United States District Court, N.D. California
[Copyrighted Material Omitted]
For Linda Hohu, Plaintiff: Michael John Low, LEAD ATTORNEY, Jaime Bianca Herren, Doyle Low LLP, Orinda, CA.
For Wendy Hatch, Administrator of the Estate of John K. Hohu, Defendant: Nikki Presley Miliband, LEAD ATTORNEY, Good Wildman Hegness et al, Newport Beach, CA; Roland Gilbert Simpson, Roland G. Simpson, A Law Corporation, Los Angeles, CA.
EDWARD M. CHEN, United States District Judge.
ORDER GRANTING DEFENDANT'S MOTION TO DISMISS AND DENYING MOTION FOR SANCTIONS
(Docket No. 13)
Plaintiff Linda Hohu (" Hohu" ) filed an action in this Court seeking declaratory relief that two claims asserted in a pending California state court action by Defendant Wendy Hatch (" Hatch" ), the Administrator of the Estate of John K. Hohu, are preempted by the Employee Retirement Income Security Act of 1974 (" ERISA" ), 29 U.S.C. § 1001, et. seq. See Complaint (" Compl." ) (Docket No. 1). Defendant Hatch thereafter filed a motion to dismiss the action under Fed.R.Civ.P. 12(b)(1), arguing that this Court lacks subject matter jurisdiction over Plaintiff's complaint. See Def.'s Mot. to Dismiss (Docket No. 13). Defendant requests that this Court " dismiss this action pursuant to FRCP 12(b)(1) on the grounds that the federal court lacks subject matter jurisdiction (federal question)
over the Plaintiff's 'Complaint for Declaratory Relief (Federal Preemption),' as previously determined by U.S. District Court Judge Josephine Staton Tucker on September 12, 2012 in the United States District Court Central District Southern Division Case No: SACV 12-1067-JST." Def.'s Mot. to Dismiss at 2. Defendant has concurrently moved for Rule 11 sanctions in the sum of $3,646.00 against Plaintiff Hohu arguing that Plaintiff's complaint lacks a factual foundation for establishing subject matter jurisdiction in federal court, a fact allegedly known by Plaintiff and her attorney as a result of the U.S. District Court for the Central District of California having previously remanded these same claims to state court for lack of subject matter jurisdiction. Having considered the parties' briefs and accompanying submissions, as well as the oral argument of counsel, the Court hereby GRANTS Defendant Hatch's motion for the reasons set forth below.
II. FACTUAL & PROCEDURAL BACKGROUND
John K. Hohu, the deceased ex-husband of Plaintiff Linda Hohu, was an employee of Cisco Systems, Inc., and participated in his employer's life insurance plan and stock incentive or Restricted Stock Units (" RSU" ) plan, both of which are " employee benefit plans" governed by ERISA. Compl. ¶ 2; see 29 U.S.C. § 1002(3) (defining " employee benefit plan" ). Plaintiff Linda Hohu was designated as John Hohu's beneficiary under each plan. Compl. ¶ 2. On July 9, 2008, some time after John Hohu had made his beneficiary designations, he and the Plaintiff became parties to marital dissolution proceedings in the Superior Court of California, County of Alameda. Id. ¶ 12. California Family Code § 2040 subjects all parties to marital dissolution proceedings to certain automatic temporary restraining orders (" TRO" ), including an order:
Restraining both parties from cashing, borrowing against, canceling, transferring, disposing of, or changing the beneficiaries of any insurance or other coverage, including life, health, automobile, and disability, held for the benefit of the parties and their child or children for whom support may be ordered.
Cal. Fam. Code § 2040(a)(3). During the course of the Hohus' marital dissolution proceedings, the Alameda County Superior Court entered an order bifurcating the issue of marital status from all other issues, and provided that " [u]ntil a judgment has been entered and filed on all remaining issues, neither party may change the beneficiary of any insurance or other coverage, including life, health, automobile and disability, held for the benefit of the parties and their minor children." See Compl., Ex. A (Stipulation and Order RE: Bifurcation of Status of Marriage, In Re Marriage of Hohu and Hohu, Case No. VF-08-397217) § 4.
John Hohu died on June 21, 2011, after the court had taken the case under submission, but before it had entered its decision and judgment. Compl. ¶ 15-16. Following John Hohu's death, Plaintiff made claims for benefits under both the life insurance and RSU plans. Compl. ¶ ¶ 18, 20. The administrator for each plan determined that Plaintiff was entitled to benefits pursuant to the terms of the respective plans, and disbursed to Plaintiff the full amount of all benefits due and payable under the plans. Id. Defendant Hatch made competing claims to benefits under each plan, but the administrator for each plan found that she was " not entitled to any of the plan benefits ultimately paid to Plaintiff Hohu." Id. ¶ ¶ 19, 21. Defendant did not appeal the decision of the plan administrators, but instead, after the benefits were disbursed to Plaintiff, brought an action under California Probate Code § 850
in the Superior Court of California, County of Orange, to recover the benefits that had been distributed to Plaintiff. Compl. ¶ 22. See also Petition, Wendy Hatch, Administrator of the Estate of John K. Hohu aka John Hohu v. Linda Hohu and Does 1-5 inclusive, Case No. 30-2011-00521387-PR-PL-LJC (Docket No 14, Ex. 1).  Defendant's probate action, filed on June 5, 2012, seeks to recover from Plaintiff the benefits distributed under the life insurance and RSU plans (valued at approximately $1.5 million) on the grounds that these assets were obtained by Plaintiff in violation of an automatic TRO imposed by California Family Code § 2040 and the judgment entered by the Alameda County Superior Court in In Re Marriage of Hohu and Hohu, Case No. VF-08-397217 (" Probate Action" ). See Compl. ¶ ¶ 22-23. Defendant's probate action asks the Orange County Superior Court to impose a constructive trust on the plan benefits distributed to Plaintiff in order to effectuate their eventual transfer back to the Estate of John Hatch. See id. ¶ 23.
Plaintiff removed Defendant's probate action to the United States District Court for the Central District of California on June 29, 2012, asserting that federal question jurisdiction existed under 28 U.S.C. § 1331 because Defendant's probate action was preempted by § 514(a) of ERISA. See Notice of Removal, Wendy Hatch, Administrator of the Estate of John K. Hohu aka John Hohu v. Linda Hohu and Does 1-5 inclusive, Case No. 12-CV-1067 JST-FMO (Docket No. 14, Ex. 2). Defendant thereafter filed a Motion for Remand, arguing that the district court lacked subject matter jurisdiction because the state probate action was not completely preempted by ERISA. Motion for Remand (Docket No. 14, Ex. 3). After a hearing on Defendant's motion, District Judge Josephine Tucker remanded the matter back to the Orange County Superior Court for want of subject matter jurisdiction. See Order Granting Petitioner's Motion for Remand (" Remand Order" ) (Docket 14, Ex. 6). Judge Tucker concluded that " Petitioner's state probate action to recover assets allegedly misappropriated in violation of state court orders is not completely preempted by ERISA," and held, " [a]ccordingly, the state court claim has not been converted into a federal claim and the Court lacks subject matter jurisdiction over this case." Id. at 6.
Following Judge Tucker's order of remand, Plaintiff filed the instant action in this Court. Her complaint asks for a declaratory judgment that Defendant's state law probate claims to benefits distributed from the life insurance plan (Count One) and the RSU plan (Count Two) are preempted by 29 U.S.C. § 1144(a), ERISA's express preemption provision. Compl. ¶ ¶ 24-33. As with Plaintiff's earlier Notice of Removal, Plaintiff's instant complaint before this Court alleges that " [t]his Court has jurisdiction of the subject matter of this suit pursuant to 28 U.S.C. § 1331." Compl. ¶ 3. Defendant has moved to dismiss Plaintiff's action for lack of subject matter jurisdiction under Rule 12(b)(1)
on the grounds that, following Judge Tucker's ruling, Defendant's state probate action is not completely preempted by ERISA, leaving this Court without federal question jurisdiction under 28 U.S.C. § 1331. See Def.'s Mot. to Dismiss at 5. Defendant also seeks sanctions under Rule 11 against Plaintiff and her lawyer in the amount of $3,646.00, a sum representing Defendant's costs and fees for bringing this motion, on the grounds that Plaintiff's filing of this action was not " well grounded in fact" or " warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law." Id. at 14.
A. Collateral Estoppel
Defendant argues that Plaintiff's declaratory action before this Court ought to be dismissed for lack of subject matter jurisdiction under the doctrine of collateral estoppel. Def.'s Mot. to Dismiss at 2; Defendant's Supplemental Brief (" Def.'s Supp. Br." ) (Docket No. 24) at 4. " Collateral estoppel, or issue preclusion, bars the relitigation of issues actually adjudicated in previous litigation between the same parties. " Steen v. John Hancock Mut. Life Ins. Co., 106 F.3d 904, 910 (9th Cir. 1997) (quoting Kamilche Co. v. United States, 53 F.3d 1059, 1062 (9th Cir. 1995)). " [T]he doctrine of collateral estoppel can apply to preclude relitigation of both issues of law and issues of fact if those issues were conclusively determined in a prior action." Steen, 106 F.3d at 910 (quoting United States v. Stauffer Chem. Co., 464 U.S. 165, 170-71, 104 S.Ct. 575, 78 L.Ed.2d 388 (1984)). " It is the general rule that issue preclusion attaches only '[w]hen an issue of fact or law is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment.'" Arizona v. California, 530 U.S. 392, 414, 120 S.Ct. 2304, 147 L.Ed.2d 374 (2000) (quoting Restatement (Second) of Judgments § 27, at 250 (1982)). " Collateral estoppel, like the related doctrine of res judicata, has the dual purpose of protecting litigants from the burden of relitigating an identical issue with the same party or his privy and of promoting judicial economy by preventing needless litigation." Parklane Hosiery Co., Inc. v. Shore, 439 U.S. 322, 326, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979) ...