Winn v. Lassen Canyon Nursery, Inc.

• Decision Date: 07 August 2013
• Docket Number: No. 2:10-CV-01030 KJM CMK,2:10-CV-01030 KJM CMK
• Parties: RICHARD WINN, SR., Plaintiff, v. LASSEN CANYON NURSERY, INC., et al., Defendants.
• Court: U.S. District Court — Eastern District of California

RICHARD WINN, SR., Plaintiff,

v.LASSEN CANYON NURSERY, INC., et al., Defendants.

No. 2:10-CV-01030 KJM CMK

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT COURT OF CALIFORNIA

DATED: August 7, 2013

ORDER

This case was on the court's April 12, 2013 calendar for the parties' cross-motions for summary judgment. Denise Winn appeared for plaintiff and Martin Jensen appeared for defendants. For the reasons explained below, the court GRANTS defendants' motion and DENIES plaintiff's motion.

I. BACKGROUND

A. Lassen Canyon Nursery 401(k) Profit Sharing Plan

Defendant Lassen Canyon Nursery, Inc. (LCN) created a 401(k) profit-sharing plan for its employees in 1997 (the "Plan"¹). (Defs.' Statement of Undisputed Material Facts ¶ 1, ECF 66.)² LCN appointed itself as the Plan Administrator. (Id. ¶ 2.) In 2007, the terms of the Plan (the "Pre-2008 Plan") were amended; this amended version of the plan (the "Amended Plan") became effective on August 1, 2007. (Ex. A at 21, ECF 71-1.) Also in 2007, LCN appointed defendant Elizabeth Ponce, a LCN officer and director, as Plan Trustee. (ECF 66 ¶¶ 2-3.) As Administrator, LCN hired Bidwell Consulting Services (BCS) to assist with administering the Plan. (Id. ¶ 5.) Defendant Dennis Cargile is an employee of BCS. (Id. ¶ 11.) LCN also hired an investment advisor, Fred Sittner, to provide the Trustee with investment information. (Id. ¶ 6.)

Both the Pre-2008 Plan and the Amended Plan provide that the responsibility of the Administrator is to administer the Plan according to its terms and that the Administrator "shall have the power and discretion to construe the terms of the Plan and determine all questions arising in connection with the administration, interpretation, and application of the Plan." (Amended Plan § 2.4, Ex. D, ECF 71-4, 71-5; Pre-2008 Plan § 2.4, Ex. E, ECF 71-6.) Both versions of the Plan also provide that the Trustee is responsible for the funds that LCN contributes to the Plan, for maintaining records, and for distributing benefits under the Administrator's direction. (Amended Plan § 7.1; Pre-2008 Plan § 7.1.)

The Amended Plan states that "[t]he Administrator shall direct the Trustee (or Insurer), as of each Valuation Date, to determine the net worth of the assets comprising the Trust Fund as it exists on the Valuation Date." (Amended Plan § 5.1.) This provision in the Pre-2008Plan is identical, except that it states "Trustee," not "Trustee (or Insurer)." (Pre-2008 Plan § 5.1.) In any event, the Plan defines "Valuation Date" as follows:

. . . the date or dates specified in the Adoption Agreement. Regardless of any election to the contrary, the Valuation Date shall include the Anniversary Date and may include any other date or dates deemed necessary or appropriate by the Administrator for the valuation of

Participants' Accounts during the Plan Year, which may include any day that the Trustee (or Insurer), any transfer agent appointed by the Trustee (or Insurer) or the Employer, or any stock exchange used by such agent, are open for business

(Amended Plan § 1.83.) The "Adoption Agreement is "the separate agreement which is executed by the Employer and sets forth the elective provisions of this Plan and Trust as specified by the Employer." (Amended Plan § 1.6; Pre-2008 Plan § 1.5.)

The Plan Year begins on August 1 of any given year and ends on July 31 of the following year. (Plan Summary, Ex. A at 21, ECF 71-1.) Valuations "are generally made annually on the last day of the Plan Year." (Id.)

B. Plaintiff's Benefits

Plaintiff Richard Winn, Sr. is a former LCN employee and Plan participant. (Defs.' Statement of Undisputed Material Facts ¶ 19.) Winn voluntarily left his position at LCN in November 2007. (Id. ¶ 20.) At or around the same time that Winn left LCN, LCN employees Sue Ann Metz, Ronald Yamasuki, Roger Hamamura and Patty Hamamura also voluntarily left their jobs. (Defs.' Statement of Undisputed Material Facts ¶ 21.)

In September 2008, plaintiff received an "Application for Benefits" informing him that his vested Plan benefits were $122,167.76, based on the valuation of the Plan for the 2007-2008 year, which ended on July 31, 2008. (Id. ¶¶ 22-24.) The Application stated that "[t]he amount of [plaintiff's] distribution may increase or decrease based on [his] date of distribution and investment performance." (Id. ¶ 25.)

The Plan funds suffered significant losses in 2008, losing $188,591.68 in value in September 2008, $299,601.97 in October 2008, and $106,854.22 in November 2008. (Id. ¶ 26.)³ The Trustee received notice of the decline in value for each month on the second week of the following month. (Id. ¶ 27.) On November 20, 2008, the Trustee, Sittner and LCN decided to revalue the Plan assets the next day, on November 21, 2008 (the "November 21 revaluation). (Id. ¶ 31.)

Sometime prior to the November 21 revaluation, Metz, the Hamamuras and Yamasuki submitted their applications for benefits. Metz received a distribution of $18,728.81 on September 24, 2008. The Hamamuras received their combined distribution of $300,363.23 on October 7, 2008. Yamasuki's distribution of $43,951.11 was approved on October 21, 2008 and he received it on November 18, 2008. (Id. ¶ 29.)

LCN received plaintiff's application for benefits in mid-November.⁴ Plaintiff's distribution of benefits was based on the November 21 revaluation. (Id. ¶ 32.) Plaintiff received $80,178.09, which was reduced to $64,142.47 after taxes. (Id.)

Plaintiff's Second Amended Complaint (SAC) alleges the following claims against all defendants: (1) a claim for declaratory judgment against all defendants, stating that defendants breached the Pre-2008 and/or Amended Plan; (2) a claim for breach of the Pre-2008 and/or Amended Plan under 29 U.S.C. § 1001, et seq.; (3) a claim for breach of duty of good faith and fair dealing; (4) a claim for misappropriation and conversion;⁵ (6) a claim for breach of contract;(7) a claim for declaratory judgment stating that LCN's issuance of the plan was invalid or alternatively, that plaintiff is entitled to purchase LCN shares that will give him an ownership equivalent to what it was before November 21, 2008; (8) breach of the Pre-2008 and/or Amended Plan; and (9) breach of fiduciary duty. (ECF 58.)

Defendants filed a motion for summary judgment on March 12, 2013 (ECF 64.) Plaintiff filed his motion for summary judgment, as well as his opposition to defendants' motion, on March 29. (ECF 72, 73.) Defendants filed a reply on April 5. (ECF 75.)⁶

II. STANDARD

A court will grant summary judgment "if . . . there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a). The "threshold inquiry" is whether "there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986).⁷

The moving party bears the initial burden of showing the district court "that there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). The burden then shifts to the nonmoving party, which "must establish that there is a genuine issue of material fact . . . ." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585 (1986). In carrying their burdens, both parties must "cit[e] to particular parts of materials in the record . . .; or show [] that the materials cited 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); see also Matsushita, 475 U.S. at 586 ("[thenonmoving party] must do more than simply show that there is some metaphysical doubt as to the material facts"). Moreover, "the requirement is that there be no genuine issue of material fact . . . . Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson, 477 U.S. at 247-48 (emphasis in original).

In deciding a motion for summary judgment, the court draws all inferences and views all evidence in the light most favorable to the nonmoving party. Matsushita, 475 U.S. at 587-88; Whitman v. Mineta, 541 F.3d 929, 931 (9th Cir. 2008). "Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no 'genuine issue for trial.'" Matsushita, 475 U.S. at 587 (quoting First Nat'l Bank of Arizona v. Cities Serv. Co., 391 U.S. 253, 289 (1968)).

III. ANALYSIS

A. State Law Claims

Defendants argue that to the extent plaintiff alleges claims under state law, summary judgment must be granted in defendants' favor because ERISA preempts state law. (ECF 65 at 7.) Plaintiff's third cause of action is titled "breach of duty of good faith and fair dealing" and his fourth cause of action is titled "misappropriation and conversion." The Ninth Circuit has held that claims for breach of the duty of good faith and fair dealing regarding insured employee benefit plans are preempted by ERISA. Bast v. Prudential Ins. Co. of Am., 150 F.3d 1003, 1007 (9th Cir. 1998) (citing Tingey v. Pixley-Richards West, Inc., 953 F.2d 1124, 1131 (9th Cir. 1992)). Claims for conversion of plan benefits also are preempted by ERISA, see Trustees of IL WU-PMA Pension Plan v. Peters, 660 F. Supp. 2d 1118, 1141 (N.D. Cal. 2009); Trustees of S. Cal. Pipe Trades Health & Welfare Trust Fund v. Temecula Mech., Inc., 438 F. Supp. 2d 1156, 1170 (C.D. Cal. 2006), as are misappropriation claims, Busse v. Shaklee Corp., No. C 10-359 SI, 2010 WL 1346406, at *7-8 (N.D. Cal. Apr. 6, 2010) (citing Bast, 150 F.3d at 1008-10). At hearing, plaintiff clarified that he does not oppose defendants' preemption arguments. The court grants defendants' motion for summary judgment as to plaintiff's third and fifth claims and denies plaintiff's motion as to these same claims.

B. ERISA Violat...