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Bafford v. Northrop Grumman Corp.

United States District Court, C.D. California

January 7, 2020

STEPHEN H. BAFFORD et al., Plaintiffs,
v.
NORTHROP GRUMMAN CORPORATION et al., Defendants.

          ORDER GRANTING DEFENDANTS' MOTION TO DISMISS [40] [42]

          OTIS D. WRIGHT, II, UNITED STATES DISTRICT JUDGE.

         I. INTRODUCTION

         Plaintiffs Stephen H. Bafford (“Bafford”), Laura Bafford, and Evelyn L. Wilson (“Wilson”) (collectively, “Plaintiffs”) for themselves and on behalf of all similarly situated participants in and beneficiaries of the Northrop Plan under the Employee Retirement Income Security Act (“ERISA”), bring this action against Northrop Grumman Corporation (“NGC”), the Administrative Committee of the Northrop Grumman Pension Plan (the “Committee”), and Alight Solutions LLC, formerly known as Hewitt Associates LLC (“Hewitt”) (collectively, “Defendants”) for equitable relief, and recovery of statutory penalties for Defendants' failure to comply with ERISA's disclosure requirements. (First Am. Compl. (“FAC”) ¶¶ 4-11, ECF No. 32.) Defendants now seek dismissal of all of Plaintiffs claims. (Hewitt's Mot. to Dismiss. (“Hewitt's Mot.”), Northrop's Mot. to Dismiss (“Northrop's Mot.”), ECF Nos. 40, 42.) For the reasons that follow, the Court GRANTS Defendants' Motion, and DISMISSES Plaintiffs' claims One, Two, Three, and Six WITHOUT PREJUDICE and DISMISSES Plaintiffs' claims Four and Five WITH PREJUDICE.[1]

         II. FACTUAL BACKGROUND

         NGC is a Delaware corporation and sponsor of the Northrop Grumman Pension Plan (“Plan”). (FAC ¶¶ 8, 15.) The Plan, in turn, is comprised of a No. of sub-plans, including the Northrop Grumman Retirement Plan and the Grumman Pension Plan, which are both at issue. (FAC ¶ 15.) The Committee is the Plan administrator of the sub-plans at issue. (FAC ¶ 9.)

         The Plan is a defined benefit pension plan, and accordingly, each participating employee is entitled to a fixed periodic payment during retirement, which is based on a pension calculation formula set forth in the applicable sub-plan. (FAC ¶ 15.) Prior to July 1, 2003, each NGC sub-plan used a “final average pay” formula to calculate benefits. (FAC ¶ 16.) Under that formula, a participant's pension was calculated based on factors, including their years of service, and the average rate of annual salary during their highest three years of salary out of the last ten years that they were a covered employee under the plan. (FAC ¶ 16.) Effective July 1, 2003, the Plan converted to a “cash balance” formula, accordingly, participants who accrued benefits before the cash balance conversion continued to be entitled to have those benefits calculated under the “final average pay” formula. (FAC ¶¶ 16, 17.)

         Consequently, employees who separated from NGC but later returned were credited for their years of service during their second period of employment for purposes of benefit vesting and early retirement credit. (FAC ¶ 18.) However, their annual salaries from their second period of employment are not considered for the “final average pay” formula calculation. (FAC ¶ 18.) Instead, their highest three years of salary, from their first period of employment, are considered. (FAC ¶ 18.)

         To help participants determine their retirement benefits, the Committee contracted with Hewitt to operate the Northrop Grumman Benefits Center, the Plan website, and issue pension benefit statements and other communications. (FAC ¶ 11.) Hewitt's services included operating an online platform that allowed participants to request statements of their accrued pension benefits based on potential future employment termination dates and benefit commencement dates. (FAC ¶ 14.)

         Both Bafford and Wilson initially worked for NGC, left NGC, and then returned to NGC. (FAC ¶¶ 23, 24, 26, 27, 29.) During their first employment period with NGC, they both accrued benefits under the Plan. (FAC ¶ 25.) During their second employment period with NGC, they also continued to accrue service credit towards early retirement under the Plan. (FAC ¶ 18.)

         During their second employment period with Northrop, Bafford and Wilson both requested and received statements of their accrued benefits under the Plan. (FAC ¶¶ 36, 37, 39, 40.) These statements came on Northrop letterhead, and advised them that more information was available by calling the Northrop Grumman Benefits Center or consulting a Northrop Grumman website. (FAC ¶¶ 11, 44, 45, 49, 50, 53.) Based on specific inputs provided by the participants, Hewitt would estimate their prospective benefits and then mail the requested information to the participants. (FAC ¶¶ 22, 37, 76.) Each statement that Bafford received from Hewitt showed a 100 percent joint-and-survivor annuity benefit of over $2, 000 per month. (FAC ¶ 37.) Similarly, Ms. Wilson also received statements that presented a 50 percent joint-and-survivor annuity benefits of $1, 412.78 and $101.72, which was based on Ms. Wilson's second period of employment salary. (FAC ¶ 39, Pls.' Opp'n to Defs.' Mot. (“Opp'n”) 5, ECF No. 49.)

         Bafford retired on October 1, 2016, and began receiving $2, 114.41 in monthly benefits. (FAC ¶ 43.) However, in December 2016, Hewitt discovered that it had incorrectly calculated his benefits and informed him via “recalculation notice” that his corrected monthly benefit amount was $807.89. (FAC ¶ 50.) Similarly, Wilson retired on February 1, 2014, and began receiving her benefits in the amount of $1, 747.47 per month. (FAC ¶ 41.) In February 2017, Hewitt also informed Wilson that it had incorrectly calculated her benefits and informed her that her corrected monthly benefit amount was $823.93. (FAC ¶ 53; Opp'n 7.) Defendants then demanded that Wilson repay over $35, 000 in overpayment. (FAC ¶ 55.)

         The “recalculation notices” sent by Defendants to Plaintiffs explained that the prior benefit calculations were incorrectly calculated. (FAC ¶ 51.) Specifically, their annual salaries from their second period of employment were incorrectly factored in the “final average pay” formula. (FAC ¶ 51.) Instead, their annual salaries from their first employment period with Northrop should have been factored into the “final average pay” formula. (FAC ¶ 51.)

         Accordingly, Plaintiffs assert that Defendants violated their duty to provide complete and accurate information regarding participants' benefits. Therefore, Plaintiffs assert the following claims: (1) Defendants breached their fiduciary duties under ERISA § 404(a); (2) the Committee violated ERISA §105; (3) in the alternative to breaching its fiduciary duties, Hewitt committed professional negligence; (4) Hewitt committed negligent misrepresentation; and (5) Defendants engaged in a prohibited transaction under ERISA § 406(a). (FAC ¶¶ 71, 77, 85, 91, 94, 106.) Defendants now seek dismissal of all Plaintiffs' claims.

         III. LEGAL STANDARD

         Dismissal under Rule 12(b)(6) “can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). “To survive a motion to dismiss . . . under Rule 12(b)(6), a complaint generally must satisfy only the minimal notice pleading requirements of Rule 8(a)(2)”-a short and plain statement of the claim. Porter v. Jones, 319 F.3d 483, 494 (9th Cir. 2003); see also Fed.R.Civ.P. 8(a)(2). The “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The “complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted). “A pleading that offers ‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause of action will not do.'” Id. (citing Twombly, 550 U.S. at 555).

         Whether a complaint satisfies the plausibility standard is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. at 679. A court is generally limited to the pleadings and must construe “[a]ll factual allegations set forth in the complaint . . . as true and . . . in the light most favorable to [the plaintiff].” Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001). But a court need not blindly accept conclusory allegations, unwarranted deductions of fact, and unreasonable inferences. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001).

         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 ...


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