Barboza v. Cal. Ass'n Of Prof'l Firefighters
| Decision Date | 25 January 2011 |
| Docket Number | NO. CIV. S-08-02569 FCD/GGH,CIV. S-08-02569 FCD/GGH |
| Court | U.S. District Court — Eastern District of California |
| Parties | DAVID BARBOZA,Plaintiff, v. CALIFORNIA ASSOCIATION OF PROFESSIONAL FIREFIGHTERS, a California corporation; CALIFORNIA ASSOCIATION OF PROFESSIONAL FIREFIGHTERS LONGTERM DISABILITY PLAN; CALIFORNIA ADMINISTRATION INSURANCE SERVICES, INC., a California corporation; and KENNETH BLANTON, DENNIS CAMPANALE, GENE DANGEL, JAMES FLOYD, CHARLES GLUCK, BRIAN PINOMAKI, and WILLIAM SOQUI, individually and as Plan Directors,Defendants. |
This matter is before the court on (1) defendants California Association of Professional Firefighters ("CAPF"), California Administration Insurance Services, Inc. ("CAISI"), and Kenneth Blanton, Dennis Campanale, Gene Dangel, Brian Pinomaki, Charles Gluck, William Soqui, and James Floyd's (collectively 、"defendants") motion for summary judgment, pursuant to Federal Rule of Civil Procedure ("Rule") 56; (2) plaintiff David Barboza's ("plaintiff") cross-motion for summary judgment; (3) defendants' motion for sanctions pursuant to Rule 11; and (4) plaintiff's cross-motion for Rule 11 sanctions.1 The court heard oral argument on the motions on December 3, 2010. Based upon the submissions of the parties and the arguments made by counsel, and for the reasons set forth below, (1) defendants' motion for summary judgment is GRANTED in part and DENIED in part; (2) plaintiff's motion for summary judgment is GRANTED in part and DENIED in part; (3) defendants' motion for sanctions is DENIED; and (4) plaintiff's motion for sanctions is DENIED.
Defendant CAPF is a non-profit mutual benefit corporation that sponsors the California Association of Professional Firefighters Long-Term Disability Plan (the "Plan"). (DUF ¶ 1.) Defendant CAISI administers the Plan and is responsible for making determinations regarding participants' disability and benefits. (DUF ¶ 3; PUF ¶ 4; Answer ¶ 6.) Individual Defendants Kenneth Blanton, Dennis Campanale, Gene Dangel, and Brian Pinomaki are Directors and Executive Board members of CAPF and are "fiduciaries" within the meaning of 29 U.S.C. §§ 1002(14) and (21). (Answer ¶¶ 7-9, 12.) Plaintiff alleges that defendants Charles Gluck and William Soqui are also Directors, Executive Board members, and fiduciaries of CAPF.3 (Complaint ¶ 11, 13; Answer ¶¶ 11, 13.) Defendant James Floyd is the owner of defendant CAISI. (Answer 1 10.)
The Plan is an ERISA welfare benefit plan that receives its funding exclusively from Plan participants, as opposed to employers, and pays all benefits solely from Plan assets. (DUF ¶¶ 2, 4; PUF ¶ 5.) Participant contributions are deposited into a Wells Fargo Bank checking account (the "Account"). (PUF ¶ 20.) The signatories on the Account are officers of CAISI. (PUF ¶ 22.) In accordance with the administrative services agreement between CAPF and CAISI, CAISI pays benefit claims and Plan expenses by writing checks from the Account on behalf of CAPF. (Administrative Services Agreement § 3.2, Ex. 4 to Decl. of Geoffrey V. White in Support of Pl.'s Mot. for Summ. J.) CAISI also writes checks from the Account to remunerate CAISI for its fees and expenses. (PUF ¶ 25.) CAISI does not provide CAPF with invoices of its administrative expenses; however CAISI provides CAPF with quarterly financial statements that detail the Plan's fees and expenses. (PUF ¶ 26; 28.)
Beginning in 1994, CAPF agreed to pay CAISI an administrative services fee of $3.65 per Plan participant, per month. (DUF ¶¶ 33, 35; Decl. of Dennis Campanale ("Campanale") ¶ 7, filed July 30, 2010.) This fee remained steady until the parties agreed to raise it to $3.75 per Plan participant, per month, beginning in April of 2009. (DUF ¶ 33.)
CAPF and CAISI are not run by ERISA lawyers, actuaries, or accountants. (Decl. of Campanale ¶ 18.) Rather, CAPF and CAISI are controlled by active and retired firefighters. (Id.) As such, defendants assert that they consult with appropriate experts for advice on matters requiring specialized knowledge or experience. For example, defendants assert that when CAPF's Board of directors (the "Board") needed to decide whether CAPF was required to file Form 990 with the Internal Revenue Service ("IRS"), they relied on the advice of an accountant and legal counsel. (Id. ¶ 16.) CAPF has not filed Form 990 since 2002. (PUF ¶ 9.) Defendants also testify that they consulted with the United States Department of Labor ("DOL") and the California Department of Insurance ("DOI") to determine whether CAPF's corporate status could satisfy 29 U.S.C. § 1103's "held in trust" requirement. (Decl. of Chris Chediak ("Chediak") ¶ 3, filed July 30, 2010; Dep. of Richard Floyd, at 14-15.)
CAPF's bylaws also require the Board to hire professionals for certain tasks. For instance, the bylaws require that the Plan's benefit reserves undergo annual actuarial review to ensure that CAPF's funds are properly managed. (PUF ¶ 41.) Defendants assert that they complied with this requirement by hiring actuaries J. Paul Dorris and his partner Ken Vance to performthis task. (Decl. of Campanale ¶ 5.) However, these actuaries "closed their doors" for a period beginning in 2006 and ending in 2009, resulting in an "interruption" in actuarial review of CAPF's funds between June 21, 2006 and July 2, 2009. (Dep. of Gene Dangel ("Dangel"), at 114-116; Dep. of Richard Floyd, at 9798.)
Plaintiff was a participant in the Plan. (Answer ¶ 14.) On approximately May 31, 2006, plaintiff applied to the Plan for long-term disability benefits. (Answer ¶ 15.) CAISI initially denied plaintiff's application in a letter dated May 18, 2007. (Id.) After receiving additional medical evidence, CAISI heard, and granted, plaintiff's appeal. (Id.) The parties dispute whether plaintiff has received all of the benefits that he is entitled to under the Plan. This dispute was the subject of a separate action before this court. (Id.) This action was dismissed without prejudice for failure to exhaust administrative remedies.4
In the present action, plaintiff brings suit against defendants, the Plan, the Plan Administrator (CAISI), and the individual board members of CAPF and CAISI, alleging numerous breaches of fiduciary duties under Part 4 of Title I of ERISA. (Compl., filed Oct. 28, 2008, ¶ 5.) Plaintiff alleges that defendants breached their fiduciary duties by: (1) failing todistribute a Summary Annual Report ("SAR") to plan participants5; (2) unlawfully refusing to file Form 990 with the IRS; (3) unlawfully failing to hold Plan assets in trust; (4) engaging in unlawful self-dealing and prohibited transactions by coming to an agreement that allows CAISI to use fees and expenses; (5) engaging in prohibited transactions by renewing the administrative services agreement between CAPF and CAISI, including authorizing an administrative services fee increase, agreeing to an unreasonably lengthy term, and including an indemnity clause; and (6) failing to obtain actuarial review as required by Plan bylaws.6 (Id.)
Based on these alleged breaches, plaintiff seeks injunctive relief to compel defendants to distribute the SAR and to file Form 990. Additionally, plaintiff requests that the court appoint an independent Trustee/Receiver to remedy defendants' alleged breaches and to conduct an accounting of the Plan. (Complaint, at 7.)
I. Summary Judgment
The Federal Rules of Civil Procedure provide for summary judgment where "the movant shows that there is no genuine disputeas to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The evidence must be viewed in the light most favorable to the nonmoving party. See Lopez v. Smith, 203 F.3d 1122, 1131 (9th Cir. 2000) (en banc).
The moving party bears the initial burden of demonstrating the absence of a genuine issue of fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). If the moving party fails to meet this burden, "the nonmoving party has no obligation to produce anything, even if the nonmoving party would have the ultimate burden of persuasion at trial." Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102-03 (9th Cir. 2000). However, if the nonmoving party has the burden of proof at trial, the moving party only needs to show "that there is an absence of evidence to support the nonmoving party's case." Celotex Corp., 477 U.S. at 325.
Once the moving party has met its burden of proof, the nonmoving party must produce evidence on which a reasonable trier of fact could find in its favor viewing the record as a whole in light of the evidentiary burden the law places on that party. See Triton Energy Corp. v. Square D Co., 68 F.3d 1216, 1221 (9th Cir. 1995). The nonmoving party cannot simply rest on its allegations without any significant probative evidence tending to support the complaint. See Nissan Fire & Marine, 210 F.3d at 1107. Instead, the nonmoving party must cite to "particular parts of materials in the record, " or show that moving party's cited materials "do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact." Fed. R. Civ. P.
56(c)(1). II. Rule 11
Pursuant to Fed. R. Civ. P. 11(b), when an attorney presents a pleading or motion to the court, the attorney certifies that, after reasonable inquiry, to the best of his or her knowledge, information, and belief:
(1) it is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation; (2) the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law; (3) the factual contentions have evidentiary support.
"Rule 11 is an extraordinary remedy, one to be exercised with extreme caution." Conn v Borjorquez, ...
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