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Koeplin v. Klotz

United States District Court, N.D. California

September 5, 2017

ROBERT KLOTZ, et al., Defendants.


          Donna M. Ryu, United States Magistrate Judge.

         This case arises under the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001 et seq. Plaintiff Linda Koeplin filed this suit against Defendants Bayside Solutions Long-Term Incentive & 401(k) Restoration Plan and Robert Klotz, an individual, asserting an ERISA claim for benefits. Defendants answered and counterclaimed against Koeplin. Koeplin now moves pursuant to Federal Rule of Civil Procedure 12(b)(6) to dismiss Defendants' first amended counterclaim. [Docket No. 23.] This matter is appropriate for resolution without a hearing pursuant to Civil Local Rule 7-1(b). For the following reasons, Koeplin's motion is granted.

         I. BACKGROUND

         In this action, Koeplin brings a single claim under ERISA for benefits she claims she is owed under the terms of the Bayside Solutions Long-Term Incentive & 401(k) Restoration Plan (“Bayside Plan” or “the Plan”). [Docket No. 15 (First Amended Complaint).] Defendants and counter-claimants Bayside Plan and Klotz make the following allegations in their first amended counterclaim, all of which are taken as true solely for purposes of Koeplin's motion to dismiss.[1] [See Docket No. 18 (First Amended Counterclaim, “FACC”).] Bayside Plan is an unfunded, nonqualified deferred compensation plan adopted and administered on behalf of Bayside Solutions, Inc. (“Bayside Solutions”), a California business. FACC ¶ 2. Participation in the Bayside Plan is limited to a “select group of management or highly compensated Employees.” Id. at ¶ 8; Scott Decl., June 14, 2017, Ex. 1[1] (Nonqualified Supplemental Deferred Compensation Plan-Plan Document (“Plan Document”) § 1.1. Bayside Solutions adopted the Bayside Plan and designated Klotz as the plan administrator in 2011. FACC ¶ 7. Defendants allege that Klotz is also a fiduciary of the Bayside Plan. Id. at ¶ 3.

         The terms of the Bayside Plan include a forfeiture clause, whereby “‘[p]articipants terminated from employment prior to becoming 100% vested will forfeit the forfeitable percentage of their Accounts as indicated in accordance with the vesting schedule selected' for employer contributions.” Id. at ¶ 10; Scott Decl. Ex. 2 (Nonqualified Supplemental Deferred Compensation Plan Adoption Agreement (“Adoption Agreement”) § 17. The provision also states that “‘[p]articipants may also forfeit 100% of their . . . Employer Contribution Accounts” for “[m]isconduct (termination for Cause) . . . [a]s described under code of conduct in employee handbook.” FACC ¶ 11; Adoption Agreement § 17. Defendants allege that because Bayside Solutions did not have an operative employee handbook definition of “misconduct” at relevant times, “Klotz was required to make factual determinations under the Bayside Plan as to circumstances of misconduct.” FACC ¶ 11.

         Koeplin was a Bayside Solutions employee from 2006 to 2016, holding the positions of Director of Accounting and Chief Financial Officer.[2] She had previously worked as an independent contractor for Bayside Solutions from 2001 to 2006. Id. at ¶ 12. Plaintiff enrolled in the Bayside Plan in August 2011, and between 2011 and 2013, Bayside Solutions made total employer contributions of $125, 000 to her Bayside Plan account. Id. at ¶¶ 12, 13.

         In August 2016, Bayside Solutions terminated Koeplin's employment as Chief Financial Officer “for cause based on her misconduct and poor performance.” Id. at ¶ 16. Defendants allege that following her termination, Bayside Solutions learned of other instances of “past misconduct and poor management that would have justified terminating her employment for cause.” Id. at ¶¶ 16, 17. According to Defendants, Koeplin forfeited 100% of the $125, 000 in employer contributions Bayside Solutions made on her behalf to the Bayside Plan “because she was terminated for cause, based on Klotz's determination of misconduct under the Bayside Plan.” Id. at ¶¶ 18, 19. Defendants allege on information and belief that Koeplin has received some or all of those contributions, and that Koeplin has not reimbursed Bayside Solutions for any of the forfeited contributions that she has received since her termination. Id. at ¶¶ 13, 19.

         Defendants' amended counterclaim is organized into four “counts, ” but they allege one claim for relief under 29 U.S.C. § 1132(a)(3). That provision authorizes a suit by a “participant, beneficiary, or fiduciary” to enforce the Bayside Plan's terms; specifically, Koeplin's forfeiture of 100% of the contributions made by Bayside Solutions on her behalf due to her termination for cause. They seek three forms of relief: declaratory judgment, equitable lien, and/or constructive trust. Id. at ¶¶ 22. Koeplin moves to dismiss the counterclaim pursuant to Rule 12(b)(6).


         A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the claims alleged in the complaint. See Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). When reviewing a motion to dismiss for failure to state a claim, the court must “accept as true all of the factual allegations contained in the complaint, ” Erickson v. Pardus, 551 U.S. 89, 94 (2007) (per curiam) (citation omitted), and may dismiss a claim “only where there is no cognizable legal theory” or there is an absence of “sufficient factual matter to state a facially plausible claim to relief.” Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010) (citing Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009); Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). A claim has facial plausibility when a plaintiff “pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citation omitted). In other words, the facts alleged must demonstrate “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 554, 555 (2007) (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)); see Lee v. City of L.A., 250 F.3d 668, 679 (9th Cir. 2001), overruled on other grounds by Galbraith v. Cty. of Santa Clara, 307 F.3d 1119 (9th Cir. 2002). Courts evaluate motions to dismiss counterclaims brought pursuant to Federal Rule of Civil Procedure 12(b)(6) under the same standard as a motion to dismiss a complaint. Swingless Golf Club Corp. v. Taylor, 679 F.Supp.2d 1060, 1066 (N.D. Cal. 2009).

         As a general rule, a court may not consider “any material beyond the pleadings” when ruling on a Rule 12(b)(6) motion. Lee, 250 F.3d at 688 (citation and quotation marks omitted). However, “a court may take judicial notice of ‘matters of public record, '” id. at 689 (citing Mack v. S. Bay Beer Distrib., 798 F.2d 1279, 1282 (9th Cir. 1986)), and may also consider “documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading, ” without converting a motion to dismiss under Rule 12(b)(6) into a motion for summary judgment. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994), overruled on other grounds by Galbraith v. Cty. of Santa Clara, 307 F.3d 1119 (9th Cir. 2002). The court need not accept as true allegations that contradict facts which may be judicially noticed. See Mullis v. U.S. Bankr. Ct., 828 F.2d 1385, 1388 (9th Cir. 1987).


         Defendants bring their counterclaim against Koeplin under 29 U.S.C. § 1132(a)(3). That ...

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