Summary
dismissing breach of fiduciary duty claim based on failure to pay wages and failure to maintain sufficient records because the "decision concerning whether to pay wages for changing time has only an extremely indirect connection to the administration of the ERISA plan" and, thus, employer was not acting as an ERISA fiduciary in making this decision
Summary of this case from DeSilva v. N. Shore-Long Island Jewish Health Sys. Inc.Opinion
Civil No. 00-1627-KI.
February 7, 2002
J. Dana Pinney, A. E. Bud Bailey, Sally A. LaJoie, Bailey, Pinney Associates, LLC, Tualatin, Oregon, Attorneys for Plaintiffs.
John F. Neupert, J. Michael Porter, Miller Nash LLP, Portland, Oregon, Attorneys for Defendant.
OPINION AND ORDER
Plaintiff, Michael Ballaris, is a former employee of the defendant, Wacker Siltronic Corporation ("Wacker"). Ballaris brings this action alleging that Wacker had a policy and practice of denying its clean room workers required overtime wages by requiring them to conduct preparatory and concluding activities while "off the clock," and altering employee time records in order to reduce its obligation to pay overtime wages. Ballaris alleges that Wacker's failure to pay overtime wages violates the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. ("FLSA"), the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq. ("ERISA"), and Oregon wage laws, including ORS 652.020 and 652.140. Before the court is Wacker's motion to dismiss plaintiff's ERISA breach of fiduciary duty claim and state law claims (#57). For the reasons below, I dismiss the ERISA breach of fiduciary duty claim but retain jurisdiction for now over the state law claim.
Second Amended Class Action Allegation Complaint.
LEGAL STANDARDS
A motion to dismiss under Rule 12(b)(6) will only be granted if it "appears beyond doubt that the plaintiff can prove no set of facts in support of his complaint which would entitle him to relief." Gilligan v. Jamco Development Corp., 108 F.3d 246, 248 (9th Cir. 1997). Normally, the review is limited to the complaint, and all allegations of material fact are taken as true and viewed in the light most favorable to the non-moving party. Id. The court, however, may consider whether conclusory allegations follow from the description of facts alleged. Holden v. Hagopian, 978 F.2d 1115, 1121 (9th Cir. 1992). The court may also review a document extrinsic to the complaint if the authenticity of the document is not contested and the complaint necessarily relies upon it. Parrino v. FHP, Inc., 146 F.3d 699, 706 (9th Cir.) (permissible to consider employer's group insurance application in action alleging improper denial of benefits), cert. denied, 119 S.Ct. 510 (1998).
DISCUSSION
I. ERISA Breach of Fiduciary Duty Claim
Ballaris alleges that Wacker employees were participants in ERISA employee benefit plans in which benefits are determined in part by the wages earned or hours worked. He alleges that Wacker violated its fiduciary duty by failing to maintain records sufficient to determine the benefits due and by failing to pay wages when due. This resulted in Wacker withholding contributions to the plans.
Wacker contends that an employer is an ERISA fiduciary only to the extent that it exercises discretionary authority or control over plan management or plan administration. Wacker argues that Ballaris' complaint bases the ERISA breach of fiduciary duty claim on its payroll management, which is not a fiduciary function because it is neither plan management nor administration.
Wacker states that it does not bring its motion to dismiss against Ballaris' claim under the ERISA recordkeeping statute, 29 U.S.C. § 1059.
Ballaris disagrees, contending that Wacker's acts were intentional violations of the law designed to save labor costs. He also contends that the motion is premature because depositions are necessary to determine the knowledge level and responsibility of the plan administrators. Once the depositions are finished, Ballaris hopes to amend the complaint to include more specific facts.
Under ERISA, a person is a fiduciary with respect to a plan "to the extent that he or she exercises any discretionary authority or discretionary control respecting management of the plan, or has any discretionary authority or discretionary responsibility in the administration of the plan." Varity Corp. v. Howe, 516 U.S. 489, 498, 116 S.Ct. 1065 (1996). The Court held that the corporation was acting as a plan fiduciary when it held a meeting to explain the effect on employee benefits and pensions by transferring to a newly formed subsidiary. During this meeting the corporation intentionally misrepresented the financial status of the new subsidiary to hide the probable and desired consequence of its financial failure, thus destroying the corporation's obligation to pay the employees' future pensions. The majority of information presented at the meeting explained that the benefits provided by the new subsidiary would be unchanged and that the benefits' security would not be undermined by transferring. Id. at 499-503.
Other cases have held that ERISA does not require "day-to-day corporate business transactions, which may have a collateral effect on prospective, contingent employee benefits, be performed solely in the interest of plan participants." Hickman v. Tosco Corp., 840 F.2d 564, 566 (8th Cir. 1988) (collecting cases). In Hickman, an employer sold a plant and terminated the employees, refusing to "bridge" periods of employment, which would have allowed 54-year-old employees to qualify for full retirement under the pension plan. The court held that the decision to terminate rather than carry the employees on the payroll was an employment decision that did not directly affect the administration of the pension plan or the investment of its assets. Thus, it was not subject to ERISA's fiduciary standard of care. Id. at 567.
I conclude that Wacker's decision concerning whether to pay wages for changing time has only an extremely indirect connection to the administration of the ERISA plan. The situation, both the nature of the decision and the effect on the plan, is very similar to that in Hickman. Consequently, Wacker was not acting as an ERISA fiduciary in this regard. The ERISA breach of fiduciary duty claim is dismissed.
II. Class Action Covering State Law Claims
On August 24, 2001, I certified a collective opt-in action under the FLSA for purposes of notice and discovery. Ballaris also alleges a conventional opt-out class action under Fed.R.Civ.P. 23 for his ERISA and state law wage claims.
Wacker asks the court to refrain from exercising supplemental jurisdiction over the proposed Rule 23 class action because that class cannot be reconciled with the class of people in the FLSA collective action. Wacker is concerned that a single jury will be faced with very different laws under the two statutes: (1) the FLSA requires overtime for hours worked in excess of 40 a week but the Oregon statutes requires overtime for manufacturing facilities like Wacker for hours worked in excess of 10 a day; (2) the Oregon statute of limitations is two years but the FLSA allows a three year limitations period for a willful violation; and (3) the willfulness standard under the FLSA, reckless disregard for the law, is different from the standard for penalty wages under the state statute and evidence of it could prejudice the jury when deciding the state claim. Wacker also notes that Ballaris filed a class action in Multnomah County on August 22, 2001, for overtime wages under the state statute based on the same facts. Wacker is concerned about inconsistent rulings in the two cases.
Three other plaintiffs have now substituted in for Ballaris.
Wacker relies on Zelaya v. J.M. Macias, Inc., 999 F. Supp. 778 (E.D.N.C. 1998), in which the court declined supplemental jurisdiction over the state law wage claim and associated class action because of the FLSA collective action. The court was primarily concerned that two different classes could exist because there was no assurance that every member of the Rule 23 class would opt into the FLSA class. Id. at 782.
Although Ballaris has not yet moved to certify the Rule 23 class, he states in his response that he will not seek to include people in the Rule 23 state law class who did not opt into the FLSA collective action. This resolves the main concern noted in Zelaya. Ballaris also provided Wacker and the court with a list of claims which he would like decided in this court. The only state law claim is:
The court will determine, as to plaintiff and opt-in plaintiffs, no longer employed with the defendant, the award and amount of penalty wages pursuant to ORS 652.140 and 652.150.
Ballaris notes that the facts are identical under both statutes. I agree that the legal decision of whether the concluding and preparatory activities must be paid, and the facts on which it is based, are the same but note the differences raised by Wacker concerning willfulness versus the standard for penalty wages and the longer statute of limitations under the FLSA.
I will deny Wacker's motion for now but give Wacker leave to renew the motion once the state court decides whether to certify the proposed class action before it.
CONCLUSION
Wacker's motion to dismiss plaintiff's ERISA breach of fiduciary duty claim and state law claims (#57) is granted in part, dismissing the ERISA breach of fiduciary duty claim.
IT IS SO ORDERED.