Wilson v. Edison Int'l, Inc.

• Citation: 315 F.Supp.3d 1177
• Decision Date: 29 May 2018
• Docket Number: Case No. LA CV15–09139 JAK (PJWx)
• Court: U.S. District Court — Central District of California
• Parties: Cassandra WILSON v. EDISON INTERNATIONAL, INC., et al.

315 F.Supp.3d 1177

Cassandra WILSON

v.EDISON INTERNATIONAL, INC., et al.

Case No. LA CV15–09139 JAK (PJWx)

United States District Court, C.D. California.

Signed May 29, 2018

Edward H. Glenn, Jr., Jacob Zamansky, Samuel E. Bonderoff, Pro Hac Vice, Zamansky LLC, New York, NY, Ken E. Steelman, Cofiroute USA, LLC, Irvine, CA, Michael L. Kirby, Kirby and Kirby LLP, San Diego, CA, for Plaintiff.

Henry Weissmann, John Michael Gildersleeve, Jordan Xavier Navarrette, Munger Tolles and Olson LLP, Los Angeles, CA, for Defendants.

Proceedings: (IN CHAMBERS) ORDER RE DEFENDANTS' MOTION DISMISS SECOND AMENDED COMPLAINT (DKT. 88)

Present: The Honorable JOHN A. KRONSTADT, UNITED STATES DISTRICT JUDGE

I. Introduction

Cassandra Wilson ("Plaintiff") brought this putative class action on behalf of herself and similarly situated employees of Edison International, Inc. ("Edison"). The putative class consists of those Edison employees who, through their participation in the Edison 401(k) Savings Plan (the "Plan"), invested in the Edison International Stock Fund from March 27, 2014 through June 24, 2015 (the "Class Period"). Second Amended Complaint ("SAC"), Dkt. 81. Plaintiff claims that Theodore Craver ("Defendant Craver") and Robert Boada ("Defendant Boada") (collectively, "Defendants") each of whom had certain alleged responsibilities with respect to the administration of the Plan, breached their respective duties of prudence imposed by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1104(a)(1)(B).¹

After a motion to dismiss the initial Complaint was granted (Dkt. 52), Plaintiff filed a First Amended Complaint ("FAC"). Dkt. 53. Defendants filed a motion to dismiss the FAC. Dkt. 61. After the Court granted the motion to dismiss the FAC, with leave to amend (Dkt. 80), Plaintiff filed the SAC. Dkt. 81. Defendants thereafter filed a Motion to Dismiss the SAC ("Motion"). Dkt. 88. Plaintiff filed an opposition to the Motion (Dkt. 93), and Defendants replied (Dkt. 94).

On October 23, 2017, a hearing was held on the Motion and it was taken under submission. Dkt. 96. For the reasons stated in this Order, the Motion is GRANTED .

II. Factual Background

A. The Edison 401(k) Plan and the Edison International Stock Fund

Edison is the parent company of Southern California Edison Company ("SCE"), which supplies electricity to customers in Southern California. SAC ¶ 52. SCE is regulated by the California Public Utilities Commission ("CPUC") and by the Federal Energy Regulatory Commission ("FERC"). Id. ¶ 2.

Certain employees of Edison, SCE and other Edison subsidiaries are eligible to participate in the Plan. Id. ¶ 45. The Plan is sponsored by SCE and is administered by the Benefits Committee of SCE.

Request for Judicial Notice ("RJN"), Dkt. 88–3 (Ex. 1 at 49). Those employees who elect to participate in the Plan may direct that a percentage of their earnings be invested in one or more funds offered by the Plan. Id. at 16. In general, income taxes are deferred on the amounts that are invested by a participating employee. The investment options that are provided to participants in the Plan are selected by the Trust Investment Committee of Edison. Id. at 54. Defendant Craver, who was the Chief Executive Officer ("CEO") of Edison throughout the Class Period, appointed the members of the Trust Investment Committee during the Class Period. Id. at 14; SAC ¶¶ 18–19, 41. Defendant Boada was at all relevant times the Vice President and Treasurer of Edison and a member of the Trust Investment Committee. SAC ¶¶ 18, 43.

During the Class Period, the Edison International Stock Fund (the "Stock Fund") was among the investment options available to Plan participants. Id. ¶ 16. The Stock Fund is an Employee Stock Ownership Plan ("ESOP") whose largest holding is in Edison common stock. RJN, Dkt. 88–4 (Ex. 2 at 9–10, 34).

B. The CPUC Proceedings and the November 2014 Settlement

In 2013, SCE retired the San Onofre Nuclear Generating Station ("SONGS"). SAC ¶ 55. As part of this process, SCE participated in several rate setting proceedings before the CPUC. Their purpose was to determine how costs associated with the closing of the SONGS would be allocated between SCE and California ratepayers. Id. ¶ 57. As a result of these proceedings, in October 2012, the CPUC issued an Order Instituting Investigation proceeding ("Proceeding"). Several advocacy groups, including the Office of Ratepayer Advocates ("ORA"), the Utility Reform Network ("TURN") and the Alliance for Nuclear Responsibility ("ANR") participated in the Proceeding. Id. ¶¶ 58–59. The Proceeding continued for approximately two years. Id. ¶¶ 58–63. Certain matters that arose during the process led to proceedings before two Administrative Law Judges, Melanie Darling ("ALJ Darling") and Kevin Dudney ("ALJ Dudney"). Id.

In November 2014, the CPUC approved a settlement agreement among SCE and the advocacy groups (the "SONGS Settlement"), finding that it was "in the public interest." Id. ¶¶ 62–63, 65. CPUC proceedings are governed by the Public Utility Code (the "Code") and by the CPUC Rules of Practice and Procedure (the "Rules"). Id. ¶ 69. The Code and the Rules provide specific limitations on ex parte communications between certain parties and CPUC personnel. Id. Rule 8.1 of the Rules defines an ex parte communication:

(c) "Ex parte communication" means a written communication (including a communication by letter or electronic medium) or oral communication (including a communication by telephone or in person) that:

(1) concerns any substantive issue in a formal proceeding,

(2) takes place between an interested person and a decisionmaker, and

(3) does not occur in a public hearing, workshop, or other public forum noticed by ruling or order in the proceeding, or on the record of the proceeding. Communications regarding the schedule, location, or format for hearings, filing dates, identity of parties, and other such nonsubstantive information are procedural inquiries, not ex parte communications.

RJN, Dkt. 88–6 (Ex. 4 at 7).

Rule 8.4 provides that in a ratesetting proceeding an "interested person," which is a term used in Rule 8.1, must report any ex parte communication within three working days of when it occurred. Id. at 11 ("Ex parte communications that are subject to these reporting requirements shall be reported by the interested person, regardless of whether the communication was initiated by the interested person. Notice of ex parte communications shall be filed within three working days of the communication."). The rules do not define "substantive issue." However, they do provide that "[c]ommunications regarding the schedule, location, or format for hearings, filing dates, identity of parties, and other such nonsubstantive information are procedural inquiries, not ex parte communications." Id. at 7.

C. Disclosure of Certain Communications

1. Email to Edison Personnel

In September 2014, approximately two months before the CPUC approved the SONGS Settlement, the Chief Ethics and Compliance Officer of Edison sent an email to Edison personnel. SAC ¶ 71. It stated: "While we are well aware of the CPUC's ex parte communications rules, this situation makes clear that awareness of the rules is not enough." Id.

2. The Warsaw Meeting

In February 2015, approximately three months after the CPUC approved the SONGS Settlement, SCE provided written notice to the CPUC about a previously unreported ex parte communication between Stephen Pickett ("Pickett"), the former Executive Vice President of SCE, and Michael Peevey ("Peevey"), the former President of the CPUC. Id. ¶¶ 8, 68. The communication occurred in March 2013, at an industry conference in Warsaw, Poland (the "Warsaw Meeting"). Id. ¶¶ 68, 72. At that time, although the CPUC proceedings were ongoing, the settlement negotiations had not commenced. Id. ¶ 68.

Before the February 2015 notice of the ex parte communication, the following had occurred: (i) Peevey had resigned from the CPUC, effective December 2014; (ii) the California Attorney General had seized handwritten notes from the Warsaw Meeting during a January 2015 search of Peevey's residence; and (iii) Edison had implemented its first policy regarding ex parte communications. Id. ¶ 73.

Approximately two weeks after the February 2015 disclosure to the CPUC, Edison filed a Form 10–K with the Securities and Exchange Commission ("SEC"). Id. ¶ 76. The Form 10–K, which is an annual financial report, included financial results for the fourth quarter of 2014 and fiscal year 2014. It disclosed the following:

On February 9, 2015, SCE filed in the OII proceeding a Late–Filed Notice of Ex Parte Communication regarding a meeting in March 2013 between an SCE senior executive and the president of the CPUC, both of whom have since retired from their respective positions. In response, the Alliance for Nuclear Responsibility, one of the intervenors in the OII, filed an application requesting that the CPUC institute an investigation into whether sanctions should be imposed on SCE in connection with the ex parte communication. The application requests that the CPUC order SCE to produce all ex parte communications between SCE and the CPUC or its staff since January 31, 2012 and all internal SCE unprivileged communications that discuss such ex parte communications.

Id.

3. Other Meetings

In April 2015, ALJ Darling and ALJ Dudney ordered SCE to provide additional information about its disclosure of the ex parte communication that occurred at the Warsaw Meeting. Id. ¶ 79. The ruling stated that "[t]he Late–Filed Ex Parte Notice [filed by Edison in February 2015] offered little information about the content of the meeting between Commission President Peevey and SCE's Executive Vice President."Id. It directed SCE to provide the following information to the CPUC by April 29, 2015: (i) documents related to any oral or written communications between any SCE employee and CPUC decisionmakers between March 1, 2013 and November 31, 2014, concerning the...