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Boden v. St. Elizabeth Medical Center, Inc.

United States District Court, E.D. Kentucky, Northern Division, Covington

April 4, 2018

DOLORES JANE BODEN, et al. PLAINTIFFS
v.
ST. ELIZABETH MEDICAL CENTER, INC., et al. DEFENDANTS

          MEMORANDUM OPINION AND ORDER

          DAVID L. SUNNING, UNITED STATES DISTRICT JUDGE

         This matter is before the Court on two motions to dismiss under Federal Rule of Civil Procedure 12(b)(6). The first Motion asks the Court to dismiss certain individuals (the “Former Committee Members”) from this case. (Doc. # 77). The second Motion asks the Court to dismiss Defendants' Counterclaim for Declaratory Judgment. (Doc. # 81). For the reasons stated herein, the Court will grant in part and deny in part the Former Committee Members' Motion to Dismiss (Doc. # 77), and grant the Plaintiffs' Motion to Dismiss Defendants' Counterclaim (Doc. # 81).

         I. FACTUAL AND PROCEDURAL BACKGROUND

         Defendant St. Elizabeth Medical Center, Inc. (“St. Elizabeth”) is a non-profit hospital system headquartered in Edgewood, Kenton County, Kentucky, that provides primary and advanced care physicians to Northern Kentucky, Ohio, and Indiana. (Doc. # 74). St. Elizabeth sponsors the St. Elizabeth Medical Center Employees' Pension Plan (the “Plan”), which is an “‘employee pension benefit plan' within the meaning of ERISA § 3(35), 29 U.S.C. § 1002(35).” Id. at 1, 5-7. The Plan's named fiduciary is St. Elizabeth Medical Center Employees' Pension Plan Administrative Committee (the “Committee”). Id. at 5. Plaintiffs allege that the Committee is comprised entirely of members of the St. Elizabeth board of trustees (the “Board”), who are named as individual defendants[1] in this action. Id. Certain individual defendants-the Former Committee Members[2]-ended their tenure on the Committee before the filing of the Amended Complaint. Id. at 5-6.

         According to Plaintiffs Dolores Boden, Jeanine Godsey, and Patricia Schaeffer, St. Elizabeth “established the Plan in 1966” to provide for its employees' retirement income. Id. at 10. These Plaintiffs are “current and former employees of [St. Elizabeth.]” Id.

         On March 17, 2016, Plaintiffs filed this putative class action against Defendants. (Doc. # 1). Approximately one year into the litigation, the Court stayed this action pending a decision from the United States Supreme Court regarding ERISA's exemption for church plans. See Advocate Health Care Network v. Stapleton, 137 S.Ct. 1652 (2017). Following the Supreme Court's decision, and with the permission of the Court (Doc. # 73), Plaintiffs filed an Amended Complaint on August 1, 2017. (Doc. # 74).

         Plaintiffs' Amended Complaint alleges that the Defendants have violated their duties as fiduciaries or sponsors of the Plan. (Doc. # 74 at 17-20). Specifically, Plaintiffs have alleged seven counts against Defendants. Count One seeks a declaration that the Plan is not a church plan and is pled against all Defendants. Id. at 20. Counts Two (violation of reporting and disclosure obligations), Five (breach of fiduciary obligations under ERISA), and Six (breach of fiduciary obligations under state law) are pled against all Defendants as fiduciaries of the Plan. Id. at. 21-27. Counts Three (failure to provide minimum funding), Four (failure to establish the Plan through a written instrument), and Seven (breach of contract) are pled against St. Elizabeth. Id. at 23-28. Plaintiffs bring these claims under ERISA § 502(a)(3), [3] 502(a)(1)(A), and 502(a)(2).

         In their Prayer for Relief, Plaintiffs request the following: (1) certification of this action as a class action; (2) a declaration that the Plan is an employee-benefit plan, a defined benefit pension plan subject to ERISA, and is not an ERISA-exempt church plan; (3) an order requiring Defendants to bring the Plan into compliance with ERISA; (4) an order requiring Defendants to make the Plan whole for past contributions that should have been made pursuant to ERISA, to pay interest and investment income on these payments, and to disgorge any profits accumulated as a result of the fiduciary breaches; (5) an order granting a preliminary and permanent injunction removing Defendants from the Committee and appointing independent fiduciaries in their place; (6) an order requiring Defendants to pay $110 per day to each Plaintiff and Class Member for failing to send them a funding notice; (7) declaratory and injunctive relief to enjoin Defendants from further violating ERISA; (8) any other equitable or monetary relief the Court deems appropriate under ERISA § 502(a); (9) an order requiring St. Elizabeth to fund the Plan in accordance with the Plan Document; (10) an award of attorneys' fees and expenses; and (11) any other relief the Court determines is just and proper. Id. at 28-29.

         Alongside their Answer, Defendants filed a Counterclaim for Declaratory Judgment, asking the Court to declare that the Plan is a “church plan” within the definition found in ERISA § 3(33), and is therefore exempt from ERISA's requirements. (Doc. # 76). The Former Committee Members then filed a Motion to Dismiss them from the case under Rule 12(b)(6). (Doc. # 77). Plaintiffs having responded (Doc. # 80), and the Former Committee Members having replied (Doc. # 83), the Former Committee Members' Motion is ripe for the Court's review.

         While responding to the Former Committee Members Motion to Dismiss, Plaintiffs also filed Motion to Dismiss Defendants' Counterclaim. (Doc. # 81). Defendants having responded (Doc. # 84), Plaintiffs having replied (Doc. # 85), and Defendants having surreplied (Doc. # 88), this Motion is also ripe for the Court's review.

         II. ANALYSIS

         A. Standard of Review

         To survive a Rule 12(b)(6) motion to dismiss, “a 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). The plausibility standard is met when the facts in the complaint allow “the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. The complaint need not contain “detailed factual allegations, ” but must contain more than mere “labels and conclusions.” Id. Put another way, 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). In reviewing a motion to dismiss under Rule 12(b)(6), the court must “accept[ ] all factual allegations [in the Amended Complaint] as true and draw[ ] all reasonable inferences in favor of the plaintiff.” Logsdon v. Hains, 492 F.3d 334, 340 (6th Cir. 2007) (citing Gazette v. City of Pontiac, 41 F.3d 1061, 1064 (6th Cir. 1994)).

         B. Defendants' Motion to Dismiss is granted in part and denied in part.

         Unfortunately, the Former Committee Members' Motion to Dismiss is not a model of clarity. (Doc. # 77-1). In addition, it suffers from a serious procedural flaw.

         A motion to dismiss under Rule 12(b)(6) is untimely if made after the moving party has made a responsive pleading. McGlone v. Bell, 681 F.3d 718, 728 n.2 (6th Cir. 2012). The Former Committee Members' Motion (Doc. # 77) was filed after the Answer filed by all Defendants (Doc. # 76), thereby rendering the Motion untimely. However, Rule 12(h)(2)(B) allows a party to bring a motion to dismiss for failure to state a claim upon which relief may be granted under Rule 12(c), which may be raised “[a]fter the pleadings are closed.” The Court will therefore construe the Former Committee Members' Rule 12(b)(6) motion as a Rule 12(c) motion, noting that the standard of review is the same. Jelovsek v. Bredesen, 545 F.3d 431, 434 (6th Cir. 2008).

         1. Counts One, Three, Four, and Seven.

         Providing no legal support and little persuasive argument, the Former Committee Members request that this Court dismiss Count One-which seeks equitable and declaratory relief under ERISA and 28 U.S.C. § 2201, et seq., the Declaratory Judgment Act. (Doc. # 77-1 at 2) (stating only that their “actions or inactions have no bearing on church plan status.”). The Former Committee Members buttress their argument in their Reply, suggesting that any liability they might have if the Court were to declare the Plan a church plan would be under specific statutes, “which are separate stand-alone claims for relief.” (Doc. # 83 at 8). Plaintiffs' argument in opposition to dismissing Count One is equally unsupported by legal citation or analysis. (Doc. # 80). According to Plaintiffs, their request for “redress” will include “redressing violations that took place while [the former Committee Members] were on the Committee, such as the failure to send proper Plan disclosures.” Id. at 3. Accepting the allegations in the Amended Complaint as true, and drawing all reasonable inferences in Plaintiffs' favor, the Court declines to find that this Count should be dismissed.

         The Declaratory Judgment Act permits a court to “declare the rights and other legal relations” of parties to a controversy. Plaintiffs have alleged that the Plan is not a church plan and therefore subject to ERISA's requirements. (Doc. # 74 at 11-17). Plaintiffs have additionally pled this action against the Defendants as fiduciaries of the Plan. Id. at 1. Because, under ERISA, fiduciaries can be “personally liable to make good” on a plan “any losses to the plan resulting from [the fiduciaries'] breach, ” ERISA § 409, common sense and logic dictate that a declaration by the Court as to whether the Plan is a church plan will necessarily involve the rights and legal relations of Plaintiffs as against the Former Committee Members. If the Plan is determined to not be a church plan, then accepting the allegations in the Amended Complaint as true and drawing all reasonable inferences in Plaintiffs favor, the Former Committee Members may be liable for breaches of their fiduciary duties. Accordingly, the Former Committee Members' Motion to Dismiss Count One is denied.

         Turning to the other Counts, the Former Committee Members argument for dismissal of Counts Three, Four, and Seven is also unsupported by legal citation or discussion. (Doc. # 77-1 at 2) (“Along these same lines, claims Three, Four, and Seven do not involve these Defendants, or any Committee members, and are aimed by Plaintiffs solely at St. Elizabeth.”). Plaintiffs are even more succinct in their argument on these Counts. (Doc. # 80 at 4) (“Movants seek their dismissal by simply arguing Plaintiffs' claims do not pertain to them. This argument should be rejected outright.”) (internal citations omitted).

         The Former Committee Members are correct that they are not named as defendants in Counts Three, Four, and Seven, and Plaintiff has therefore failed to state a claim against them for these Counts. (Doc. # 74 at 23-24, 27-28). See, e.g., Kimes v. S. Health Partners, No. 4:16-cv-129-JHM, 2017 WL 374482 (W.D. Ky. Jan. 25, 2017) (allowing the plaintiff to file an amended complaint, but holding that “[i]f Plaintiff fails to amend his complaint to name these individuals as Defendants in their individual capacities, then these claims will also be dismissed for failure to state a claim upon which relief may be granted.”); see, e.g., Andreson v. Diorio, et al., 349 F.3d 8, 17-18 (1st Cir. 2003) (affirming the lower court's dismissal of Diorio from a defamation claim when Diorio was not named as a defendant in the defamation count in the complaint). Accordingly, the Former Committee Members Motion to dismiss Counts Three, Four, and Seven will be granted.

         2. The ERISA Inadequate Funding Claim

         Under ERISA, Congress set up a program that “governs employee benefit plans and establishes both the obligations of plan fiduciaries and the remedies for any breach of those duties.” Tullis v. UMB Bank, N.A., 515 F.3d 673, 676 (6th Cir. 2008). ERISA allows a civil action to be brought by “the Secretary [of Labor], or by a participant, beneficiary, or fiduciary for appropriate relief under section 409 (29 U.S.C. § 1109)” for breach of a fiduciary's duty. Id. at 676-77 (citing 29 U.S.C. § 1132(a)(2)). In Count Five, Plaintiffs allege that Defendants breached their fiduciary duties by failing to “create and enforce adequate funding policies, ” leading to a loss to the Plan “equal to the foregone funding and earnings thereon.” (Doc. # 74 at 25-26).

         The Former Committee Members argue that Plaintiffs' ERISA breach-of-fiduciary-duty claim should be dismissed because Plaintiffs do not have standing to bring such a claim, as they have sustained no injury-in-fact, but instead allege only “contingent and speculative” injury. (Doc. # 77-1 at 3-6). The Former Committee Members argue that Plaintiffs do not allege that St. Elizabeth has “failed to pay any required plan benefits to Plaintiffs, ” and that they “have no liability under ERISA” for “speculative risk of loss.” Id. at 3-5. In summary, the Former Committee Members argue that “[t]he possible risk of an unknown and unascertainable loss of benefits cannot support” an ERISA ...


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