Kevin Cash v. Country Trust Bank

• Decision Date: 10 July 2018
• Docket Number: No. 17-cv-2611-SHM-tmp,17-cv-2611-SHM-tmp
• Parties: KEVIN CASH, Plaintiff, v. COUNTRY TRUST BANK and TURNER HOLDINGS, LLC, Defendants.
• Court: U.S. District Court — Western District of Tennessee

KEVIN CASH, Plaintiff, v. COUNTRY TRUST BANK and TURNER HOLDINGS, LLC, Defendants.

No. 17-cv-2611-SHM-tmp

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF TENNESSEE WESTERN DIVISION

July 10, 2018

ORDER

Before the Court are two motions. The first is Defendant Turner Holdings, LLC's ("Turner") December 13, 2017 Motion to Dismiss Plaintiff's First Amended Complaint ("Turner's Motion to Dismiss"). (ECF No. 31.) Plaintiff Kevin Cash responded on December 27, 2017. (ECF No. 33.)

The second is Defendant Country Trust Bank's ("Country Trust") December 21, 2017 Supplemental Motion to Dismiss ("Country Trust's Motion to Dismiss"). (ECF No. 32.) Cash responded on December 28, 2017. (ECF No. 34.) Country Trust replied on January 11, 2018. (ECF No. 40.)

For the following reasons, Turner's Motion to Dismiss and Country Trust's Motion to Dismiss (collectively, "Motions to Dismiss") are GRANTED in part and DENIED in part.

I. Background

This case arises from an attempt to obtain a loan from a 401(k) plan, the repayment of a previous loan obtained from that plan, an IRS levy, and a failure to compensate for labor.

Cash brings state law claims for fraud, unjust enrichment, breach of contract, conversion, negligence, intentional infliction of emotion distress, and negligent infliction of emotional distress. In the alternative, he brings a claim under the Employee Retirement Income Security Act of 1974 ("ERISA") as amended, 29 U.S.C. §§ 1001, et. seq.

A. Factual and Procedural Background

At all relevant times, Cash was an employee of Turner. (See Amend. Compl., ECF No. 29 ¶¶ 3, 5, 36.)

Turner is an Adopting Employer of the Prairie Farms Dairy, Inc. 401(k) Plan (the "401(k) Plan") through a Participation Agreement for Prairie Farms Dairy, Inc. 401(k) Plan (the "Participation Agreement"). (See 401(k) Plan, ECF No. 32-1; Participation Agreement, ECF No. 32-3.) The 401(k) Plan allows plan participants to secure loans from a trust fund. (401(k) Plan, ECF No. 32-1 at 424.)¹ Country Trust is the Trustee of the 401(k) Plan under the Prairie Farms Dairy, Inc. 401(k) Plan Trust Agreement (the "Trust Agreement"). (Trust Agreement, ECF No. 10-3.)

As a Turner employee, Cash was afforded retirement benefits under the 401(k) Plan. (See Amend. Compl., ECF No. 29 ¶¶ 5, 10; see generally 401(k) Plan, ECF No. 32-1.)

On June 24, 2011, Turner secured a $4,000 loan under the 401(k) Plan. (See Amend. Compl., ECF No. 29 ¶ 9; 401(k) Plan Loan Issuance Confirmation, ECF No. 32-5.) The loan was to be repaid through monthly payments deducted from Cash's paycheck. (Amend. Compl., ECF No. 29 ¶ 13; 401(k) Plan Loan Issuance Confirmation, ECF No. 32-5 at 491.) The promissory note evidencing the loan became "due and payable on the maturity date June 26, 2014. . . ." (401(k) Plan Loan Issuance Confirmation, ECF No. 32-5 at 491.)

Some time before June 2016, a Turner representative told Cash his first loan had been paid in full. (Amend. Compl., ECF No. 29 ¶ 19.) In June 2016, Cash sought a second loan under the 401(k) Plan. (Id. ¶¶ 16-18.) Country Trust informed Cash that he had a remaining balance of $1,162.37 on his first loan. (Id. ¶ 20.) Country Trust's representative told Cash that its records reflected that Cash had made payments from June 2011 to December 2013, and that six payments Cash had made in 2014 had not been credited. (Id. ¶¶ 20-21, 23-24.) Cash was also told that he could obtain a second loan once his first loan had beenpaid. (Id. ¶ 27.)² Country Trust directed Cash to make his second loan request directly to Turner, which would determine Cash's eligibility to secure a second loan. (Id. ¶ 30.)

The same month, Cash spoke with a Turner representative who told Cash that "he could not have another loan, and that he did not qualify for another loan." (Id. ¶¶ 30-31.)

Between September 10, 2016, and June 22, 2017, $1,162.37 was removed from Cash's paychecks as repayment for his 2011 loan. (Id. ¶¶ 36-37.) On July 20, 2017, $26.42 was removed from Cash's paycheck as repayment for his 2011 loan. (Id. ¶ 39.)

On March 13, 2017, the Internal Revenue Service ("IRS") sent Turner a notice of levy on Cash's wages to pay unpaid taxes. (Id. ¶ 48.) The notice instructed Turner to give the letter to Cash "immediately." (Id. ¶ 49.)

Turner gave Cash the letter on April 10, 2017. (Id. ¶ 54.) The same day, Turner removed $903.37 from Cash's paycheck in accordance with the levy. (Id. ¶¶ 55, 57-58, 60.)

Cash contacted the IRS. The IRS told Cash that Turner had miscalculated the amount of money to be removed from Cash's paycheck to satisfy the levy. (Id. ¶ 63.)

On April 20, 2017, the IRS released the levy on Cash's wages. (Id. ¶ 66; ECF No. 31-4.)

On or about April 27, 2017, Turner failed to pay Cash for 16 hours of work. (Amend. Compl., ECF No. 29 ¶ 68.) After that, Turner removed $1 from Cash's paychecks as an "ADMFEE." (Id. ¶ 69.)

On July 20, 2017, Cash filed a complaint against Turner and Country Trust (collectively, "Defendants") in the Shelby County Circuit Court for the Thirtieth Judicial District at Memphis. (ECF No. 1-1 at 9.) Cash brought claims of fraud, unjust enrichment, breach of contract, conversion, negligence, intentional infliction of emotional distress ("IIED"), and negligent infliction of emotional distress ("NIED"). (Id. at 9-17.)

On August 23, 2017, Defendants removed to this Court on the basis of diversity jurisdiction and subject matter jurisdiction. (Notice of Removal, ECF No. 1 at 2-6.)

On August 30, 2017, Defendants separately moved to dismiss Cash's complaint. (ECF Nos. 8-10.) Cash responded on November 5, 2017. (ECF Nos. 19-20.)

On November 6, 2017, Cash moved to amend the complaint. (ECF No. 21.) Turner responded on November 16, 2017. (ECF No. 23.) Country Trust responded on November 20, 2017. (ECF No. 24.)

The Court granted leave to amend the complaint on December 5, 2017. (ECF No. 28.) Cash filed the Amended Complaint the same day. (Amend. Compl., ECF No. 29.) In the Amended Complaint, Cash brings state law claims of fraud, unjust enrichment, breach of contract, conversion, negligence, IIED, and NIED. (Id.) In the alternative, he brings a claim under ERISA. (Id.)

On December 8, 2017, the Court dismissed as moot Defendants' August 30, 2017 motions to dismiss. (ECF No. 30.)

On December 13, 2017, Turner filed its Motion to Dismiss. (ECF No. 31.) On December 21, 2017, Country Trust filed its Motion to Dismiss. (ECF No. 32.) Cash timely responded. (ECF Nos. 33-34.) Country Trust replied on January 11, 2018. (ECF No. 40.)

B. Plan Documents

1. Prairie Farms Dairy, Inc. 401(k) Plan

The 401(k) Plan provides in relevant part:

The purpose of this Plan is to provide retirement benefits to Employees. This Plan is designated as a 40l(k) profit sharing plan.

This Plan is for the exclusive benefit of the Participants and their Beneficiaries, and it shall be interpreted and administered in a manner consistent with the provisions of the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code of 1986, as amended.

(401(k) Plan, ECF No. 32-1 at 379.)

Under the 401(k) Plan, participants may obtain loans secured by the 401(k). Those loans are subject to the following provisions:

Loans to Participants. Subject to any rules or procedures set forth in a written loan policy that may be established by the Administrator or elected in the Participation Agreement, the Trustee may permit loans to be made from the Trust Fund to Participants and Beneficiaries, and subject to any such rules or procedures, all loans will be made in accordance with the following provisions:

(a) Availability of Loans. The Administrator will have the sole right to approve or disapprove a loan application, but loans will be made available to all Participants on a reasonably equivalent basis.

. . .

(d) Written Loan Agreement. All loans must be evidenced by a legally enforceable agreement (which may include more than one document) set forth in writing or in such other form as may be approved by the Internal Revenue Service, and the terms of such agreement must specify the amount and term of the loan, and the repayment schedule.

. . .

(h) Loans Must Bear Reasonable Interest. Any loan must bear interest at a rate reasonable at the time of application, considering the purpose of the loan and the rate being charged by representative commercial banks in the local area for a similar loan, unless the Administrator sets forth a different method for determining loan interest rates in its loan procedures such as using the prime rate or some other rate based on the prime rate. The loan agreement will also provide for the payment of principal and interest not less frequently than quarterly. Such interest will be credited either directly to the Participant's Account, or in the alternative to the general Trust Fund, as set forth in the loan policy.

(i) Loans Must be Secured. If a Participant's loan application is approved by the Administrator, such Participant will be required to execute a note, a loan agreement and an assignment of his Vested Aggregate Account as collateral for the loan. The Administrator, on a nondiscriminatory basis, may permit a Participant to pledge outside security in lieu of pledging his Vested Aggregate Account as collateral. The Participant must obtain the consent of his Spouse, if any, within the 180-day period before the Participant's Vested Aggregate Account is used as security for the loan.

. . .

(n) Establishment of Administrative Procedures. The Administrator may, in a separate written loan policy, establish rules or procedures regarding the conditions under which the Trustee can make loans to Participants. Such separate written document, when properly executed, will be deemed incorporated in this Plan. The rules or procedures therein may be modified or amended by the Administrator without the necessity of amending this Section, but any such modifications must be communicated to Participants.

(Id. at 424-26.)

The claim procedure under the 401(k) Plan is:

(a) Each

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