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Neyland v. Paychex, Inc.

United States District Court, D. Colorado

November 30, 2017

PAYCHEX, INC., Defendant.



         This matter is before the Court upon the Recommendation of United States Magistrate Judge Michael J. Watanabe that Defendant's Motion to Dismiss Plaintiff's Complaint under Fed.R.Civ.P. 12(b)(6) (Doc. # 14) be granted. (Doc. # 24.)

         The Court referred the underlying motion pursuant to 28 U.S.C. § 636 and Fed.R.Civ.P. 72. (Doc. # 15.) On June 22, 2017, Magistrate Judge Watanabe issued his Report and Recommendation (the “Recommendation”) that this Court grant Defendant's motion and dismiss Plaintiff's claims. (Doc. # 24.) Plaintiff timely objected to the Recommendation. (Doc. # 25.) Defendant thereafter filed a response to the objection. (Doc. # 26.)

         For the reasons described herein, the Recommendation is adopted as an order of this Court, and Defendant's Motion to Dismiss is granted.


         The Magistrate Judge's Recommendation provides a recitation of the factual and procedural background of this case. See (Doc. # 24.) The Recommendation is incorporated herein by reference. See 28 U.S.C. § 636(b)(1)(B); Fed.R.Civ.P. 72(b). Accordingly, the factual background of this dispute will be reiterated only to the extent necessary to address Plaintiff's objections.

         On June 8, 2004, Plaintiff's employer, Colorado Construction Supply (“CCS”), entered into an agreement with ePlan Services (“ePlan”) and Citywide Retirement Services, LLC (“Citywide”) for 401(k) plan services for CCS employees. (Doc. # 4 at ¶ 4.) Thereafter, Plaintiff opened a 401(k) plan (the “Plan”) with ePlan and Citywide and deposited $243, 568.19 in his account. (Id. at ¶ 5.) Plaintiff was the designated trustee and administrator of his Plan. (Id. at ¶ 6.)

         Two months later, without Plaintiff's knowledge, $50, 000 was taken out of his Plan as a loan. (Id. at ¶ 7.) The loan documents produced by Citywide did not contain Plaintiff's signature. (Id. at ¶ 8.) In addition, Citywide and ePlan failed to issue to the Internal Revenue Service (“IRS”) a CP2000 and a 1099 form-each a type of tax form- for the distribution of the loan. Eventually, the loan was not repaid and went into default. (Id. at ¶¶ 17-19.) The IRS also did not receive the requisite tax forms for the defaulted loan. (Id.)

         A few months later, CCS was sold, and Plaintiff's Plan was consequently canceled. (Id. at ¶ 12.) Plaintiff contacted ePlan and requested via e-mail the balance on his Plan and any tax information.[2] (Id. at ¶ 13.) Thereafter, Plaintiff rolled over the remaining balance of $192, 886.97-approximately $50, 000 less than he initially deposited-from his Plan into a Wells Fargo bank account. (Id. at ¶ 15.)

         Seven years later, Defendant Paychex, Inc. purchased ePlan. (Id. at ¶ 16.) In 2012, the Colorado Secretary of State registered Citywide as a delinquent business. (Id. at ¶ 10.)

         Plaintiff contends he first learned of the $50, 000 loan from his Plan in April 2015, when the IRS contacted him and requested back taxes on the defaulted loan. (Id. at ¶¶ 22-23.) Subsequently, Plaintiff received all of the necessary tax forms.[3] Plaintiff discovered he did not receive the forms due to a “nine year computer glitch experienced by ePlan and Defendant.” (Id. at ¶¶ 18-19, 27.) After an audit, the IRS concluded that Plaintiff was the victim of identity theft. (Id. at ¶ 25.)

         Plaintiff brought this action against Defendant in Douglas County District Court in March 2017. (Doc. # 1.) Plaintiff asserted five claims for relief: breach of contract, negligence, breach of agreement, breach of fiduciary duty, and outrageous conduct. (Doc. # 4.) Defendant timely removed the case pursuant to 28 U.S.C. § 1332. (Doc. # 1.)

         Defendant filed its Motion to Dismiss, arguing Plaintiff's claims are barred by the statute of limitations and by the economic loss rule. (Doc. # 14.) Defendant also asserted that Plaintiff's claims failed as a matter of law because it (Paychex) was not involved in the events giving rise to the claims. (Id.)

         On June 22, 2017, the Magistrate Judge recommended that this Court grant Defendant's Motion to Dismiss based on the statute of limitations.[4] (Doc. # 24.) The Magistrate Judge concluded that, when Plaintiff rolled over a balance of $192, 886.97- $50, 000 less than and a 20 percent decrease in value from Plaintiff's deposit of $243, 568.19-on December 20, 2004, Plaintiff should have discovered the existence of loan. (Id. at 7.) Therefore, pursuant to Colorado's statutes of limitations, Plaintiff was required to assert his tort claims no later than December 20, 2006, and his contract claims no later than December 20, 2007. ...

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