Moon v. Rush, 2:11-cv-03102-GEB-CKD

VIRGINIA C. MOON, on her own behalf and on behalf of the Peters

Rush Habib & McKenna 401(k) Profit Sharing Plan, Plaintiff, v. DAVID H. RUSH, MARK A. HABIB, and JAMES P. MCKENNA, Defendants.

DAVID H. RUSH Counterclaimant, v. VIRGINIA C. MOON, Counterdefendant.

2:11-cv-03102-GEB-CKD

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA

Dated: August 5, 2013

ORDER DENYING DEFENDANTS'

DISMISSAL AND SUMMARY

JUDGMENT MOTIONS; GRANTING IN

PART AND DENYING IN PART

COUNTERDEFENDANT'S DISMISSAL

MOTION; AND SCHEDULING STATUS

CONFERENCE

Defendants move for dismissal of this action under Federal Rule of Civil Procedure ("Rule") 12(h)(3) and move in the alternative for summary judgment under Rule 56. Plaintiff responds to the summary judgment motion by requesting relief under Rule 56(d), and moves fordismissal of counterclaimant Rush's counterclaims under Rule 12(b)(6).¹ Each motion is opposed.

I. BACKGROUND

This action concerns Plaintiff's divorce-based property interests in a defined contribution employee pension benefit plan, which is governed by ERISA and called the Peters Rush Habib & McKenna 401(k) Profit Sharing Plan (the "Plan"). (Decl. of Nina Wasow in Supp. of Pl.'s Opp'n to Mot. to Dismiss ("Wasow Decl."), ECF No. 44, Ex. 1; Compl. ¶¶ 1, 5; Answer ¶¶ 1, 5.) When Plaintiff and Rush divorced in 1995, the Superior Court of California, County of Butte (the "state court") entered a domestic relations order ("DRO") requiring that certain enumerated assets be segregated and held for Plaintiff's benefit. (Wasow Decl., Ex. 1, 3:24—31.) The DRO was "intend[ed] to dispose of [Plaintiff's] community property interest in [Defendant Rush's ERISA] Plan." (Id., Ex. 1, 1:23—24.) The DRO was entitled a "Stipulation & Order Dividing Community Interest in Employee Benefit Plan—Qualified Domestic Relations Order." (Id., Ex. 1, 1:11—14.) It was signed by and provided to Rush. (Id., Ex. 1, 6:29) Rush was also listed in the DRO as a trustee of Plan and as the person designated to receive notices on behalf of the Plan. (Id., Ex. 1, 2:1—28.)

For sixteen years after entry of the DRO, Plaintiff was treated by Defendants as a beneficiary of the Plan. (Id., Exs. 3—5, 10—11; Decl. of Virginia C. Moon in Supp. of Pl.'s Opp'n to Mot. toDismiss ("Moon Decl."), ECF No. 35, ¶ 4; id., Exs. 1—13.) Funds were repeatedly deposited into a bank account titled "Peters et al Profit Sharing Plan fbo Virginia Rush aka Virginia Moon[,] David H. Rush[,] Trustee." (Id., Exs. 3 & 4.) Numerous documents were prepared acknowledging Plaintiff's ownership of a property specifically allotted to her by the DRO. (Moon Decl., Exs. 4—13.) The Plan Administrator sent Plaintiff a pension benefits statement describing her interest in the Plan based on the DRO. (Wasow Decl. ¶ 12; id., Ex. 11.)² Plaintiff declares that she was neither told of nor aware of "any additional steps needed to be taken to secure [her] interest in the Plan," and that her understanding was that the assets listed in the DRO were being held by the Plan for her benefit. (Moon Decl. ¶¶ 1, 3.)

Over sixteen years after entry of the DRO, and over sixteen months after specifically being asked by Plaintiff's counsel if the DRO was deemed not to be a Qualified Domestic Relations Order ("QDRO") under 29 U.S.C. § 1056(d)(3)(A), (Wasow Decl., Ex. 9), Defendants informed Plaintiff that they believed the DRO was not a QDRO. (Id. ¶ 15; id., Ex. 13.) After Plaintiff filed the instant federal lawsuit, Defendants moved in state court for a determination affirming the Plan Administrator's decision that the DRO was a QDRO. (Id. ¶ 16.) Defendants consistently represented to the state court judge in that action that the state court's determination would not affect this prior-commenced federal action. (Id., Ex. 14, 23:1—14, 25:16—18, 38:24—39:6, 40:23—41:1.) Once the state court affirmed Defendants' determination that the DRO was nota QDRO, (Perkins Decl., ECF No. 25, Ex. 1, 3:7—11), Defendants filed their pending motions to dismiss Plaintiff's lawsuit based on the state court's decision. (Defs.' Counter-Mot. for Dismissal or Summ. J. ("Defs.' Counter Mot."), ECF No. 24.) The state court's decision is now on appeal before the California Court of Appeals. (Wasow Decl. ¶ 19.)

II. LEGAL STANDARD

A. Rule 12(h)(3)

Challenges to a federal court's subject matter jurisdiction "may be raised by the parties at any time pursuant to [Rule] 12(h)(3)." Augustine v. United States, 704 F.2d 1074, 1075 n.3 (9th Cir. 1983). Like a motion under Rule 12(b)(1), a Rule 12(h)(3) challenge "can be either facial or factual." White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000). Facial challenges attack the pleadings as insufficient to invoke federal jurisdiction; factual challenges contest the truth of the jurisdictional pleadings. Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). In a factual attack on jurisdiction, a court may "look beyond the complaint" to evaluate jurisdictional facts that are not intertwined with the merits. White, 227 F.3d at 1242. However, when the question of jurisdiction is dependent on the resolution of factual issues intertwined with the merits, dismissal for lack of subject matter jurisdiction is generally "improper." Williston Basin Interstate Pipeline Co. v. An Exclusive Gas Storage Leasehold & Easement in the Cloverly Subterranean, Geological Formation, 524 F.3d 1090, 1094 (9th Cir. 2008). "[A] federal court may dismiss a federal question claim for lack of subject matter jurisdiction only if: (1) 'the alleged claim under the Constitution or federal statutes clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction'; or (2) 'such a claim is wholly insubstantial and frivolous.'" Leeson v.Transamerica Disability Income Plan, 671 F.3d 969, 975 (9th Cir. 2012) (quoting Bell v. Hood, 327 U.S. 678, 682—83 (1946)).

B. Rule 12(b)(6)

Decision on a Rule 12(b)(6) dismissal motion requires determination of "whether the complaint's factual allegations, together with all reasonable inferences, state a plausible claim for relief." United States ex rel. Cafasso v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1054 (9th Cir. 2011) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678—79 (2009)). "A claim has facial plausibility 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 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)).

In evaluating a Rule 12(b)(6) motion, the court "accepts the complaint's well-pleaded factual allegations as true and draws all reasonable inferences in the light most favorable to the plaintiff." Adams v. U.S. Forest Serv., 671 F.3d 1138, 1142—43 (9th Cir. 2012) (citing Twombly, 544 U.S. at 555—56). However, this tenet does not apply to "legal conclusions . . . cast in the form for factual allegations." Fayer v. Vaughn, 649 F.3d 1061, 1064 (9th Cir. 2011) (internal quotation marks omitted). "Therefore, conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss." Id. (internal quotation marks omitted); see also Iqbal, 556 U.S. at 678 ("A pleading that offers 'labels and conclusions' or 'a formulaic recitation of the elements of a cause of action will not do.'" (quoting Twombly, 550 U.S. at 555)).

C. Rule 56

A party seeking summary judgment bears the initial burden of demonstrating the absence of a genuine issue of material fact for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). "A fact is 'material' when, under the governing substantive law, it could affect the outcome of the case." Thrifty Oil Co. v. Bank of Am. Nat'l Trust & Sav. Ass'n, 322 F.3d 1039, 1046 (9th Cir. 2003) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). An issue of material fact is "genuine" when "'the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'" Id. (quoting Anderson, 477 U.S. at 248). To meet this burden, the movant must "inform[] the district court of the basis for its motion, and identify[] those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact." Celotex, 477 U.S. at 323 (internal quotation marks omitted).

If the movant satisfies its "initial burden," "the nonmoving party must set forth, by affidavit or as otherwise provided in Rule 56, 'specific facts showing that there is a genuine issue for trial.'" T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987) (quoting former Fed. R. Civ. P. 56(e)); see also Fed. R. Civ. P. 56(c)(1). The nonmoving party "cannot 'rest upon the mere allegations or denials of the adverse party's pleading' but must instead produce evidence that 'set[s] forth specific facts showing that there is a genuine issue for trial.'" Estate of Tucker ex rel. Tucker v. Interscope Records, Inc., 515 F.3d 1019, 1030 (9th Cir. 2008) (quoting Anderson, 477 U.S. at 248). Further, Local Rule 260(b) requires:

Any party opposing a motion for summary judgment or summary adjudication [must] reproduce the itemizedfacts in the [moving party's] Statement of Undisputed Facts and admit those facts that are undisputed and deny those that are disputed, including with each denial a citation to the particular portions of any pleading, affidavit, deposition, interrogatory answer, admission, or other document relied upon in support of that denial.

E.D. Cal. R. 260(b). If the nonmovant does not "specifically . . . [controvert duly supported] facts identified in the [movant's] statement of undisputed facts," the nonmovant "is deemed to have admitted the validity of the facts contained in the [movant's] statement." Beard v. Banks, 548 U.S. 521, 527 (2006).

Because a district court has no independent duty "to scour the record in search of a genuine issue of

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