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Draney v. Westco Chemicals, Inc.

United States District Court, C.D. California

December 2, 2019

DANIEL DRANEY, Plaintiffs,




         Daniel Draney (“Draney”) and Lorenzo Ibarra (“Ibarra”) (collectively, “Plaintiffs”) for themselves and on behalf of the: (1) Westco Chemicals, Inc. Profit Sharing 401(k) Plan (“401(k) Plan”) and (2) Westco Chemicals Defined Benefit Pension Plan (“Defined Benefit Plan”) (collectively, the “Plans”), bring this action against Westco Chemicals, Inc. (“Westco”), Ezekiel “Alan” Zwillinger (“Alan”), and Steven Zwillinger (“Steven”) (collectively “Defendants”) for violations of the Employee Retirement Income Security Act, 29 U.S.C. §§ 1001-1461 (“ERISA”). (First Amended Compl. (“FAC”) ¶ 1, ECF No. 23.) Defendants now seek dismissal of the first two claims in so far as they relate to the Defined Benefit Plan (“Motion”). (Def.s' Mot. to Dismiss. (“Mot.”), ECF No. 24.) For the reasons that follow, the Court GRANTS Defendants' Motion, and DISMISSES Plaintiffs claims to the extent that they include the Defined Benefit Plan WITHOUT PREJUDICE.[1]


         Westco is a privately held family business. (FAC ¶ 16.) Westco is the Plans' sponsor and thus is a “named fiduciary” pursuant to 29 U.S.C. §1002(16)(B) who has authority to control and manage the administration of the Plans. (FAC ¶ 16.) The 401(k) Plan is an “employee pension benefit plan” within the meaning of 29 U.S.C. § 1002(2)(A) and a defined contribution plan within the meaning of 29 U.S.C. § 1002(34). (FAC ¶ 19.) Westco also possesses or exercises certain types of authority, responsibility, or control over the Plans and thus is a functional fiduciary under 29 U.S.C. §1002(21)(A). (FAC ¶ 16.) Defendant Alan is the current (or former) President of Westco. (FAC ¶ 17.) The First Amended Complaint (“FAC”) alleges that Alan designated himself to make all the investment decisions for the Plans and he kept absolute control over the Plans' assets. (FAC ¶ 17.) Defendant Steven is Alan's son and has assumed responsibilities from Alan at Westco. (FAC ¶ 18.) The FAC alleges that Steven currently holds himself out as the Plans' Trustee to the Plans' participants, and makes investment decisions for the Plans and exercises control over the Plans' assets. (FAC ¶ 18.)

         The FAC alleges that since 2014, Defendants are directly harming the Pension Funds' participants by failing to properly fund the Pension Fund. (FAC ¶ 36.) For instance, it is alleged that the Pension Fund's 2015 disclosure form stated that at the beginning of the fiscal year the Pension Fund had $1, 730, 766 in asserts but at the end of the fiscal year the Pension Fund declined in value to $1, 584, 416. (FAC ¶ 37.) It is further alleged that the majority of the benefits paid by the Pension Fund were paid to Alan, and that the Pension Fund was used for Alan's sole benefit. (FAC ¶ 37.) Moreover, the FAC alleges that Defendants have either placed the Pension Fund's assets in a non-interest bearing account, which would be flagrant breach of the duty of prudence, or Defendants have invested the Pension Funds' assets and are earning income on the investment and keeping the income for themselves, which would be a breach of the duty of prudence and the duty of loyalty. (FAC ¶ 38.)

         The FAC also alleges that upon retirement, Defendants never provided Plaintiff Ibarra any information about the Plans or his account status in the Plans. (FAC ¶ 40.) It is further alleged that Ibarra was rebuffed by Steven when he questioned him about the Plans and his retirement accounts. (FAC ¶ 40.) Accordingly, Ibarra alleges that he never received the amounts due to him pursuant to the Defined Benefit Plan. (FAC ¶ 40.) Also, named Plaintiff Draney alleges that on multiple occasions, he requested a copy of the Plan document but was never provided the plan document. (FAC ¶ 21.)

         Accordingly, Plaintiffs brought the following claims against Defendants: (1) breach of ERISA's duty of prudence; (2) duty of loyalty; and (3) for a purported failure to operate the 401(k) Plan according to its terms. (FAC ¶¶ 57-77.) Defendants now seek dismissal of the first two claims as they touch and concern the Defined Benefit Plan. (Mot. 1.)


         A motion to dismiss under Federal Rule of Civil Procedure (“Rule”) 12(b)(1) examines the court's subject matter jurisdiction. When a party moves to dismiss for lack of subject matter jurisdiction, “the plaintiff bears the burden of demonstrating that the court has jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). Under Rule 12(b)(1), a defendant may make a facial attack, in which the Court's review is limited to the allegations in the complaint, or a factual attack, in which the court may consider certain extrinsic evidence without converting the motion to one for summary judgment. Richter v. CC-Palo Alto, Inc., 176 F.Supp.3d 877, 884-85 (N.D. Cal. 2016); Cal. Sportfishing Protection Alliance v. All Star Auto Wrecking, Inc., 860 F.Supp.2d 1144, 1147 (E.D. Cal. 2012.). If a plaintiff lacks standing, the court lacks subject matter jurisdiction under Article III of the U.S. Constitution. Cetacean Cmty. v. Bush, 386 F.3d 1169, 1174 (9th Cir. 2004).

         To establish Article III standing, a plaintiff must demonstrate “(1) an injury-in-fact, (2) [that is] fairly traceable to the challenged conduct of the defendant, and (3) [that is] likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1543 (2016). The injury-in-fact requirement calls for a Plaintiff to demonstrate that he or she suffered “an invasion of a legally protected interest” that is “concrete and particularized” and “actual or imminent, not conjectural or hypothetical.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992).

         Where a district court grants a motion to dismiss, it should generally provide leave to amend unless it is clear the complaint could not be saved by any amendment. See Fed. R. Civ. P. 15(a); Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008).


         Defendants now move for dismissal on the basis that Plaintiffs' lack Article III standing. (Mot. 5.) Defendants do not challenge traceability nor redressability. (See Mot.5.) Instead, Defendants narrowly argue that “an allegation of the requisite injury-in-fact is missing from the FAC.” (Mot. 5.) Plaintiffs oppose the Motion, arguing that Plaintiff Ibarra suffered direct injuries that include denial of the Defined Benefit Plan and the opportunity to make a claim for benefits. (Opp'n to Mot. (“Opp'n”) 7, ECF No. 26.) Plaintiffs further allege that the Defined ...

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