Ford v. Bonhomme-Cahn, Case No.: 3:16-cv-00460-L-WVG

THOMAS F. FORD, et al., Plaintiff, v. ADRIANA LAURA BONHOMME-CAHN, in her individual capacityand as executor of the Estate of Pete Carl Cahn, Defendant.

Case No.: 3:16-cv-00460-L-WVG

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

April 25, 2018

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

Pending before the Court is Defendant Adriana Laura Bonhomme-Cahn's ("Defendant") motion for summary judgment. (MSJ [Doc. 29].) Pursuant to Civil Local Rule 7.1(d)(1), the Court decides the matter on the papers submitted and without oral argument. For the reasons stated below, the Court GRANTS IN PART AND DENIES Defendant's motion.

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I. BACKGROUND

This case arises out of the alleged looting of an ERISA governed Employee Welfare Benefit Plan (the "Plan") by Plan fiduciaries. In 1989, Pete Cahn, an accountant, created a company called the Association of Civil Employers ("ACE). ACE then established the Plan. To participate in the Plan, Adopting Employers signed Adoption Agreements (Docs. 29-3 Exs. E, J) and paid actuarially determined contributions into the fund on an annual basis. In consideration for these contributions, Employees of the Adopting Employers became Participants in the Plan. A Plan Document (Doc. 29-3 Ex. J), which was incorporated by reference into the Adoption Agreements, explains the benefits of participation. In short, participation entitles employees to defined benefits such as payments in the event of severance, disability, and death. (Plan Doc.) Participation does not entitle Adopting Employers to a residual interest in their contributions. (Id.)

In 1989, Plaintiffs Thomas F. Ford ("Ford"), Thomas F. Ford Inc. ("Ford"), and Ronald P. Hempel ("Hempel") (collectively, "Plaintiffs") signed Adoption Agreements and thereby became Adopting Employers. (Ford Adoption Agreement [Doc. 29-3 Ex. I]; Hempel Adoption Agreement [Doc. 29-3 Ex. E].) From 1989 until 1996, Plaintiffs made annual payments to the Plan. Ford claims to have contributed a total of $624,150 into the Plan. (Ford Decl. [Doc. 30-2] ¶ 8.) Hempel claims to have contributed a total of $367,013 into the Plan. (Hempel Decl. [Doc. 30-1] ¶8.) In addition to Ford and Hempel, at least eight other entities became Adopting Employers. (Doc. 30-26.) There are currently as many as sixty six additional Employees that may qualify for Plan benefits. (Ford. Decl. ¶ 23; Hempel Decl. ¶ 23.) Ford and Hempel's contributions appear to account for more than 96% of total Plan contributions. (Doc. 30-26.)

In February of 2015, Pete Cahn committed suicide. (JSUF [Doc. 31] 4.) Following Pete Cahn's suicide, Plaintiffs hired an attorney, who commissioned a forensic accountant. After reviewing Plan documents with the help of their attorney and forensic accountant, including documents provided by Defendant, Plaintiffs discovered evidencesuggesting that Defendant was appointed to a fiduciary role as a member of the Plan's Benefits Committee in 2001, a role she seemingly never resigned (Doc. 29-3 Ex. I.) Plaintiffs also discovered evidence suggesting that, whereas Pete Cahn and Defendant purported to be drawing only modest amounts of money from the fund for expenses (Doc. 30-25), Pete Cahn and Defendant were in fact withdrawing staggering amounts of money from the fund for expenses. (Docs. 30-12; 30-13.) Specifically, Plaintiffs allege that Defendant and Pete Cahn improperly siphoned around $1.4 million in funds from the Plan.

Accordingly, Plaintiffs, who became Plan fiduciaries after Pete Cahn's death, filed a First Amended Complaint against Defendant, both in her individual capacity and as executor of Pete Cahn's estate. (FAC [Doc. 14].) In the FAC, Plaintiffs allege that Defendant and Pete Cahn breached their fiduciary duties to the Plan in violation of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. 1104. Defendant now moves for summary judgment as to all claims against her. (MSJ.) Plaintiffs oppose. (Opp'n [Doc. 30].)

II. LEGAL STANDARD

Summary judgment is appropriate under Rule 56(c) where the moving party demonstrates the absence of a genuine issue of material fact and entitlement to judgment as a matter of law. See Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A fact is material when, under the governing substantive law, it could affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute about a material fact is genuine if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248.

The party seeking summary judgment bears the initial burden of establishing the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323. The moving party can satisfy this burden in two ways: (1) by presenting evidence that negates an essential element of the nonmoving party's case; or (2) by demonstrating that the nonmoving partyfailed to make a showing sufficient to establish an element essential to that party's case on which that party will bear the burden of proof at trial. Id. at 322-23. "Disputes over irrelevant or unnecessary facts will not preclude a grant of summary judgment." T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987).

"[T]he district court may limit its review to the documents submitted for the purpose of summary judgment and those parts of the record specifically referenced therein." Carmen v. San Francisco Unified Sch. Dist., 237 F.3d 1026, 1030 (9th Cir. 2001). Therefore, the court is not obligated "to scour the record in search of a genuine issue of triable fact." Keenan v. Allan, 91 F.3d 1275, 1279 (9th Cir. 1996) (citing Richards v. Combined Ins. Co. of Am., 55 F.3d 247, 251 (7th Cir. 1995). If the moving party fails to discharge this initial burden, summary judgment must be denied and the court need not consider the nonmoving party's evidence. Adickes v. S.H. Kress & Co., 398 U.S. 144, 159-60 (1970).

If the moving party meets this initial burden, the nonmoving party cannot defeat summary judgment merely by demonstrating "that there is some metaphysical doubt as to the material facts." Matsushita Elect. Indus. Co., Ltd. v Zenith Radio Corp., 475 U.S. 574, 586 (1986). Rather, the nonmoving party must "go beyond the pleadings" and by "the depositions, answers to interrogatories, and admissions on file," designate "specific facts showing that there is a genuine issue for trial." Celotex, 477 U.S. at 324 (quoting Fed. R. Civ P. 56(e)).

When making this determination, the court must view all inferences drawn from the underlying facts in the light most favorable to the nonmoving party. See Matsushita, 475 U.S. at 587. "Credibility determinations, the weighing of evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge, [when] he [or she] is ruling on a motion for summary judgment." Anderson, 477 U.S. at 255.

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III. DISCUSSION

In her motion for summary judgment, Defendant argues (1) that Plaintiffs lack Article III standing; (2) that Plaintiffs' claims are barred by a three year statute of limitations and a six year statute of repose; and (3) that Plaintiffs are not entitled to individual recovery.¹ The Court will address these arguments in turn.

A. Standing

The doctrine of standing is rooted in the "cases or controversies" requirement of Article III § 2, Cl. 1 of the U.S. Constitution. To establish standing, a plaintiff must demonstrate an injury in fact, that is fairly traceable to the challenged conduct of the defendant, and that is likely to be redressed by a favorable judicial decision. Lujan v. Defenders of Wildlife, 504 U.S. 560, 560-561 (1992). Defendant presents several arguments to the effect that Plaintiffs lack standing because the alleged looting of the Plan did not cause them any harm.

First, Defendant argues that Hempel lacks standing because his retirement terminated his participation in the Plan—meaning a Plan default would not harm him because he is no longer entitled to Plan benefits. In support of this argument, Defendant cites to Hempel's Adoption Agreement. Hempel's Adoption Agreement states that "[a] participant shall terminate participation in the Plan on ... the day he . . . terminates employment ... whether by reason of retirement, disability, layoff, or otherwise..." (Hempel Adoption Agreement §6.) If this provision governs, Defendant's argument would be persuasive and Hempel would not have standing based on being a Plan Participant. However, there is some ambiguity as to whether the parties intended for retirement to terminate Plan participation.

To wit, the Adoption Agreement incorporates the Plan Document by reference (Hempel Adoption Agreement Premises I - III.) The Plan Doc.'s definition of "Participant" appears inconsistent with the Adoption Agreement's provision that retirement terminates participation. Specifically, the Plan Doc. defines a Participant as an "Employee" or an employee's dependent. (Plan Doc. § 2.17.) Furthermore, the Plan Doc. defines an Employee in a manner that includes a person "who has terminated employment with the Adopting Employer by reason of retirement or disability on or after the Effective Date." (Id. § 2.12(b).) Because Hempel terminated employment by reason of retirement, he seems to trigger the Plan Doc.'s definition of "Employee", which in turn triggers the Plan Doc's definition of "Participant." Thus, Hempel would appear to be a "Participant" under the Plan Doc., but not under the Adoption Agreement. This inconsistency between the two operative documents creates a triable issue as to whether the parties, at time of contracting, intended that retirement terminate Plan participation.

Second, Defendant argues that Plaintiffs lack standing because the Plan cannot go into default. The premises of this argument are (1) that all Participant's benefits are capped at their unappreciated contribution...