Nixon v. Vaughn

• Decision Date: 16 October 2012
• Docket Number: No. 2:12–CV–00308.,2:12–CV–00308.
• Citation: 904 F.Supp.2d 553
• Parties: Mary NIXON v. Alice Melinda VAUGHN, born Reeves, Fidelity Investments Institutional Operations Company, and CITGO Petroleum Corporations.
• Court: U.S. District Court — Western District of Louisiana

904 F.Supp.2d 553

Mary NIXON

v.Alice Melinda VAUGHN, born Reeves, Fidelity Investments Institutional Operations Company, and CITGO Petroleum Corporations.

No. 2:12–CV–00308.

United States District Court,

W.D. Louisiana,

Lake Charles Division.

Oct. 16, 2012.

M. Steven Beverung, Book & Beverung, Lake Charles, LA, for Mary Nixon.

B. Thomas Shea, Sanchez Law Firm, Walter Marshall Sanchez, Offices of Walter M. Sanchez, John S. Bradford, David L. Morgan, Ross M. Raley, Stockwell Sievert, et al, Lake Charles, LA, for Alice Melinda Vaughn, born Reeves, Fidelity Investments Institutional Operations Company, and CITGO Petroleum Corporations.

MEMORANDUM RULING

PATRICIA MINALDI, District Judge.

Before the court is a Motion to Dismiss Pursuant to Rule 12(b)(6) [Doc. 10], filed by the defendants, CITGO Petroleum Corporation (“CITGO”) and Fidelity InvestmentsInstitutional Operations Company, Inc. (“Fidelity”). The motion is opposed by the plaintiff, Mary Nixon [Doc. 14]. CITGO and Fidelity filed a Reply to the plaintiff's opposition [Doc. 15]. The undersigned finds that this court does not have subject matter jurisdiction over the instant case because the plaintiff's claims are not completely preempted under ERISA. Therefore, the defendant's motion is DENIED and the matter is REMANDED to state court.

BACKGROUND

The plaintiff filed this action against her sister (Alice Melinda Vaughn, born Reeves), CITGO, and Fidelity, alleging that her sister fraudulently converted funds the plaintiff was entitled to as a beneficiary under a 401(k) from the CITGO Petroleum Corporation Employee Retirement and Savings Plan. Further, she alleged that CITGO and the plan administrator/record keeper, Fidelity, were negligent in failing to inform her of Ms. Vaughn's actions.¹

The 401(k) originated with the plaintiff's father, Allen Reeves, who had accumulated it while working for CITGO.² Allen Reeves had named the plaintiff's mother, Cherry Reeves, as sole beneficiary of his 401(k), and Cherry Reeves rolled the 401(k) into a new 401(k) plan when he died in 1995. ³ Following that, Cherry Reeves named her daughters, the plaintiff and Ms. Vaughn, as beneficiaries under her new 401(k) plan.⁴ Cherry Reeves died on August 5, 2007, at which time her 401(k) passed to the plaintiff and Ms. Vaughn.⁵ Following this, and allegedly without the plaintiff's consent or knowledge, Ms. Vaughn opened a new 401(k) account in the plaintiff's name, using the funds from the plaintiff's share of the deceased Cherry Reeves's 401(k) to do so.⁶ Fidelity allegedly administered the account.⁷

According to the plaintiff, when making this transfer, Ms. Vaughn fraudulently listed the plaintiff's address as 607 Tulane Street, Lake Charles, Louisiana. ⁸ The plaintiff asserts that she has never resided at or received her mail at this address, and that in fact it is Ms. Vaughn's address instead. ⁹ According to the plaintiff, even though Fidelity and CITGO were aware at all times that it was Ms. Vaughn, and not the plaintiff, taking these actions in setting up the new 401(k) account in the plaintiff's name, they made no attempt to inform the plaintiff of this activity, or to contact her to verify that Ms. Vaughn had given them the right address.¹⁰

After setting up the alleged fraudulent 401(k) account, the plaintiff contends that Ms. Vaughn requested that Fidelity close out the account she set up in favor of the plaintiff and to issue a check to the plaintiff for the full amount in the 401(k).¹¹ Ms. Vaughn then requested that the check be sent to 607 Tulane Street.¹² Upon Ms. Vaughn's request, Fidelity issued two checks payable to the plaintiff, for a total amount of $17,496.18, which was the entire amount of the 401(k), less an amount withheld for federal income tax, and sent the check to Ms. Vaughn's address, 607 Tulane Street.¹³

Upon receipt of these checks at her home, Ms. Vaughn allegedly forged the plaintiff's signature on the checks without the plaintiff's permission or knowledge, and then deposited them in her personal account for her own use. ¹⁴ The plaintiff avers that she was never made aware by Ms. Vaughn, Fidelity, or CITGO that a request was made to liquidate the 401(k).¹⁵ It was not until much later, after the plaintiff filed her 2008 tax return and the Internal Revenue Service assessed additional taxes, penalties, and interest against her for under-reporting and under paying federal income taxes, that the plaintiff caught on to Ms. Vaughn's fraudulent activity.¹⁶

The plaintiff contends that Ms. Vaughn's fraudulent actions and CITGO and Fidelity's negligence (in allowing the fraud to happen) entitle her to damages and attorney's fees.¹⁷ She claims, as itemized damages, $17,496.18, the full amount of the 401(k) allegedly stolen from her by Ms. Vaughn. ¹⁸ She also requests compensation for taxes, penalties, and interest paid to the Internal Revenue Service as a result of Ms. Vaughn's unauthorized conversion and liquidation of her 401(k), damages for mental anguish and anxiety, and attorney's fees.¹⁹

The plaintiff originally filed her petition on December 7, 2011 in the 14th Judicial District Court in Calcasieu Parish.²⁰ The defendants timely removed the case to this court on the basis of federal question jurisdiction, alleging that the case arose under the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq.²¹ Fidelity and CITGO now move to dismiss the plaintiff's claims against them under Rule 12(b)(6). The defendants make four arguments: first, that the plaintiff's 401(k) is governed by ERISA, and that ERISA preempts any and all state law causes of action she is bringing; ²² second, that they are not proper defendants under ERISA because they are not the plan or plan administrators and did not have discretionary authority over the plan; ²³ third, that the plaintiff's petition should be dismissed because she has not exhausted the administrative remedy requirement, and instead “marched directly into court;” ²⁴ and, fourth, that the plaintiff's claims are time barred, since the 401(k) plan provided for a two year statute of limitations, and she brought her claims more than two years after the alleged violations happened.²⁵

In the plaintiff's Opposition to the Motion to Dismiss, she argues first that ERISA does not preempt her state law remedies, because ERISA preemption only applies in cases that deal with the payout of benefits, and not in this situation, where she is alleging that Fidelity and CITGO were negligent in not telling her she was a beneficiary to the 401(k), in not calling to confirm her address, and in letting Ms. Vaughn liquidate the 401(k); ²⁶ second, that Fidelity and CITGO are proper defendants, because she has pled sufficient facts to establish that they had discretionary control over the 401(k) plan; ²⁷ third, that the exhaustion of administrative remedies provision should not apply to her, because: (1) she never knew about the 401(k) and thus could not know about the administrative remedy requirement and (2) her claim is for breach of fiduciary duty, which has no remedy exhaustion requirement; ²⁸ fourth, she says that her claims are not time-barred, because she had no way of knowing about Ms. Vaughn's actions until 2011 when the Internal Revenue Service penalized her for not paying taxes upon the liquidation of the 401(k), and thus her statute of limitations should run from 2011.²⁹ The plaintiff additionally argues that by attaching exhibits to their Motion to Dismiss, the defendants are unfairly attempting to convert the 12(b)(6) to a Motion for Summary Judgment.³⁰ She asserts that the 401(k) plan document attached to the defendants' motion is not central to her case, and therefore is not an appropriate document to consider in a 12(b)(6) Motion. But, if the undersigned must consider it, she requests that it should be treated as a Motion for Summary Judgment, and all parties should be allowed to present material relevant to the motion.³¹

In the defendants' Reply, they argue that the 401(k) plan excerpts attached to their Motion to Dismiss should be considered because the 401(k) plan is central to the plaintiff's claims, and in fact her complaint repeatedly references it.³² The defendants then reassert their four arguments originally made in their Motion.³³

LEGAL STANDARDS

I. MOTION TO DISMISS UNDER RULE 12(B)(6)

A motion filed pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure challenges the sufficiency of a plaintiff's allegations. Fed.R.Civ.P. 12(b)(6). When ruling on a 12(b)(6) motion, the court accepts the plaintiff's factual allegations as true, and construes all reasonable inferences in a light most favorable to the plaintiff or nonmoving party. Gogreve v. Downtown Develop. Dist., 426 F.Supp.2d 383, 388 (E.D.La.2006).

To avoid dismissal under a Rule 12(b)(6) motion, a plaintiff must plead enough facts to “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007). “Factual allegations must be enough to raise a right to relief above the speculative level ... on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Id. at 1965. Accordingly, a plaintiff must provide “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id.

II. SUA SPONTE DETERMINATION OF SUBJECT MATTER JURISDICTION

Federal courts exercise limited jurisdiction. Howery v. Allstate Ins. Co., 243 F.3d 912, 916 (5th Cir.2001). Although the question of subject matter jurisdiction is not before the court on a motion to dismiss, a district court has “a duty to establish subject matter jurisdiction over the removed action sua sponte, whether the parties raised the issue or not.” See United Investors Life Ins. Co. v. Waddell & Reed, Inc., 360 F.3d 960, 967 (9th Cir.2004). “If at any time prior to judgment it appears that the district court lacks...