Opinion
CIVIL ACTION NO. 1:20-CV-210
2021-08-11
Brady HANSON, Jayna Mobley, Amanda Totten, Julia Monarch, Madison Andis, and Erica Heredia, Plaintiffs, v. WILCOX VETERINARY CLINIC PLLC, Robert B. Wilcox Jr., DVM, Rebecca Wilcox, Kacie Wilcox Barbay, Wilcox Veterinary Clinic 401(k) Plan, and Wilcox Veterinary Clinic Cash Balance Plan, Defendants.
Christopher David Johnsen, Johnsen Law, Kingwood, TX, Tamara Danielle Stiner Toomer, Johnsen Law PLLC, Humble, TX, for Plaintiffs Brady Hanson, Jayna Mobley, Julia Monarch, Brenda Morvant. Tamara Danielle Stiner Toomer, Johnsen Law PLLC, Humble, TX, for Plaintiffs Madison Andis, Erica Heredia. Elizabeth F. Eoff, Deryck Van Alstyne, Michael Allen Harvey, Brenna Renee Lermon, Munsch, Hardt, Kopf & Harr, PC, Houston, TX, for Defendants Wilcox Veterinary Clinic PLLC, Robert B. Wilcox, Rebecca Wilcox, Kacie Wilcox Barbay. Michael Allen Harvey, Brenna Renee Lermon, Munsch, Hardt, Kopf & Harr, PC, Houston, TX, for Defendants Wilcox Veterinary Clinic 401(K) Plan, Wilcox Veterinary Clinic Cash Balance Plan.
Christopher David Johnsen, Johnsen Law, Kingwood, TX, Tamara Danielle Stiner Toomer, Johnsen Law PLLC, Humble, TX, for Plaintiffs Brady Hanson, Jayna Mobley, Julia Monarch, Brenda Morvant.
Tamara Danielle Stiner Toomer, Johnsen Law PLLC, Humble, TX, for Plaintiffs Madison Andis, Erica Heredia.
Elizabeth F. Eoff, Deryck Van Alstyne, Michael Allen Harvey, Brenna Renee Lermon, Munsch, Hardt, Kopf & Harr, PC, Houston, TX, for Defendants Wilcox Veterinary Clinic PLLC, Robert B. Wilcox, Rebecca Wilcox, Kacie Wilcox Barbay.
Michael Allen Harvey, Brenna Renee Lermon, Munsch, Hardt, Kopf & Harr, PC, Houston, TX, for Defendants Wilcox Veterinary Clinic 401(K) Plan, Wilcox Veterinary Clinic Cash Balance Plan.
ORDER ON DEFENDANTS’ MOTIONS TO DISMISS
Michael J. Truncale, United States District Judge
Before the Court are Defendants Wilcox Veterinary Clinic, PLLC (the "Clinic"), Robert B. Wilcox Jr. DVM ("Dr. Wilcox"), Rebecca Wilcox ("Ms. Wilcox"), and Kacie Wilcox Barbay's ("Ms. Barbay") separate Motions to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). [Dkts. 30, 31, 32]. The Court has considered the motions, relevant pleadings, and the applicable law. For the reasons stated below, the Clinic's Motion to Dismiss [Dkt. 32] is DENIED in part and GRANTED in part ; Dr. Wilcox and Ms. Wilcox's Motion to Dismiss [Dkt. 31] is DENIED ; and Ms. Barbay's Motion to Dismiss [Dkt. 30] is DENIED .
I. BACKGROUND
Plaintiffs bring this action against Defendants for alleged violations of the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1101, et seq. ("ERISA") and the Fair Labor Standards Act, 29 U.S.C. § 201, et seq. ("FLSA"). [Dkt. 28]. Plaintiffs Brady Hanson ("Dr. Hanson"), Jayna Mobley, Amanda Totten, Julia Monarch, Madison Andis, and Brenda Morvant are former employees of the Clinic. Id. at 2. At all relevant times, Plaintiffs were participants of the Wilcox Veterinary Clinic Cash Balance Plan ("Cash Balance Plan") and the Wilcox Veterinary Clinic 401(k) Plan ("401(k) Plan"). Id. at 4. The Clinic was the named Plan Administrator of both the Cash Balance Plan and the 401(k) Plan (collectively, "the Plans"). Id. Dr. Wilcox owned and operated the Clinic, and he and his wife, Ms. Wilcox, were Trustees of the Plans. Id. at 4–5. Ms. Barbay, the daughter of Dr. Wilcox and Ms. Wilcox, allegedly served as the contact person for employment matters relating to the Clinic and helped administer the Plans. Id. at 4. Plaintiffs allege that Defendants violated ERISA's reporting and disclosure requirements by failing to furnish Plaintiffs with statutorily required plan documents meant to provide participants with general information about the Plans and their financial performance. Id. at 5–9, 13–16. Plaintiffs further allege that the individual Defendants, as Trustees or knowing participants, breached their fiduciary duties to Plaintiffs. Id. at 9–12; 16–17. Plaintiffs also allege that Defendants violated the FLSA by failing to pay them overtime. Id. at 12–13, 17–19.
The Clinic, Ms. Barbay, and Dr. and Ms. Wilcox filed separate motions to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), [Dkts. 6, 7, 8], and separate motions for more definite statement pursuant to Federal Rule of Civil Procedure 12(e), [Dkts. 9, 10, 11]. Thereafter, Plaintiffs filed an Amended Complaint [Dkt. 28], and the Court dismissed Defendants’ pending motions as moot [Dkt. 42]. Defendants filed new separate motions to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). [Dkts. 30, 31, 32]. Plaintiffs filed an omnibus response in opposition. [Dkt. 33]. Defendants filed separate replies. [Dkts. 34, 35, 36]. The Court held an oral hearing on the pending motions. [Dkt. 38].
II. LEGAL STANDARD
Rule 12(b)(6) of the Federal Rules of Civil Procedure provides that a party may move for dismissal of an action for failure to state a claim upon which relief can be granted. FED. R. CIV. P. 12(b)(6). To survive a motion to dismiss, 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, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp.v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). A claim is facially plausible if the plaintiff pleads factual content that allows a court "to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. To meet this standard, the facts alleged "must be enough to raise a right to relief above the speculative level," but the complaint need not contain "detailed factual allegations." Twombly , 550 U.S. at 555, 127 S.Ct. 1955. While the court must accept the facts in the complaint as true, it will "not accept as true conclusory allegations, unwarranted factual inferences, or legal conclusions." Gentilello v. Rege , 627 F.3d 540, 544 (5th Cir. 2010) (quoting Plotkin v. IP Axess Inc. , 407 F.3d 690, 696 (5th Cir. 2005) ).
III. DISCUSSION
Plaintiffs assert four causes of action against Defendants for ERISA violations: (1) Failure to Provide Summary Plan Descriptions; (2) Failure to Provide Documents Following a Written Request; (3) Breach of Fiduciary Duty in Investing Plan Assets; and (4) Knowing Participation; and a fifth cause of action for FLSA violations; (5) Failure to Pay Overtime. The Clinic moves to dismiss counts one, two, and five. [Dkt. 32]. Ms. Barbay moves to dismiss counts one, two, three, and four. [Dkt. 30]. Dr. Wilcox moves to dismiss counts one, two, and three. [Dkt. 31]. Ms. Wilcox moves to dismiss count three. Id.
A. ERISA Disclosure Violations
In counts one and two, Plaintiffs allege that the Clinic, Dr. Wilcox, and Ms. Barbay failed to satisfy certain ERISA disclosure requirements under 29 U.S.C. §§ 1132(c)(1), 1022(a), and 1024(b). Defendants move to dismiss these claims. For the reasons stated below, the Court denies Defendants’ motions.
ERISA imposes several disclosure obligations upon administrators of employee benefit plans. See 29 U.S.C. §§ 1132(c)(1), 1022(a), 1024(b). Congress enacted these provisions "to ensure that ‘the individual participant knows exactly where he [or she] stands with respect to the plan.’ " Newell ex rel. Snow v. Aetna Life Ins. Co. , No. CIV.A. 302-CV-0475M, 2002 WL 1840925, at *3 (N.D. Tex. Aug. 8, 2002) (quoting Firestone Tire & Rubber Co. v. Bruch , 489 U.S. 101, 118, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989) ). Two sets of ERISA disclosure requirements are relevant here. The first, § 1132(c)(1), requires the plan administrator to, among other things, timely comply with a participant or beneficiary's request for specified types of information. If the administrator does not provide the requested information "within 30 days after such request," the administrator "may in the court's discretion be personally liable to such participant or beneficiary in the amount of up to $100 a day from the date of such failure or refusal, and the court may in its discretion order such other relief as it deems proper." 29 U.S.C. § 1132(c)(1). Section 1132(a)(1)(A) affords a plan participant or beneficiary a private cause of action for the relief provided in § 1132(c). Id. § 1132(a)(1)(A).
The second set of disclosure requirements, set forth in §§ 1022(a) and 1024(b), requires the administrator to affirmatively provide a summary plan description ("SPD") to the participant or beneficiary that contains the information described in § 1022(b). Brown v. Aetna Life Ins. Co. , 975 F. Supp. 2d 610, 618 (W.D. Tex. 2013) (finding that §§ 1022(a) and 1024(b) require the administrator to provide the SPD or modification whether or not one is requested). The SPD must "be written in a manner calculated to be understood by the average plan participant" and "be sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan." 29 U.S.C. § 1022(a) ; see Manuel v. Turner Indus. Grp., L.L.C. , 905 F.3d 859, 865 (5th Cir. 2018) ("SPDs are ... important because they are often the primary source of information for participants trying to understand their benefits."). Section 1024(b) sets forth timing requirements for publishing and furnishing SPDs and all material modifications and changes. Id. § 1024(b).
Defendants present two main arguments in their motions to dismiss. First, Dr. Wilcox and Ms. Barbay argue that they cannot be found liable for failing to comply with disclosure requirements because they are not the named administrators of the Plan, and only the Clinic is the designated administrator. Second, the Clinic, Dr. Wilcox and Ms. Barbay argue that Plaintiffs did not make a proper request for documents under § 1132(c)(1). The Court finds that both arguments are without merit.
First, Plaintiffs plausibly allege that the Clinic, Dr. Wilcox and Ms. Barbay are plan administrators. ERISA defines the term "administrator" as "the person specifically so designated by the terms of the instrument under which the plan is operated," or, "if an administrator is not so designated, the plan sponsor." Id. § 1002(16)(A). According to the Plan documents, the Clinic is the only named administrator of the Plan. Plaintiffs do not contest this. Plaintiffs, instead, allege that Dr. Wilcox and Ms. Barbay may also have been appointed as administrators pursuant to the terms of the Plan, and therefore are liable in that capacity.
Plaintiffs assert in their response that Defendants’ Exhibits one through four [Dkts. 31-1, 31-2, 31-3, 31-4] are not properly before the Court and constitute inadmissible summary judgment evidence. [Dkt. 33, pp. 6–7]. Although these exhibits were not attached to the Complaint, they are relevant plan documents referred to in the Complaint and central to the claims at issue, and therefore are properly considered part of the pleadings. See Collins v. Morgan Stanley Dean Witter , 224 F.3d 496, 499 (5th Cir. 2000) ; see, e.g. , Jones v. Hartford Life & Accident Ins. Co. , No. 2:16-CV-316, 2016 WL 5887601, at *2 (E.D. Tex. Oct. 7, 2016) (Gilstrap, J.) (considering ERISA plan documents even though they were not attached to the complaint); In re Elec. Data Sys. Corp. "ERISA" Litig. , 305 F. Supp. 2d 658, 667–68 (E.D. Tex. 2004) (Davis, J.) (same). By attaching the plan documents, Defendants "merely assist[ ] the plaintiff in establishing the basis of the suit, and the court in making the elementary determination of whether a claim has been stated." Collins , 224 F.3d at 499.
According to the Cash Balance Plan, the Clinic, as the "employer," has the authority to appoint the administrator. The Plan also provides that the Clinic will serve as the administrator "unless another person or entity has been designated by [the Clinic] ... to administer the Plan on behalf of the Employer." Plaintiff alleges that Dr. Wilcox and Ms. Barbay's conduct in administering the Plans is consistent with them being appointed as administrators. According to Plaintiff, Dr. Wilcox, as the owner of the Clinic, identified himself individually as the plan administrator in numerous documents and exercised discretionary authority and control over the management of the plans, as well as the investment of plan assets. [Dkt. 28, p. 4]. Ms. Barbay is alleged to have been the designated point person for employee benefit matters and to have performed many of the daily functions of the plan administrator. Id. Plaintiffs’ argument relies on the terms of plans at issue, not on a theory that Dr. Wilcox and Ms. Barbay were de facto plan administrators. [Dkt. 33, p. 10]. The de facto plan administrator theory has never been adopted by the Fifth Circuit and has been "flatly rejected by at least eight circuits." See Connecticut Gen. Life Ins. Co. v. Humble Surgical Hosp., L.L.C. , 878 F.3d 478, 486 (5th Cir. 2017) (quotations omitted) (declining to hold non-designated plan administrators liable for allegedly violating ERISA's disclosure requirements). Discovery may reveal that Dr. Wilcox and Ms. Barbay were not plan administrators and thus had no corresponding duties. But at this point in litigation, it is plausible that Dr. Wilcox and Ms. Barbay were appointed as plan administrators within the meaning of ERISA, requiring them to comply with the disclosure requirements.
Second, Plaintiffs made a valid request for plan documents pursuant to § 1132. Through their attorney, Plaintiffs sent a written request for plan documents to Ms. Barbay—the designated point person for communications and decision-making regarding employee benefit matters. Defendants argue that this request was invalid because it was not made by Plaintiffs themselves, it referred to the Clinic as the "Center," and it was made to a third-party non-administrator. It does not appear that the Fifth Circuit has dealt with this exact issue. But other courts have held that an administrator is not entitled to ignore a written request for documents from a plan participant's attorney. Grant v. Eaton Disability Long-Term Disability Plan , No. 3:10CV164TSL-FKB, 2013 WL 485868, at *6 (S.D. Miss. Feb. 6, 2013) ; Minadeo v. ICI Paints , 398 F.3d 751, 758 (6th Cir. 2005). Not inconsistent with that rule, administrators may require written authorization from a plan participant before satisfying an attorney's request for information. Minadeo , 398 F.3d at 758 ; see also Daniels v. Thomas & Betts Corp. , 263 F.3d 66, 77 (3d Cir. 2001) (holding that "a representation by an attorney that he is making a request on behalf of a participant or beneficiary triggers the duty to respond under § 1024(b)(4) when the administrator has no reason to question the attorney's authority. In the rare case where the administrator has reason to question that authority, it can respond by requesting further evidence. The objective of the statute would be ill served, however, by permitting administrators to refuse to respond with no indication that authority is even an issue."); Kellogg v. Metropolitan Life Ins. Co. , 549 F.3d 818, 827 (10th Cir. 2008) (finding that plan administrator "clearly had a responsibility under ERISA to provide [participant's] counsel with a copy of the latest SPD and plan documentation" under § 1024(b)(4) ).
Because ERISA's disclosure requirements exist to help ensure that participants have access to information about their plans, a written request from a participant's attorney is sufficient to require the administrator to either (1) provide the requested information directly to the plan participant, or (2) inform the attorney that the information will be released upon receipt of an authorization signed by the plan participant. Id. The Clinic, Ms. Barbay, and Dr. Wilcox failed to take either of these steps within the thirty-day period imposed by 29 U.S.C. § 1132(c). Instead, they simply ignored Plaintiffs’ request. The email exchanges involving Ms. Barbay (who, for reasons stated above, may have been appointed as plan administrator) make clear that she understood that Plaintiffs made a request for documents through their attorney. In one email Ms. Barbay even confirmed that she would distribute the requested documents to Plaintiffs directly, although she never did. Therefore, at this stage in litigation, Plaintiffs’ request was valid and sufficiently clear to trigger Defendants’ disclosure obligations under ERISA. See Center for Restorative Breast Surgery, L.L.C. v. Humana Health Benefit Plan of La. , No. 10-4346, 2015 WL 4394034, at *17 (E.D. La. July 15, 2015) (Fallon, J.) ("[T]he touchstone is whether the request provides the necessary clear notice to a reasonable plan administrator which, given the context of the request, should be provided.") (internal quotations omitted); Grant , 2013 WL 485868, at *7 (holding that a participant's request for documents directed to counsel for the plan administrator, "or other personnel who routinely handle the ... plan's business," was proper under § 1024(b) ) (citations and quotations omitted). For these reasons, Plaintiffs state plausible violations of ERISA's disclosure requirements, and Defendants’ motions to dismiss are denied as to these claims.
B. Breach of Fiduciary Duty in Investing Plan Assets under ERISA
In count three Plaintiffs claim that Dr. Wilcox and Ms. Wilcox breached their fiduciary duties as Plan Trustees in investing plan assets imposed by 29 U.S.C. § 1104(a)(1)(A)–(C). Specifically, Plaintiffs allege that Dr. Wilcox and Ms. Wilcox failed to act in the best interest of plan participants or exercise prudence in their discretionary management of plan assets when they failed to "diversif[y] the investments of the plan so as to minimize the risk of large losses." [Dkt. 28, pp. 9–10]. Plaintiffs also allege that "Dr. and Ms. Wilcox have hidden from Plaintiffs the identity and authority of the decision-maker regarding the management of Plan assets by failing to provide ... information about how the participants’ account balances were invested." [Dkt. 33, p. 17]. Plaintiffs’ briefing makes clear that they proceed under § 1132(a)(3) of ERISA's civil enforcement provisions. Id. at 14–17. Under this provision an individual plan participant may pursue equitable remedies for breaches of fiduciary duties in his individual capacity. Hawk v. Consol. Rest. Operations, Inc. , No. 3:03-CV-0399-B, 2007 WL 9711656, at *6 (N.D. Tex. Feb. 22, 2007). "ERISA assigns to plan fiduciaries ‘a number of detailed duties and responsibilities [under 29 U.S.C. § 104(a)(1)(A)–(C) ], which include the proper management, administration, and investment of [plan] assets, the maintenance of proper records, the disclosure of specific information, and the avoidance of conflicts of interest.’ " Laborers National Pension Fund v. Northern Trust Quantitative Advisors, Inc. , 173 F.3d 313, 317 (5th Cir. 1999) (quoting Mertens v. Hewitt Associates , 508 U.S. 248, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993) ).
Ms. Barbay and the Clinic also move to dismiss Plaintiff's breach of fiduciary duty claim. The Court denies both motions because it does not construe Plaintiffs’ Complaint as alleging any fiduciary breach claim against Ms. Barbay or the Clinic. Plaintiffs confirm this reading of the Complaint in their response. [Dkt. 33, p. 17 n.4].
Section 1132(a)(3) provides for a civil action "by a participant, beneficiary, or fiduciary ... (B) to obtain other appropriate equitable relief (i) to redress [ERISA] violations or (ii) to enforce any provisions of this subchapter or the terms of the plan." 29 U.S.C. § 1132(a)(3)(B).
To establish a claimed breach of fiduciary duty, an ERISA plaintiff must prove a breach of a fiduciary duty and a prima facie case of loss to the plan. "Once the plaintiff has satisfied these burdens, the burden of persuasion shifts to the fiduciary to prove that the loss was not caused by ... the breach of duty."
McDonald v. Provident Indem. Life Ins. Co. , 60 F.3d 234, 237 (5th Cir. 1995) (citation omitted).
To support this claim, Plaintiffs reference Dr. Hanson's 401(k) Summary Annual Report ("SAR")—the only SAR that Plaintiffs received prior to filing suit. The remaining Plaintiffs received no information about the way their benefits accrued under either the 401(k) Plan or the Cash Balance Plan. [Dkt. 28, pp. 10–12, 16]. Taking Plaintiffs’ allegations as true, the Complaint contains a sufficiently detailed examination of the "erratic" earnings history and losses incurred by Dr. Hanson's 401(k) SAR, which present a plausible theory that Dr. and Ms. Wilcox breached their fiduciary duties in investing plan assets. See Id. at 10–11. Considering that Plaintiffs do not have ready access to necessary plan documents, in conjunction with the purpose of ERISA, Plaintiffs are entitled to reasonable discovery on this claim regarding the management of plan assets. See Innova Hosp. San Antonio, Ltd. P'ship v. Blue Cross & Blue Shield of Georgia, Inc. , 892 F.3d 719, 730 (5th Cir. 2018) ("[W]hile a plaintiff must offer sufficient factual allegations to show that he or she is not merely engaged in a fishing expedition or strike suit, we must also take account of [his or her] limited access to crucial information.") (citations omitted); Martinez v. Schlumberger, Ltd. , 338 F.3d 407, 411 (5th Cir. 2003) ("Congress enacted ERISA to protect employees’ rights to benefits while also encouraging employers to develop employee benefit programs."). These facts allow the Court to draw the reasonable inference that Defendants are liable for breaching their fiduciary duties in investing Plan assets.
Defendants argue that this count should be dismissed because the Plans at issue expressly denounce any form of liability for the Plan Trustees regarding the investment of Plan assets. [Dkt. 31, p. 5]. But the plan documents do not definitely establish that position. Under the terms of the Plans, it appears that a Trustee is absolved of liability "[i ]n the event that the Trustee shall be directed by the Employer, or an Investment Manager," [Dkt. 31-1] (emphasis added), or "[i ]n the event that the Trustee shall be directed by a Participant ..., the Employer, or an Investment Manager." [Dkt. 31-4] (emphasis added). The other exhibits attached by Defendants suffer from similar ambiguous and noncommittal language. At this stage in litigation, it is not clear whether Dr. Wilcox and Ms. Wilcox were directed trustees of the Plans. And because the plan documents do not unequivocally establish that both were directed trustees devoid of any discretionary authority to direct or influence the investment of Plan assets, Defendants’ argument fails.
Finally, Defendants argue that Plaintiffs’ breach of fiduciary duty claim under § 1132(a)(3) is barred because Plaintiffs had available to them an alternate remedy to recover benefits under § 1132(a)(1)(B). Defendants’ argument relies on Varity Corp. v. Howe , 516 U.S. 489, 116 S.Ct. 1065, 134 L.Ed.2d 130 (1996), where the Supreme Court observed that a plaintiff may bring a private action for breach of fiduciary duty under ERISA only when there is no other remedy available under § 1132. See id. at 515, 116 S.Ct. 1065. This argument also fails.
Section 1132(a)(1)(B) provides for a civil action "(1) by a participant or beneficiary ... (B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." 29 U.S.C. § 1132(a)(1)(B)
As it stands, Plaintiff's live pleading asserts four substantive counts under ERISA: Count one—Failure to Provide Summary Plan Descriptions; Count two—Failure to Provide Documents Following a Written Request; Count three—Breach of Fiduciary Duty in Investing Plan Assets; and Count four—Knowing Participation. A claim for lost benefits under § 1132(a)(1)(B) is not included. Indeed, that provision of ERISA is not mentioned a single time in the Complaint. See generally Manuel v. Turner Indus. Grp., L.L.C. , 905 F.3d 859, 864 (5th Cir. 2018) ("But ERISA includes numerous requirements beyond the mere payment of benefits in accord with a plan's written terms."). Plaintiffs instead sue Dr. and Ms. Wilcox as Plan Trustees for their alleged mismanagement of Plan assets and for losses that their actions caused to the Plans, not to Plaintiffs individually. The injury that creates this cause of action is distinguishable from claims brought under § 1132(a)(1)(B) to recover benefits due, enforce rights, or clarify rights to future benefits under the terms of the Plan. C.f. Innova , 892 F.3d at 733 (affirming the dismissal of a § 1132(a)(3) claim that was "indistinguishable" and "essentially [a] claim[ ] for benefits denied" under § 1132(a)(1) ).
The Court must follow Varity ’s fundamental precept that a breach of fiduciary duty claim under § 1132(a)(3) cannot survive if a claim for lost benefits under § 1132(a)(1)(B) is available. But viewing the evidence in Plaintiffs’ favor, the Court holds without conclusively deciding that § 1132(a)(1)(B), even if pled, does not afford Plaintiffs an adequate remedy in this suit. Plaintiffs are no longer members of their former employer's plans because the plans no longer exist. Accordingly, any claim to recover those plan benefits is foreclosed under § 1132(a)(1)(B), and Plaintiff's cause of action is not precluded by Varity . See Hager v. DBG Partners, Inc. , 903 F.3d 460, 469 (5th Cir. 2018) (finding no possibility that plaintiff could recover any benefits under § 1132(a)(1)(B) where plan was defunct or discontinued); Hawk , 2007 WL 9711656, at *11 (finding that because an employer no longer offered benefit plans, "a claim to recover those benefits under § 1132(a)(1)(B) is foreclosed"); Varity , 516 U.S. at 515, 116 S.Ct. 1065 ("The plaintiffs in this case could not proceed under [ § 1132(a)(1)(B) ] because they were no longer members of the [benefit] plan and, therefore, had no "benefits due [them] under the terms of [the] plan."); c.f. Tolson v. Avondale Indus., Inc. , 141 F.3d 604, 610 (5th Cir. 1998) (noting that relief was available to plaintiff under § 1132(a)(1)(B) where plaintiff "was the beneficiary of two viable plans whom [sic] he had standing to sue and did sue.") (emphasis added). For these reasons, the Court will allow Plaintiff to pursue equitable relief under § 1132(a)(3) for the Defendants’ alleged fiduciary breaches. Dr. Wilcox and Ms. Wilcox's motion to dismiss is denied as to this count.
C. Knowing Participation under ERISA
In count four, Plaintiffs assert a claim against Ms. Barbay for knowing participation under § 1132(a)(3) for her participation in the other Defendants’ alleged fiduciary breaches. [Dkt. 28, p. 17]. Under ERISA, a non-fiduciary such as Ms. Barbay may be liable for a fiduciary breach if they have "actual or constructive knowledge" of the breach, and "participate in a fiduciary breach." See Harris Tr. & Sav. Bank v. Salomon Smith Barney, Inc. , 530 U.S. 238, 240, 120 S.Ct. 2180, 147 L.Ed.2d 187 (2000) ; In re Enron Corp. Sec., Derivative & ERISA Litig. , 284 F. Supp. 2d 511, 570 (S.D. Tex. 2003). But the non-fiduciary may only be liable as a "party in interest" and only for "appropriate equitable relief." 29 U.S.C. § 1132(a)(3) ; In re Enron Corp. , 284 F. Supp. 2d at 570. "ERISA does not permit civil actions for legal damages against non-fiduciaries charged with knowing participation in a fiduciary breach." In re Dynegy, Inc. Erisa Litig. , 309 F. Supp. 2d 861, 877 (S.D. Tex. 2004). Ms. Barbay moves to dismiss this claim against her because (1) there are insufficient factual allegations and (2) she cannot be liable for legal damages. [Dkt. 30].
First, the Court finds that Plaintiffs have set forth sufficient factual content to state a plausible claim for relief against Ms. Barbay. Plaintiffs claim that Ms. Barbay knowingly assisted the Clinic, Mr. Wilcox, and Ms. Wilcox in breaching their fiduciary duties "by not providing [Plaintiffs] copies of the SPDs, SARs, and periodic benefit statements for the [Plans]." Id. Plaintiffs also claim that Ms. Barbay "was intimately familiar with the Plan Trustees’ neglectful management and investment of the [Plan assets]" and that her knowing assistance resulted in "significant[ ] impact[ ]" to the "Plans investments." Id. The Complaint contains supporting details of Ms. Barbay's participation in the alleged breach and additional facts from which the Court can reasonable infer she had actual or constructive knowledge of the breach. See Iqbal , 556 U.S. at 667, 129 S.Ct. 1937 ; Innova , 892 F.3d at 729 (5th Cir. 2018) ("[The Fifth Circuit] adhere[s] to the Supreme Court's admonition that ‘[t]he plausibility standard is not akin to a ‘probability requirement.’ ") (citation omitted). Additionally, as the daughter of Dr. And Ms. Wilcox, Ms. Barbay falls within the definition of a "party in interest" as defined in 29 U.S.C. § 1002(14). Plaintiffs have, therefore, pleaded a viable cause of action for knowing participation against Ms. Barbay that is sufficiently detailed to permit "the reasonable inference that [Ms. Barbay] is liable for the misconduct alleged," Iqbal , 556 U.S. at 667, 129 S.Ct. 1937, and that "discovery will reveal further supporting evidence," Twombly , 550 U.S. at 556, 127 S.Ct. 1955.
Second, the Court construes Plaintiffs’ Complaint as seeking equitable relief. Defendants disagree and argue that this count must be dismissed because Ms. Barbay cannot be liable for legal damages. The Complaint plainly states that Plaintiffs’ claim for knowing participation is grounded in § 1132(a)(3) —a provision that permits only equitable relief for ERISA violations. The Complaint also states that Plaintiffs seek "other equitable relief" on their ERISA claims. And Plaintiffs’ briefing clarifies that they seek relief in the form of a surcharge. From these allegations, the Court finds that Plaintiffs seek equitable relief only. "Courts must focus on the substance of the relief sought and the allegations pleaded, not on the label used." Gearlds v. Entergy Servs., Inc. , 709 F.3d 448, 452 (5th Cir. 2013) (finding plaintiff's complaint "viable in light of Amara " even though plaintiff "did not expressly plead or argue ‘surcharge’ " but did "argue that he should be made whole" for a fiduciary breach and "specifically asked for "[a]ny and all other damages and/or relief, equitable or otherwise, to which [he] may be entitled under federal law").
Until recently, it was accepted that "appropriate equitable relief" for ERISA violations generally did not include relief in the form of monetary payments and that money damages were only considered a legal remedy. But as Plaintiffs correctly point out, the Supreme Court in CIGNA Corp. v. Amara has expanded the kind of relief available under § 1132(a)(3) when a plaintiff sues a plan fiduciary. 563 U.S. 421, 131 S.Ct. 1866, 179 L.Ed.2d 843 (2011). In Amara , the Court held that a remedy in the form of money, such as a surcharge, was not beyond the scope of traditional equitable relief because "[e]quity courts possessed the power to provide relief in the form of monetary ‘compensation’ for a loss resulting from a trustee's breach of duty, or to prevent the trustee's unjust enrichment." Id. at 441, 131 S.Ct. 1866 ; see generally Mertens v. Hewitt Assocs. , 508 U.S. 248, 255 n. 5, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993) ("ERISA § 502(a)(3) only allows claims for the types of equitable relief typically available in equity."). The Amara Court therefore made clear that courts in equity could traditionally order "an award of make-whole relief" in form of a surcharge. Amara , 563 U.S. at 442, 131 S.Ct. 1866. The Fifth Circuit has affirmed that " Amara ’s pronouncements about surcharge as a potential remedy under [ § 1132(a)(3) ] should be followed." Gearlds , 709 F.3d at 452. Therefore, surcharge is a form of equitable relief available to ERISA claimants under 1132(a)(3).
The Court concludes that, at the pleading stage, Plaintiffs have at least stated a plausible claim for relief against Ms. Barbay, and therefore further proceedings are required. The Court leaves it for a future determination whether Plaintiffs’ knowing participation claim may prevail on the merits and whether the circumstances of the case ultimately warrant the relief of surcharge. See In re Dynegy , 309 F. Supp. 2d at 907 (finding a plausible knowing participation claim and that the issue of "which, if any, equitable remedy would be appropriate must await development of the facts"). Accordingly, Ms. Barbay's motion is denied in this respect.
D. Unpaid Overtime under the FLSA
In count five, all Plaintiffs except Dr. Hanson assert that the Clinic failed to pay them overtime in violation of the FLSA. An employer violates the FLSA if it fails to pay covered employees at least one and one-half times their normal rate for hours worked in excess of forty hours per week. 29 U.S.C. § 207(a)(1). To state a claim for unpaid overtime under the FLSA, a plaintiff "must show by a preponderance of the evidence: (1) there existed an employer-employee relationship during the relevant periods; (2) the employee engaged in activities within the coverage of the FLSA; (3) the employer violated the FLSA's overtime wage requirements; and (4) the amount of overtime compensation due." Johnson v. Heckmann Water Res. (CVR), Inc. , 758 F.3d 627, 630 (5th Cir. 2014) ; see also Williams v. Superior Hospitality Staffing, Inc. , No. 18-2793, 2019 WL 118013, at *2 (E.D. La. Jan. 7, 2019). The Clinic argues that Plaintiffs did not sufficiently plead enterprise coverage and moves to dismiss this count.
An employee is covered by the FLSA if he is "employed by an enterprise engaged in commerce or in the production of goods for commerce." 29 U.S.C. § 207(a)(1) ; see Sobrinio v. Med. Ctr. Visitor's Lodge, Inc. , 474 F.3d 828, 829 (5th Cir. 2007) (per curiam). The FLSA defines an "enterprise engaged in commerce or in the production of goods for commerce" as one that:
(i) has employees engaged in commerce or in the production of goods for commerce, or that has employees handling, selling, or otherwise working on goods or materials that have been moved in or produced for commerce by any person; and (ii) is an enterprise whose annual gross volume of sales made or business done is not less than $500,000 (exclusive of excise taxes at the retail level that are separately stated)[.]
29 U.S.C. § 203(s)(1)(A). The FLSA defines "Commerce" as "trade, commerce, transportation, transmission, or communication among the several States or between any State and any place outside thereof." Id. § 203(b).
Plaintiffs fail to adequately plead enterprise coverage under the FLSA. To satisfy the pleading requirement, Plaintiffs must allege facts that give rise to "at least a reasonable inference" that the Clinic is engaged in interstate commerce. Kidwell v. Digital Intel. Sys., LLC , No. 3:13-CV-4064-B, 2014 WL 4722706, at *7 (N.D. Tex. Sept. 22, 2014). The only statements pled in the Amended Complaint relevant to enterprise coverage are:
(1) "[The Clinic] provided veterinary services for clients throughout the United States and received compensation from its clients for these services that were delivered across state lines. At all relevant times to this litigation, the Clinic had annual gross volume of sales that exceeded $500,000." [Dkt. 28, ¶ 40]; and
(2) "[The Clinic’ is an ‘enterprise’ as defined by the FLSA ... and is engaged in commerce within the meaning of the FLSA ...." [Id. ¶ 73; see also id. ¶ 42].
These allegations provide only threadbare factual context, and the Court finds them to be merely conclusory and "formulaic recitations" of the elements of an FLSA cause of action. Twombly , 550 U.S. at 555, 127 S.Ct. 1955 (citations omitted). Therefore, neither allegation includes facts to support a finding that the Clinic was an enterprise engaged in commerce or the production of goods for commerce under the FLSA. A number of courts within the Fifth Circuit have held nearly identical allegations to be insufficient in establishing enterprise coverage. See Baker v. ABC Provider DFW, LLC , No. 4:13-CV-288, 2014 WL 1267302, at *2 (E.D. Tex. Mar. 26, 2014) (Schell, J.); Ridley v. Penbar, Inc. , No. CV H-17-974, 2018 WL 398231, at *3 (S.D. Tex. Jan. 12, 2018) ; Coleman v. John Moore Servs., Inc. , No. CIV.A. H-13-2090, 2014 WL 51290, at *5 (S.D. Tex. Jan. 7, 2014) ; Kidwell , 2014 WL 4722706, at *7. Therefore, even after being provided an opportunity to amend their Complaint, Plaintiffs fail to adequately articulate enterprise coverage under the FLSA. For this reason, the Clinic's motion to dismiss is granted as to this count.
Plaintiffs will not be granted an opportunity to replead. A district court "should freely give leave [to amend] when justice so requires." FED. R. CIV. P. 15(a)(2). But whether to grant leave to amend is within the sound discretion of the district court. Pervasive Software Inc. v. Lexware GmbH & Co. KG , 688 F.3d 214, 232 (5th Cir. 2012) (quoting Wimm v. Jack Eckerd Corp. , 3 F.3d 137, 139 (5th Cir. 1993) ). It may be denied "when it would cause undue delay, be the result of bad faith, represent the repeated failure to cure previous amendments, create undue prejudice, or be futile." Morgan v. Chapman , 969 F.3d 238, 248 (5th Cir. 2020) (citing Smith v. EMC Corp. , 393 F.3d 590, 595 (5th Cir. 2004) ). Because Plaintiffs failed to cure this defect in their Amended Complaint and discovery has proceeded for a significant period, any additional amendment would cause undue delay and prejudice. For this reason, the Court denies Plaintiff leave to amend and dismisses this count with prejudice.
IV. CONCLUSION
It is therefore ORDERED that the Clinic's Motion to Dismiss [Dkt. 32] is GRANTED in part, and Plaintiffs’ FLSA claims are DISMISSED WITH PREJUDICE . The Clinic's Motion [Dkt. 32] is DENIED in all other respects.
It is further ORDERED that Dr. Wilcox and Ms. Wilcox's Motion to Dismiss [Dkt. 31] is DENIED ; and Ms. Barbay's Motion to Dismiss [Dkt. 30] is DENIED .