Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Castillo v. Community Child Care Council of Santa Clara County, Inc.

United States District Court, N.D. California

May 24, 2018

MARIO DEL CASTILLO, et al., Plaintiffs,
v.
COMMUNITY CHILD CARE COUNCIL OF SANTA CLARA COUNTY, INC., et al., Defendants.

          ORDER GRANTING DEFENDANTS' MOTION TO DISMISS RE: DKT. NOS. 68, 76, 94, 98, 102

          SUSAN VAN KEULEN UNITED STATES MAGISTRATE JUDGE.

         I. INTRODUCTION

         On December 21, 2017, Plaintiffs Mario Del Castillo, Puthea Chea, and Michael Rasche, (together, “Plaintiffs”) filed a putative class action alleging claims under the Employee Reitrement Income Security Act (“ERISA”). ECF 1. On February 16, 2018, Defendant Life Insurance Company of the Southwest (“LSW”) moved to dismiss Plaintiffs' complaint. ECF 68. On February 20, 2018, Defendant Mary Chacon (“Chacon”) moved to dismiss Plaintiffs' state law claims. ECF 76. On March 7, 2018, Defendant Alfredo Villasenor (“Villasenor”) moved to dismiss Plaintiffs' claims against him. ECF 94. On March 9, 2018, Defendant Kevin Logan (“Logan”) moved to dismiss claims against him, largely joining in arguments made by LSW. ECF 98. On March 16, 2018, Board of trustees of Community Child Care Council of Santa Clara County, Inc. (“4Cs Board of Trustees”), Community Child Care Council of Santa Clara County, Inc. (“4Cs”), Julienne La Fitte, Clarence Madrilejos, James McDaniel, Ben Menor, and Xiaoyan Xu moved to dismiss Plaintiffs' complaint, also joining in arguments made by LSW, Chacon, Villasenor, and Logan. ECF 102. On April 24, 2018, the Court heard oral arguments on the Defendants' motions. After reviewing the parties' submissions and hearing argument, the Court grants Defendants' motions to dismiss for the reasons detailed below.

         II. BACKGROUND

         a. The Parties

         Plaintiffs are three current or former employees of Defendant 4Cs. ECF 1 at ¶¶ 4-6. 4Cs is a non-profit that operates a Head Start program in Santa Clara County. ECF 1 at ¶ 8; ECF 102 at 5. 4Cs is operated by Defendant 4Cs Board of Trustees. ECF 1 at ¶ 8. Defendants Ben Menor, Xiaoyan Xu, Clarence Madrilejos, James McDaniel, Julienne La Fitte, Jamie Gallardo, Connie Jimenez, Maria Reyes and Faye Sears are now, and/or have been members of the 4Cs Board of Trustees. ECF 1 at ¶ 9. From 1987 to approximately August 2017, Defendant Villasenor was the Executive Director of 4Cs. ECF 1 at ¶ 12.

         Beginning in or about 1987, Defendant 4Cs Board of Trustees has been the plan sponsor and plan administrator of the 4Cs Plans, consisting of (1) a “non-qualified” deferred compensation plan, established pursuant to 26 U.S.C. § 409A et seq., (2) a defined contribution plan, and (3) a profit sharing plan. ECF 1 at ¶ 10. Plaintiffs have not properly named the 4Cs Plans as a defendant. The 4Cs Plans do not appear in the caption of the complaint, have not been served with the complaint, and have not appeared in this action. Fed.R.Civ.P. 4, 10.[1]

         Plaintiffs allege that Logan Group Securities have acted and continue to act as investment advisors and brokers to the 4Cs Plans. ECF 1 at ¶¶ 14, 16. Defendant Kevin Logan was and is an officer of Logan Group Securities. ECF 1 at ¶ 15. Defendant Mary Chacon, as a representative of Defendant Cetera Financial Group, has acted and continues to act as an investment advisor and broker to some or all of the 4Cs Plans. ECF 1 at ¶ 17.

         Defendant LSW is an insurer of the life annuity contracts that 4Cs purchased for Plaintiffs. ECF 1 at ¶ 18. Defendant First Allied Retirement Services, Inc. (“ARS, Inc.”) has acted and continues to act as an administrator to the 4Cs Plans. ECF 1 at ¶ 19. Defendant Unger is an officer of ARS, Inc. ECF 1 at ¶ 20.

         b. Allegations

         Beginning in approximately 1987, 4Cs began offering pension benefits to its employees (“4Cs Plans”). ECF 1 at ¶ 10. Plaintiffs are participants in the 4Cs Plans. ECF 1 at ¶¶ 4-6. Plaintiffs allege that at a time unknown, but prior to 2003, 4Cs and its Board began converting Plaintiffs' vested retirement account balances into life annuity contracts underwritten and sold by LSW. ECF 1 at ¶ 23. Plaintiffs allege that 4Cs management personnel presented them and other employees with documents that “purported to be enrollment applications for the 4Cs retirement plans, ” but “in reality . . . were binding contracts” whereby participants “unknowingly agreed to convert” vested balances into “highly restricted and financially imprudent life annuity” contracts. ECF 1 at ¶ 37. Plaintiffs allege that this transfer was improper because Plaintiffs were misinformed about what they were signing (see, e.g., ECF 1 at ¶¶ 33-36), Plaintiffs were not informed about “restrictions” on the LSW Annuities (see, e.g., ECF 1 at ¶¶ 41-43), ERISA prohibits certain provisions in the LSW Annuities (see, e.g., ECF 1 at ¶¶ 80-83, 89-90), the LSW Annuities were imprudent investments (see, e.g., ECF 1 at ¶¶ 97-98), and the purchase of the LSW Annuities constituted prohibited transactions under ERISA (see, e.g., ECF 1 at ¶¶ 104-106).

         i. Applications for Annuities

         Each Plaintiff filled out and signed a two-page form entitled “Application for Annuity.” ECF 69, Request for Judicial Notice (“RJN”), Ex. A-C (the “Applications”).[2] Plaintiffs Del Castillo and Rasche signed and dated their Applications on April 3, 2003. ECF 69-1 at 3, 21. Plaintiff Chea signed and dated his Application on December 6, 2012. ECF 69-1 at 18. Each Application contains twelve Sections. Id. Plaintiffs Rasche and Del Castillo's Applications indicate that they were applying for the “SecurePlus Platinum Flexible Equity-Indexed and Declared Interest Annuity” Plan (ECF 69-1 at 2 § IV, 20 § IV), and Plaintiff Chea's Application indicates that Chea applied for the “SecurePlus Platinum Plan” (ECF 69-1 at 17 § IV). Each Application indicates that premiums are payable by “Salary Reduction” on a “Monthly” basis. ECF 69-1 at 2 § III, 20 § III, 17 § III. In the Disclosure Information section where each Plaintiff signed and dated the Application, it states, “I have received a copy of the disclosure material and understand that the results shown, other than the guaranteed minimum values, are not guarantees, promises or warranties.” ECF 69-1 at 3 § XII, 18 § XII, 21 § XII.

         ii. SecurePlus Platinum Disclosure Material

         Plaintiffs were also provided disclosure materials with their Applications.[3] Plaintiffs Del Castillo and Rasche signed and/or initialed pages of the SecurePlus Platinum Summary/Application provided by LSW (ECF 69-1 at 4-9, 22-27), and Plaintiff Chea was given a SecurePlus Platinum Disclosure/Application form with the application (ECF 69-5 at 11-15) (the “Summary Forms”). These Summary Forms disclosed, among other things:

• “SecurePlus Platinum is an Equity-Indexed and Declared Interest Rate Annuity” that it is a “fixed annuity with certain important insurance features . . .”
• “ If you are the Annuitant and you die while this annuity is in force, LSW will pay the greater of the Accumulation Value or the Policy Value (these are described later) to your Beneficiary as a Death Benefit and will waive any remaining Withdrawal Charges.”
• “Beginning in the second Policy Year and in each Policy Year thereafter, you may withdraw up to 10% of your annuity's Accumulation Value without a Withdrawal Charge (Free Withdrawal Amount).” (Emphasis in original.)
• There “are no Withdrawal Charges after the 15th Policy Year, ” but “Withdrawal Charges are applied as a percentage of the amount withdrawn in excess of the available Free Withdrawal Amount.” Withdrawal Charges are:

         (Image Omitted)

• “You have a right to a complete refund of your total premium payments at any time within 30 days of receiving your annuity Policy. To exercise this right, you must return your Policy with a written request for a refund.”

         c. Procedural Posture

         i. The Complaint

         Plaintiffs filed this action on December 21, 2017, naming as Defendants 4Cs, the 4Cs Board of Trustees, Julienne La Fitte, Clarence Madrilejos, James McDaniel, Ben Menor, Xiaoyan Xu, Jaime Gallardo, Connie Jiminez, Maria Reyes, Faye Sears, Villa Senor, Robert C. Unger, Logan, Logan Group Securities, First Allied Retirement Services, Mary Chacon, Cetera Financial Group, and LSW. On January 4, 2018, Plaintiffs consented to the jurisdiction of the undersigned magistrate judge. ECF 36. On February 2, 2018, Plaintiffs voluntarily dismissed Defendant Cetera Financial Group. ECF 55. On May 4, 2018, Plaintiffs voluntarily dismissed Defendants Maria Reyes, Connie Jiminez, and Logan Group Securities. ECF 130, 131, 132. All of the remaining Defendants have consented to the jurisdiction of the undersigned magistrate judge. ECF 51, 75, 87, 95, 99, 128, 129.

         Plaintiffs' complaint alleges nine causes of actions. The first six causes of action arise out of ERISA. The final three causes of action are state law claims.[4]

         Plaintiffs' Claim One alleges a violation of ERISA § 103, 29 U.S.C. § 1023 against Defendants 4Cs Plans, 4Cs Board of Trustees, and Villasenor. Plaintiffs seek civil penalties under ERISA § 502(c)(1) based on the alleged failure to file the correct 5500 forms with the Department of Labor as ERISA § 103 requires.

         Plaintiffs' Claim Two alleges violation of ERISA §§ 101-105, 29 U.S.C. § 1021 against Defendants 4Cs Plans, 4C Board of Trustees, Villasenor, Unger, ARS, Inc., and LSW. Plaintiffs seek civil penalties under ERISA § 502(c)(1) based on the alleged failure to provide documents to Plaintiffs both at certain times as required by the statute and upon request by Plaintiffs.

         Plaintiffs' Claim Three alleges violations of ERISA §§ 202-203, 29 U.S.C. § 1052-1053 against Defendants 4Cs Plans, 4C Board of Trustees, Villasenor, and LSW. Plaintiffs seek declaratory relief for Defendants' alleged failure to provide a plan with the minimum participation standards as required by ERISA.

         Plaintiffs' Claim Four alleges violations of ERISA § 206(d), 29 U.S.C. § 1056(d) against Defendants 4Cs Plans, 4C Board of Trustees, and LSW. Plaintiffs allege that by using vested retirement balances to purchase annuities, Defendants violated ERISA § 206(d), which prohibits “alienation” of benefits.

         Plaintiffs' Claim Five (labeled Four) alleges violations of ERISA § 404, 29 U.S.C. § 1104 against Defendants 4Cs Plans, 4C Board of Trustees, Logan, LSW, and Chacon. Plaintiffs allege that Defendants breached their fiduciary obligations by failing to provide plan documents and by allowing vested retirement account balances to be converted into life annuity contracts that allow for an excessive degree of investment risk and lack reasonable investment diversification. ECF 1 at ¶¶ 95-101.

         Plaintiffs' Claim Six (labeled Five) alleges violations of ERISA § 406, 29 U.S.C. § 1106 against Defendants Logan, and LSW. Plaintiffs allege that Defendants breached their fiduciary duties by engaging in or permitting prohibited financial transactions. ECF 1 at ¶¶ 102-110.

         Plaintiffs' Claim Seven (labeled Six) alleges a state law claim for breach of contract against Defendants 4Cs, 4Cs Board of Trustees, 4Cs Plans, Logan, and Chacon. Plaintiffs claim that Plaintiffs and Defendants entered into a contract wherein Defendants agreed to provide Plaintiffs with a retirement benefit and that Defendants breached that contract by using contributions to the Plans to pay compensation to other Defendants. ECF 1 at ¶¶ 111-119.

         Plaintiffs' Claim Eight (labeled Seven) alleges a state law claim for fraud in the inducement, in concealment and intentional deceit against Defendants 4Cs, 4Cs Board of Trustees, 4Cs Plans, Villasenor, Logan, LSW, and Chacon. Plaintiffs claim that Defendants engaged in acts of deceit by encouraging Plaintiffs to sign documents which purported to be “applications” but were in fact binding life annuity contracts. ECF 1 at ¶¶ 120-125.

         Plaintiffs' Claim Nine (labeled Eight) alleges a state law claim for conversion against Defendants 4Cs Plans, Logan, LSW, and Chacon. Plaintiffs claim that Defendants exercised unlawful dominion and control over a sum of money consisting of retirement contributions promised to Plaintiffs. ECF 1 at ¶¶ 126-131.

         ii. Defendants' Motions to Dismiss

         Defendants ARS, Inc. and Unger filed an answer on February 20, 2018. ECF 73. The remaining Defendants have filed five motions to dismiss on the grounds discussed below.

         LSW Motion to Dismiss (ECF 68)

         LSW moves to dismiss the following claims on the following grounds:

• Statute of Limitations: LSW argues that Claims Two, Three, Four, Five (labeled Four), and Six (labeled Five) are barred by the statute of limitations provided for in ERISA.
• Preemption: LSW argues that Plaintiffs' state law claims against LSW, Claims Eight (labeled Seven) and Nine (labeled Eight), are preempted by ERISA.
• Administrator: LSW argues that Claim Two must be dismissed because LSW is not an administrator and therefore cannot be liable.
• Fiduciary: LSW argues that Claims Five (labeled Four) and Six (labeled Five) must be dismissed because LSW is not a fiduciary and therefore cannot be liable under those claims.
• Failure to State a Claim: LSW also argues that Claims Three, Four, Eight (labeled Seven), and Nine (labeled Eight) must be dismissed because they fail to state a claim.

         Chacon Motion to Dismiss (ECF 76)

• Preemption: Chacon moves to dismiss Plaintiffs' state law claims against Chacon, Claims Seven (labeled Six), Eight (labeled Seven), and Nine (labeled Eight), because they are preempted by ERISA.
• Failure to State a Claim: Chacon moves to dismiss Claim Eight (labeled Seven) because it fails to state a claim.

         Villasenor Motion to Dismiss (ECF 94)

         Villasenor moves to dismiss the following claims on the following grounds:

• Statute of Limitations: Villasenor argues that Claims One and Two are barred by the applicable state statute of limitations.
• Administrator: Villasenor argues that Claim Two must be dismissed because Villasenor is not a plan administrator and therefore cannot be liable.
• Preemption: Villasenor argues that the state law cause of action against him, Claim Eight (labeled Seven), must be dismissed because it is preempted by ERISA.
• Failure to State a Claim: Villasenor argues that Claim Three must be dismissed for failure to state a claim.

         Logan Motion to Dismiss (ECF 98)

         Logan moves to dismiss the following claims on the following grounds:

• Statute of Limitations: Logan argues that Claims Five (labeled Four) and Six (labeled Five) are barred by the statute of limitations provided for in ERISA.
• Preemption: Logan moves to dismiss Plaintiffs' state law claims against Logan, Claims Seven (labeled Six), Eight (labeled Seven), and Nine (labeled Eight), because they are preempted by ERISA.
• Fiduciary: Logan argues that Claims Five (labeled Four) and Six (labeled Five) must be dismissed because Logan is not a fiduciary and therefore ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.