language in the SPD, Hyundai fails to address the fact that the original complaint also frequently referenced the SPD, such that Hyundai could have requested judicial notice of that document in connection with its first motion.⁴

Second, in moving to dismiss Counts II and V, Hyundai argues no relief is available under those counts because only Liberty Life has the power to reform the terms of the agreement. Hyundai appears to concede that it could have raised this issue in its first motion.

Third, Hyundai claims that...