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Medina v. Initiatives

United States District Court, D. Colorado

September 30, 2014

JANEEN MEDINA, individually, and on behalf of all others similarly situated, and on behalf of the CHI Plans, Plaintiff,
CATHOLIC HEALTH INITIATIVES, a Colorado corporation, et al.,


ROBERT E. BLACKBURN, District Judge.

The matters before me are (1) the Recommendation of United States Magistrate Judge [#210], [1] filed August 13, 2014; (2) Defendants' Objections to Recommendation of Magistrate Judge Regarding Motion To Dismiss Plaintiff's Amended Complaint [#216], filed August 27, 2014; and (3) Plaintiff's Objection to Recommendation of Magistrate Judge [#218], filed September 2, 2014. I sustain both plaintiff's and defendants' objections in part and overrule them in part, and approve and adopt the recommendation in part and, respectfully, reject it in part, as further set forth herein.

As required by 28 U.S.C. § 636(b), I have reviewed de novo all portions of the recommendation to which objections have been filed, and have considered carefully the recommendation, objections, and applicable caselaw. Both parties have presented relatively limited objections. For example, there is no objection to the magistrate judge's determination that defendants' motion to dismiss the claims for discretionary statutory penalties as barred by limitations is premature and thus that the motion should be denied without prejudice. I agree, and adopt the recommendation in this respect.

In addition, neither party objects to the substance of the magistrate judge's recommendation that Counts II and VI be dismissed as against the individual defendants. Defendants do object, however, to the recommendation that these claims be dismissed without prejudice as against the individual defendants. ( See Recommendation at 23 n.11.) I sustain this objection. Because these particular defendants are not proper parties as to Counts II and VI, these claims as against them are properly dismissed with prejudice.[2] See Blough v. Cooperative Benefit Administrators, Inc., 2013 WL 5740448 at *4 (W.D. Okla. Oct. 22, 2013). The recommendation therefore is approved and adopted as to the dismissal of these claims, but rejected insofar as it suggests that the dismissal should be without prejudice.

I thus turn to the parties' substantive objections. These are directed to the magistrate judge's recommended disposition of Count VII of the Amended Complaint ([#82], filed November 22, 2013), which alleges a cause of action for breach of fiduciary duty pursuant to section 502(a)(2) of ERISA, 29 U.S.C. § 1132(a)(2), against the individual members of the CHI and Affiliates Defined Benefit Plan Subcommittee (the "DB Plan Subcommittee"), [3] the Board of Stewardship Trustees (the "BOST"), [4] and the Humane Resources Committee ("HR Committee").[5] Plaintiff claims that this claim should be allowed to proceed against these defendants because she has adequately pled that they are "functional fiduciaries" under section 3(21)(A)(iii) of ERISA, 29 U.S.C. § 1002(21)(A)(iii).

"[U]nder ERISA, an individual may acquire fiduciary status either by (a) being expressly appointed by the plan as a fiduciary, or (b) by exercis[ing] the fiduciary functions set forth in ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A)." Holdeman v. Devine, 474 F.3d 770, 777 (10th Cir. 2007) (alteration in original). See also Mertens v. Hewitt Associates, 508 U.S. 248, 262, 113 S.Ct. 2063, 2071, 124 L.Ed.2d 161 (1993) ("ERISA... defines fiduciary' not in terms of formal trusteeship, but in functional terms of control and authority over the plan, thus expanding the universe of persons subject to fiduciary duties - and to damages[.]") (internal citation omitted; emphasis in original). A person may be considered a fiduciary in one of three statutorily enumerated circumstances:

a person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, (ii) he 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) he has any discretionary authority or discretionary responsibility in the administration of such plan.

29 U.S.C. § 1002(21)(A). The magistrate judge determined that plaintiff plausibly alleged but a single, narrow fiduciary claim against the members of the DB Plan Subcommittee under subsection (i).[6] Plaintiff takes no issue with the magistrate judge's determination that the allegations of the Amended Complaint are otherwise inadequate to allege that the individual defendant are functional fiduciaries under the definitions found at subsections (i) and (ii) of this section, and I concur with her thorough and well-reasoned assessment in that regard. However, plaintiff insists that she has asserted viable claims against all the individual defendants pursuant to subsection (iii). I concur.

Plaintiff points out that while section 3(21)(A)(i) confers fiduciary obligations on a person who "exercises" discretionary authority or control over the management of an ERISA plan, subsection (iii) requires only that the person " has any discretionary authority or discretionary responsibility in the administration of such plan." Clearly, this subsection (iii) must address conduct other than the exercise of discretionary authority, lest it be found superfluous. See TRW Inc. v. Andrews, 534 U.S. 19, 31, 122 S.Ct. 441, 449, 151 L.Ed.2d 339 (2001) ("It is a cardinal principle of statutory construction that a statute ought, upon the whole, to be so construed that, if it can be prevented, no clause, sentence, or word shall be superfluous, void, or insignificant.") (internal citation and quotation marks omitted). Given that subsection (i) already addresses the affirmative exercise of discretionary authority, subsection (iii) must create liability where the defendant has such authority but fails to exercise it. Bouboulis v. Transport Workers Union of America, 442 F.3d 55, 63 (2nd Cir. 2006) ("Subsection three describes those individuals who have actually been granted discretionary authority, regardless of whether such authority is ever exercised.'") (quoting Olson v. E.F. Hutton & Co., Inc., 957 F.2d 622, 625 (8th Cir. 1992)).

I agree with plaintiff that the allegations of her complaint are sufficient plausibly to assert that the individual defendants, as members of their respective committees, possessed the type of discretionary authority sufficient to make them functional fiduciaries within the meaning of 29 U.S.C. § 1002(21)(A)(iii). The magistrate judge's conclusion to the contrary was based on the mistaken reliance of the "exercise" language of subsection (i) in analyzing subsection (iii). Thus, although I agree with her conclusion that the Amended Complaint fails to state a cause of action under subsection (i) (with the one limited exception of plaintiff's claims that the members of the DB Plan Subcommittee authorized disbursements from the trust), I must respectfully reject the suggestion that a similar result is warranted with respect to claims against the individual defendants under subsection (iii).[7]

Plaintiff's allegations are essentially that these committees had authority to act, but did not. It can hardly be gainsaid, and thus is reasonable to infer, that a committee can act, or fail to act, only through the actions or omissions of its individual constituent members. Thus, although "group pleading" often is insufficient to apprise each individual defendant of what he or she is specifically alleged to have done, and therefore frequently does not meet the requirements of Rule 8, see Robbins v. Oklahoma, 519 F.3d 1242, 1250 (10th Cir. 2008), I find the allegations of the Amended Complaint here adequate to put the individual defendants on notice that they each allegedly failed to exercise the authority of their positions to make the plan compliant with ERISA in the ways set forth in the Amended Complaint. See Slack v. International Union of Operating Engineers, 2014 WL 4090383 at *16 (N.D. Cal. Apr. 19, 2014) ("Collective' or group' pleading in a complaint is not per se improper and may not, in itself, always be fatal to a claim."); Howard v. Municipal Credit Union, 2008 WL 782760, at *12 (S.D.N.Y. Mar. 25, 2008) ("While Rule 8 does not prohibit collective allegations' against multiple defendants, it does require that the allegations be sufficient to put each [d]efendant on notice of what they allegedly did or did not do.'") (internal citations and quotation marks omitted). I thus expand the magistrate judge's conclusion that the individual members of the DB Plan Subcommittee potentially may be liable for breaches of that committee's fiduciary duties to include all alleged breaches of fiduciary duty asserted in Count VII, not just the allegation that the magistrate judge found to assert a claim under section 3(21)(A)(i).

Relatedly, I reject the magistrate judge's recommendation that Count VII be dismissed as against the individual members of the BOST and the HR Committee. Although defendants argue that their rights in this regard were merely inchoate, the operative document provides that " the Board and the HR Committee may itself [ sic ] exercise any of the above duties delegated to the Committee with respect to the Plans at any time. " ( See Charter of the CHI & Affiliates Defined Benefit Retirement Plan Subcommittee at 2 [#39-1], Exh. C (emphasis in original).) There were no conditions or other limitations on the ability of these committees to assume some or all of the responsibilities assigned to the DB Plan Subcommittee, which included, inter alia, "general administration." ( See id. at 1-2.) The Amended Complaint thus plausibly can be read to allege that these committees, acting through their respective individual members, failed to exercise their authority to make the CHI Plan compliant with ERISA even when the DB Plan Subcommittee would or did not. See Martin v. Schwab, 1992 WL 296531 at *4 (W.D. Mo. Aug. 11, 1992) ("The fact that defendants did not choose to exercise their authority did not in any way diminish the authority bestowed on them[.]")

I agree with the magistrate judge that a motion to dismiss is not the proper vehicle to determine the fact-intensive questions that govern whether any individual defendant in fact was a functional fiduciary under any definition set forth in section 3(21)(A)(iii).[8] Moreover, the question whether the particular ways in which plaintiff alleges defendants failed to act in fact do implicate fiduciary aspects of the individual defendants' responsibilities is not an issue properly before me at this juncture.[9] I hold only ...

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