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Montry Mcnally; Ruby Bell; and Kenneth Bales v. Eye Dog Foundation For the

August 26, 2011

MONTRY MCNALLY; RUBY BELL; AND KENNETH BALES, PLAINTIFFS,
v.
EYE DOG FOUNDATION FOR THE BLIND, INC., EYE DOG FOUNDATION PROFIT SHARING PLAN, GWEN BROWN, AN INDIVIDUAL, AND DOES 1 THROUGH 50,
DEFENDANTS.



ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT [Doc. #108]

INTRODUCTION

This action concerns whether Plaintiffs Montry McNally, Ruby Bell and Kenneth Bales are entitled to benefits under the Employee Retirement Income Security Act ("ERISA"). Plaintiffs are the beneficiaries of the estate of Lequita McKay, Defendant Eye Dog Foundation for the Blind, Inc.'s ("EDF") former employee. On November 25, 2009, Plaintiffs filed an Amended Complaint against Defendants EDF, EDF Profit Sharing Plan and EDF executive director Gwen Brown. In their Amended Complaint, Plaintiffs bring claims under ERISA and several state law claims. On January 14, 2011, Plaintiffs moved for summary judgment on all of their claims. For the reasons that follow, the motion will be granted in part and denied in part.

FACTUAL BACKGROUND*fn1

Lequita McKay ("McKay") was employed by Eye Dog Foundation for the Blind, Inc. ("EDF") as its Chief Executive Director. PUMF 26. Pursuant to her employment with EDF, McKay was a participant in EDF's Profit Sharing Plan ("the Plan"). PUMF 27. On October 8, 2006, McKay resigned from EDF. PUMF 29.*fn2 At various times between retirement and the time of her death, McKay requested the immediate distribution of her vested interest in the Plan. PUMF 30. No action was taken by EDF to implement McKay's distribution under the Plan. PUMF 31.*fn3

On July 20, 2007, McKay died. McNally Declaration at ¶ 4, Doc. 108-12 at 2. Plaintiffs Montry McNally ("McNally"), Ruby Bell ("Bell") and Kenneth Bales ("Bales") are McKay's beneficiaries under the Plan. PUMF 32. Since September 2007, Plaintiffs and their counsel made repeated efforts to obtain payment of the benefits accrued under the Plan, but were unsuccessful. PUMF 33. On October 4, 2007, Plaintiffs formally requested their distribution of McKay's vested interest under the Plan. PUMF 34. Defendants did not respond to Plaintiffs' request within ninety days after receipt of the claim. PUMF 35.*fn4

On September 16, 2008, Defendant Gwen Brown ("Brown"), who became EDF's Executive Director after McKay's resignation and her subsequent death, wrote a letter to Bell stating that the EDF Board of Directors would not be making any distributions under the Plan and that the request for benefits was being forwarded to an attorney for review and advisement. PUMF 36; see also Hannon Declaration at ¶ 10, Doc. 125-8 at 2. Other than the September 16, 2008 letter from Brown, Defendants ceased all communication with Plaintiffs. PUMF 37.*fn5

On April 30, 2009, Plaintiffs' counsel requested information from Defendants relating to the Plan, including a current statement from Morgan Stanley detailing both the total assets which stand in the Plan and the portion of those assets that are allocable to McKay's account. PUMF 45. Plaintiffs were informed by Defendants' counsel that no information would be forthcoming. PUMF 46.*fn6 Subsequently, the present action ensued.

LEGAL STANDARD

Summary judgment is appropriate when it is demonstrated that there exists no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970); Fortyune v. Am. Multi-Cinema, Inc., 364 F.3d 1075, 1080 (9th Cir. 2004); Jung v. FMC Corp., 755 F.2d 708, 710 (9th Cir. 1985). Where summary judgment requires the court to apply law to undisputed facts, it is a mixed question of law and fact. Sousa v.Unilab Corp. Class II (Non-Exempt) Members Group Benefit Plan, 252 F. Supp. 2d 1046, 1049 (E.D. Cal. 2002). Where the case turns on a mixed question of law and fact and the only dispute relates to the legal significance of the undisputed facts, the controversy for trial collapses into a question of law that is appropriate for disposition on summary judgment. Union Sch. Dist. v. Smith, 15 F.3d 1519, 1523 (9th Cir. 1994); Sousa, 252 F. Supp. 2d at 1049.

Under summary judgment practice, the moving party always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any," which it believes demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). "[W]here the nonmoving party will bear the burden of proof at trial on a dispositive issue, a summary judgment motion may properly be made in reliance solely on the 'pleadings, depositions, answers to interrogatories, and admissions on file.'" Id. Indeed, summary judgment should be entered, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. Id. at 322. "[A] complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Id. In such a circumstance, summary judgment should be granted "so long as whatever is before the district court demonstrates that the standard for entry of summary judgment, as set forth in Rule 56(c), is satisfied." Id. at 323.

If a moving party fails to carry its burden of production, then "the non-moving party has no obligation to produce anything, even if the nonmoving party would have the ultimate burden of persuasion." Nissan Fire & Marine Ins. Co. v. Fritz Companies, 210 F.3d 1099, 1102-03 (9th Cir. 2000). If the moving party meets it initial burden, the burden then shifts to the opposing party to establish that a genuine issue as to any material fact actually does exist. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986); Nolan v. Cleland, 686 F.2d 806, 812 (9th Cir. 1982); Ruffin v. Cnty. of Los Angeles, 607 F.2d 1276, 1280 (9th Cir. 1979). A fact is "material" if it might affect the outcome of the suit under the governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986); Thrifty Oil Co. v. Bank of Am. Nat'l Trust & Sav. Ass'n, 322 F.3d 1039, 1046 (9th Cir. 2002). A "genuine issue of material fact" arises when the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson, 477 U.S. at 248-49; Thrifty Oil, 322 F.3d at 1046.

In attempting to establish the existence of a factual dispute, the opposing party may not rely upon the mere allegations or denials of its pleadings, but is required to tender evidence of specific facts in the form of affidavits, and/or admissible discovery material, in support of its contention that the dispute exists. Fed. R. Civ. P. 56(e); Matsushita, 475 U.S. at 586 n.11; First Nat'l Bank, 391 U.S. at 289; Willis v. Pac. Mar. Ass'n, 244 F.3d 675, 682 (9th Cir. 2001). However, the opposing party need not establish a material issue of fact conclusively in its favor. It is sufficient that "the claimed factual dispute be shown to require a jury or judge to resolve the parties' differing versions of the truth at trial." First Nat'l Bank, 391 U.S. at 290; Hopper v. City of Pasco, 248 F.3d 1067, 1087 (9th Cir. 2001). Thus, the "purpose of summary judgment is to 'pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial.'" Matsushita, 475 U.S. at 587 (quoting Fed. R. Civ. P. 56(e) advisory committee's note on 1963 amendments); Mende v. Dun & Bradstreet, Inc., 650 F.2d 129, 132 (9th Cir. 1982).

In resolving the summary judgment motion, the court examines the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any. Fed. R. Civ. P. 56(c); Fortyune, 364 F.3d at 1079-80. The evidence of the opposing party is to be believed, and all reasonable inferences that may be drawn from the facts placed before the court must be drawn in favor of the opposing party. Anderson, 477 U.S. at 255; Matsushita, 475 U.S. at 587; Stegall v. Citadel Broad, Inc., 350 F.3d 1061, 1065 (9th Cir. 2003). Nevertheless, inferences are not drawn out of the air, and it is the opposing party's obligation to produce a factual predicate from which the inference may be drawn. Sousa, 252 F. Supp.2d at 1049.

Finally, to demonstrate a genuine issue, the opposing party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita, 475 U.S. at 586 (citation omitted). "Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no 'genuine issue for trial.'" Id. at 587 (citation omitted). If the nonmoving party fails to produce evidence sufficient to create a genuine issue of material fact, the moving party is entitled to summary judgment. Nissan Fire & Marine, 210 F.3d at 1103.

DISCUSSION

A. Claim for Benefits Pursuant to ERISA § 502(a)(1)(B)

Plaintiffs move for summary judgment on their claim for benefits against all Defendants under ERISA § 502(a)(1)(B). In the Complaint, Plaintiffs allege that Defendants have violated their duties under ERISA by refusing to pay benefits owed to them under the Plan. Complaint at ¶ 30.

ERISA was enacted to "promote the interests of employees and their beneficiaries in employee benefit plans" and "to protect contractually defined benefits." Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 113 (1989) (citations omitted). ERISA § 502(a)(1)(B) permits ERISA plan beneficiaries to bring a civil action to recover benefits due under the terms of a plan; to enforce rights under the terms of the plan; or to clarify rights to future benefits under the terms of the plan. See 29 U.S.C. § 1132(a)(1)(B).

1. Plaintiffs' motion for summary judgment on their claim for benefits against Brown is DENIED.

The Ninth Circuit has recently clarified that potential liability under ERISA § 502(a)(1)(B) is not limited to only plans and plan administrators. Cyr v. Reliance Standard Life Ins. Co., 642 F.3d 1202, 1206 (9th Cir. 2011). In support of their conclusion, the Ninth Circuit cited to ERISA § 502(d)(2), which provides that "[a]ny money judgment under this subchapter against an employee benefit plan shall be enforceable only against the plan as an entity and shall not be enforceable against any other person unless liability against such person is established in his individual capacity under this subchapter." Id. at 1206-07 (emphasis added). Thus, the Ninth Circuit concluded that the "unless" clause of ERISA § 502(d)(2) "necessarily indicates that parties other than plans can be sued for money damages under other provisions of ERISA . . . as long as that party's individual liability is established." Id. at 1207.

In their motion for summary judgment, Plaintiffs have not explained or demonstrated how Brown is individually liable for failing to provide benefits under the Plan. Accordingly, Plaintiffs' motion for summary judgment on its claim for benefits against Brown is DENIED.

2. Plaintiffs' motion for summary judgment on their claim for benefits against EDF and the EDF Profit Sharing Plan is GRANTED.

A district court reviews an ERISA plan administrator's decision to deny benefits de novo, unless the plan document grants the administrator discretion to interpret the plan terms and determine eligibility for benefits. Firestone, 489 U.S. at 115. If the plan confers discretionary authority, then the standard of review shifts to abuse of discretion. Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 963 (9th Cir. 2006).

While the parties do not address what is the appropriate standard of review, Plaintiffs have provided the Summary Plan Description ("SPD") of the Plan. Copner Declaration Exhibit C, Doc. 108-20 at 3. The SPD lists EDF as the Plan Administrator and explicitly states that the "Plan Administrator has the complete power, in its sole discretion, to determine all questions arising in connection with the administration, interpretation, and application of the Plan[.]" Id. at 26. Thus, because the Plan grants EDF discretion, the appropriate standard of review of EDF's denial of benefits is abuse of discretion.

In determining whether the ERISA plan administrator's denial of benefits was an abuse of discretion, the Court must look at whether the denial of benefits was (1) illogical, (2) implausible or (3) without support in inferences that may be drawn from the facts in the record. Salomaa v. Honda Long Term Disability Plan, 642 F.3d 666, 676 (9th Cir. 2011). In addition, procedural errors by the administrator are also "weighed in deciding whether the administrator's decision was an abuse of discretion." Abatie, 458 F.3d at 972.

The SPD provides that if a participant terminates employment, and subsequently dies before receiving all benefits under the Plan, the participant's beneficiaries are entitled to the vested percentage of the participant's remaining account balance at the time of the participant's death. Id. at 16. The death benefit will be paid to the participant's beneficiaries in a single lump-sum payment. Id.

It is undisputed that McKay was a participant in the Plan. PUMF 27. On July 20, 2007, McKay died. McNally Declaration at ¶ 4, Doc. 108-12 at 2. Plaintiffs are McKay's beneficiaries under the Plan. PUMF 32; McNally Declaration Exhibit A, Doc. 108-13 at 3. After McKay's death, Plaintiffs made repeated efforts to obtain payment of the benefits accrued under the Plan, but were unsuccessful. PUMF 33. On October 4, 2007, Plaintiffs formally requested their distribution of McKay's vested interest under the Plan. PUMF 34; McNally Declaration Exhibit C, Doc. 108-13 at 8.

After Plaintiffs submitted their claim for benefits, there were significant procedural errors by EDF as Plan Administrator. ERISA requires that every employee benefit plan (1) provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant, and (2) afford a reasonable opportunity to any participant whose claim for benefits has been ...


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