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Elbling v. Crawford and Co.

United States District Court, S.D. California

March 28, 2018

RONALD ELBLING, Plaintiff,
v.
CRAWFORD AND COMPANY, Defendant.

          ORDER GRANTING MOTION TO DISMISS WITH LEAVE TO AMEND

          Hon M. James Corenz United States District Judge

         In this action alleging denial of benefits under an employee pension benefit plan pursuant to the Employee Retirement Income Security Act ("ERISA"), Defendant Crawford and Company filed a motion to dismiss. Plaintiff filed an opposition and Defendant replied. The Court decides the matter on the papers submitted and without oral argument. See Civ. L. R. 7.1(d.1). For the reasons stated below, Defendant's motion is granted. Plaintiff is granted leave to amend.

         According to the complaint, Plaintiff was employed by Defendant as an Executive General Adjuster for over fourteen years before retiring at the age of 70. During his employment, Plaintiff entered into Defendant's deferred compensation plan ("DCP"). When he retired, Plaintiff had earned over $76, 000 worth of long-term incentive credits ("LTIC") under the DCP, and was fully vested. Immediately after retiring, Plaintiff began working for Defendant's competitor Vericlaim. Shortly thereafter, he received a letter from Defendant that his LTIC benefits were forfeited because he violated a non-compete provision included in the DCP.

         Plaintiff unsuccessfully appealed Defendant's decision to deny benefits, and did not pursue a second-level appeal. Instead, he filed the instant action alleging claims for denial of benefits under ERISA, declaratory relief that the non-compete provision is unenforceable under California law, breach of contract, tortious breach of the implied covenant of good faith and fair dealing, and unfair competition in violation of California Business and Professions Code §17200 et seq. ("Unfair Competition Law" or "UCL"). The Court has federal question jurisdiction over the ERISA claim pursuant to 28 U.S.C. §1331, and supplemental jurisdiction over the remaining state law claims pursuant to 28 U.S.C. §1367(a).

         Pending before the Court is Defendant's motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). A motion under Rule 12(b)(6) tests the sufficiency of the complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Dismissal is warranted where the complaint lacks a cognizable legal theory. UMG Recordings, Inc. v. Shelter Capital Partners LLC, 718 F.3d 1006, 1014 (9th Cir. 2013). Alternatively, the complaint may be dismissed where it presents a cognizable legal theory, yet fails to plead essential facts under that theory. Id. The Court must assume the truth of all factual allegations in the complaint and “construe them in the light most favorable to [the nonmoving party].” Gompper v. VISX, Inc., 298 F.3d 893, 895 (9th Cir. 2002). On the other hand, legal conclusions, even if cast in the form of factual allegations, “are not entitled to the assumption of truth.” Ashcroft v. Iqbal, 556 U.S. 662, 664 (2009).

         Defendant argues that the complaint should be dismissed because Plaintiff failed to exhaust administrative remedies by not pursuing a second-level appeal, the ERISA claim lacks merit, and the state law claims are preempted. In his opposition, Plaintiff withdrew the second cause of action for declaratory relief, but opposed all other aspects of Defendant's motion.

         1. Exhaustion of Administrative Remedies

         To file a court action under ERISA, "a claimant must avail himself or herself of a plan's own internal review procedures." Diaz v. United Agr. Employee Welfare Benefit Plan, 50 F.3d 1478, 1483 (9th Cir. 1995). Failure to exhaust the plan's internal review procedures precludes a court action. Sarraf v. Standard Ins. Co., 102 F.3d 991, 993 (9th Cir. 1996).

         The DCP includes internal review procedures.[1] The pertinent provisions are:

§13 Claims Procedures
13.1. Presentation of Claim. Any . . . Claimant . . . may deliver to the Committee a written claim for a determination with respect to the amounts distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within 60 days after such notice was received by the Claimant. All other claims must be made within 180 days of the date on which the event that caused the claim to arise occurred. . . .. [¶]
13.3. Review of a Denied Claim. Within 60 days after receiving a notice from the Committee that a claim has been denied, in whole or in part, a Claimant . . . may file with the Committee a written request for review of the denial of the claim. Thereafter, the Claimant . . .:
(a) may review all documents . . .;
(b) may submit written comments or other ...

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