417 F.3d 133 (1st Cir. 2005), 03-2162, Edes v. Verizon Communications, Inc.

Docket Nº:03-2162.
Citation:417 F.3d 133
Party Name:Ronald R. EDES, Kevin Lyons, John Parsons, Plaintiffs, Appellants, v. VERIZON COMMUNICATIONS, INC., et al., Defendants, Appellees.
Case Date:August 02, 2005
Court:United States Courts of Appeals, Court of Appeals for the First Circuit
 
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417 F.3d 133 (1st Cir. 2005)

Ronald R. EDES, Kevin Lyons, John Parsons, Plaintiffs, Appellants,

v.

VERIZON COMMUNICATIONS, INC., et al., Defendants, Appellees.

No. 03-2162.

United States Court of Appeals, First Circuit.

August 2, 2005

Heard Feb. 10, 2005.

APPEAL FROM THE U.S. DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS, Hon. Patti B. Saris, U.S. District Judge.

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[Copyrighted Material Omitted]

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Shannon Liss-Riordan, with whom Earl D. Munroe, Munroe & Chew, Michael M. McArdle, and Law Offices of Michael M. McArdle were on brief, for appellant.

Jeffrey G. Huvelle, with whom Frederick G. Sandstrom, Covington & Burling, Marc Schoenecker, and Verizon Services Group were on brief, for appellee.

Before Torruella, Lynch, and Lipez, Circuit Judges.

LIPEZ, Circuit Judge.

Plaintiffs-appellants Ronald R. Edes, Kevin Lyons, and John Parsons appeal the dismissal of their claims against Defendants-appellees Verizon Communications, Inc., et al., under the Employee Retirement Income Security Act of 1974, 29 U.S.C § 1001-1461, as amended ("ERISA"). Plaintiffs allege that Defendants violated ERISA by relegating them to the payrolls of third-party payroll agencies, thereby: (1) wrongfully denying them benefits under ERISA plans; (2) interfering with their attainment of plan participation rights; (3) breaching fiduciary duties owed to them; (4) failing to meet ERISA's minimum participation standards; and (5) using arbitrary, unwritten plan eligibility criteria. We affirm the district court's decision to dismiss each of these claims pursuant to Fed.R.Civ.P. 12 (b) (6).

I.

As alleged in the complaint, Plaintiffs were hired by GTE Service Corporation ("GTE"), a business unit of GTE Corporation (now Verizon Communications, Inc.), to work in its Danvers, Massachusetts, office in or around April 1994. Although Plaintiffs were hired directly by GTE, each was told to sign on with one of two independent payroll agencies, FISC Inc. or BeneTemps Inc., who issued Plaintiffs' paychecks during the entire period of their employment with GTE. Plaintiffs received no paychecks or benefits from GTE during their tenure. In all other respects, Plaintiffs were treated like "regular," full-time GTE employees. In particular, Plaintiffs received the same training, performance reviews, and access to GTE facilities as other employees; were invited to corporate functions, staff meetings, and committee service just as other employees were; and were explicitly instructed to identify themselves to outsiders as "GTE employees" rather than as temporary employees. In short, according to the complaint, Plaintiffs

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were "thoroughly integrated in GTE's workforce."

In August 1998, GTE terminated Parsons' employment in preparation for closing the Danvers facility. In December 1998, GTE terminated Edes' and Lyons' employment. On May 3, 1999, Plaintiffs made demands for ERISA plan benefits on the GTE Human Resources Department. GTE denied the claims on September 8, 1999 on the ground that Plaintiffs had not been employed by GTE, and offered Plaintiffs no administrative review options.

On October 10, 2001, Plaintiffs filed a putative class-action complaint in federal district court against Verizon Communications, Inc. (formerly GTE Corporation), seven named GTE ERISA benefits plans and their administrators and fiduciaries, 1 and "GTE John Doe Unknown Plans 1 - 10." Plaintiffs alleged, on information and belief, that because eligibility to participate in GTE's ERISA plans was "expressly limited to employees who were paid directly by a participating business unit," Defendants had violated their rights under ERISA and state common law.

On February 20, 2002, Defendants moved to dismiss each of Plaintiffs' claims pursuant to Fed.R.Civ.P. 12 (b) (6), arguing, inter alia, that their claims of interference with attainment of participation rights and breach of fiduciary duty were time-barred and their state common-law claim preempted. After a hearing on the motion, the court stayed discovery but did not stay automatic disclosure, noting that Defendants had yet to disclose the plans' actual language. On September 19, 2002, the court issued an order denying Defendants' motion to dismiss without prejudice to its renewal "once the precise language of the terms of eligibility is produced." In October 2002, Defendants submitted an attorney declaration with exhibits stating that they had disclosed plan documents to Plaintiffs in May and June 2002. After the court permitted Plaintiffs to take a deposition to determine when the relevant eligibility criteria had been included in GTE's ERISA plans, Defendants filed a memorandum in further support of their motion to dismiss in January 2003. Plaintiffs filed a memorandum in further opposition to the motion.2

On July 25, 2003, the district court issued a memorandum and order granting Defendants' motion to dismiss the complaint. The court held that Plaintiffs' claims of interference with plan participation rights and breach of fiduciary duty were time-barred and that their state common-law claim was preempted by ERISA. Edes v. Verizon Communications, Inc., 288 F.Supp.2d 55, 59, 61-62, 64 (D. Mass. 2003) . The district court also concluded that Plaintiffs otherwise failed to state claims for which relief could be granted. Id. at 58-59, 64. Plaintiffs timely

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appealed. [3

II.

We review de novo a district court's decision to dismiss a complaint pursuant to Rule 12 (b) (6), "accepting all well-pleaded facts as true and drawing all reasonable inferences in favor of the plaintiff." Clorox Co. P.R. v. Proctor & Gamble Commercial Co., 228 F.3d 24, 30 (1st Cir. 2000). A "complaint is properly dismissed only when the allegations are such that 'the plaintiff can prove no set of facts to support [the] claim for relief.'" Id. (quoting Rockwell v. Cape Cod Hosp., 26 F.3d 254, 260 (1st Cir. 1994)). "Granting a motion to dismiss based on a limitations defense is entirely appropriate when the pleader's allegations leave no doubt that an asserted claim is time-barred." LaChapelle v. Berkshire Life Ins. Co., 142 F.3d 507, 509 (1st Cir. 1998).

A. Entitlement to Benefits Under the Plans

Plaintiffs argue that the district court improperly dismissed their claim of entitlement to plan benefits under ERISA § 502 (a) (1) (B), 29 U.S.C. § 1102 (a) (1) (B), for lack of standing. See, e.g., Abraham v. Exxon Corp., 85 F.3d 1126, 1129 (5th Cir. 1996) ("Whether an employee has standing as a 'participant' depends, not on whether he is actually entitled to benefits, but on whether he has a colorable claim that he will prevail in a suit for benefits."). The district court made no reference in its decision to standing. Rather, based on the plan documents submitted by Defendants, the court concluded that "by the terms of the plans, [P]laintiffs are not entitled to benefits because they [were] not paid directly by GTE, but instead [were] paid by temporary payroll agencies." Edes, 288 F.Supp.2d at 58 (footnote omitted).4

Plaintiffs also insist that they may proceed with their claim because they were common-law employees of GTE by virtue of their full "integrat [ion] in GTE's workforce." Whether or not this is so, the district court correctly concluded that "[t]he fact that [P]laintiffs may be common law employees is not by itself enough to state a valid claim for benefits under ERISA." Edes, 288 F.Supp.2d at 58-59. In an opinion published several months after the district court rendered its decision, a panel of this circuit reached the same conclusion, stating that a plaintiff "may have a plausible argument that he was a common law employee . . ., but it is the language of the Plan, not common law status, that controls." Kolling v. Am. Power Conversion Corp., 347 F.3d 11, 14 (1st Cir. 2003).

Plaintiffs' own complaint alleges, and the plan documents submitted by Defendants confirm, that GTE's ERISA plans explicitly exclude from participation employees who were not "paid directly" by GTE, without regard for their common-law employment status.5] Plaintiffs further allege that they were in fact not "paid directly"

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by GTE, but by third-party payroll agencies. Because they "can prove no set of facts to support [their] claim" for benefits under the ERISA plans, Rockwell, 26 F.3d at 260, the district court properly dismissed Plaintiffs' claim under ERISA § 502(a) (1) (B) .

B. Interference with Attainment of Plan Participation Rights

Plaintiffs allege that Defendants misclassified them as off-payroll employees for the purpose of interfering with their attainment of plan participation rights in violation of ERISA § 510, 29 U.S.C. § 1140. That statute provides, in relevant part:

It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled [under ERISA or an ERISA plan], or for the purpose of interfering with the attainment of any right to which such participant may become entitled.

29 U.S.C. § 1140.

The district court held that Plaintiffs could not state a claim for relief under this provision for two independent reasons. "First, an employer may hire employees under terms that render them ineligible to receive benefits given to other employees without violating [ERISA] § 510." Edes, 288 F.Supp.2d at 59. Plaintiffs argue that the district court's analysis ignored the language in ERISA § 510 prohibiting employers from discriminating against a participant or beneficiary "for the purpose of interfering with the attainment of any right to which such participant may become entitled" under an ERISA plan. 29 U.S.C. § 1140 (emphasis added). Plaintiffs argue that whether or not Defendants...

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