Opinion
Civil Action No. AW-00-1026
August 11, 2000
MEMORANDUM OPINION
Presently before the Court is Defendant's Motion to Dismiss. Plaintiff filed a response, Defendant replied accordingly, and the motion is ripe for resolution. No hearing is deemed necessary. See Local Rule 105.6 (D.Md.). For the reasons discussed below, the Court will grant Defendant's motion and close this case.
BACKGROUND
Plaintiff Mojtaba Tofighbakhsh, an employee of Defendant Potomac Electric Power Company ("Pepco") alleges Defendant fraudulently transferred funds from his 401(k) savings plan. Plaintiff has been employed with Defendant since 1984. In 1985, Plaintiff enrolled in Pepco's 401(k) savings plan. The Pepco Savings Plan ("Plan") is a 401(k) pension plan regulated by ERISA. See Plan, at 44. The Plan allows a participating employee to contribute a portion of his or her Pepco salary into a pension fund. Each participant has an individual investment account and can chose to invest in one of the following funds: Equity, Dryfus Family, Guarantee Investment, or Pepco Stock. See Complaint, at ¶ 2. Pepco employees have the option to transfer from one fund to another once a quarter. See Plan, at 21-22. The relevant provision of the Plan provides, "To transfer funds between funds other than the Dreyfus Funds or to transfer funds to the Dreyfus Family of Funds, you must fill out a transfer form and return it to Payroll Benefits Accounting before the cutoff date. Your savings will be valued as of the first day of the following month." See id. at 21 (emphasis added).
Plaintiff attached portions of the Pepco Plan and account records to the Complaint as exhibits, and incorporates them throughout the Complaint. To further assist the Court, Defendant provided the entire text of the Plan. The Court will consider the Plan and other documents in the context of this 12(b)(6) motion as it is offered in support of Plaintiff's Complaint. The Court may review these documents without converting the motion to one for summary judgment under Rule 56, because the documents are referred to in the Complaint. See HQM, Ltd. v. Hatfield, 71 F. Supp.2d 500, 502 (D.Md. 1999) ("The Fourth Circuit and courts in this district have also recognized an exception for written documents referred to in the complaint and relied upon by the plaintiff in bringing the civil action.") (citing New Beckley Mining Corp. v. International Union, United Mine Workers of America, 18 F.3d 1161, 1164 (4th Cir. 1994); Cortec Indus. v. Sum Holding, L.P., 949 F.2d 42, 47-48 (2d Cir. 1991); Biospherics, Inc. v. Forbes, Inc., 989 F. Supp. 748, 749-50 (D.Md. 1997); aff'd, 151 F.3d 180 (4th Cir. 1998); In re Medimmune, Inc. Securities Litigation, 873 F. Supp. 953, 957 (D.Md. 1995)).
On or about August 4, 1998, Plaintiff requested a transfer from the Dryfus Family Fund to the Pepco Stock in the amount of $83, 407.00. See Complaint, at ¶ 4. Accordingly, the transfer should have been valued on September 1, 1998. During the second week of September, 1998, Plaintiff inquired about the status of the transfer and learned from a representative of the Payroll and Benefits Office that two blocks of Pepco stock were purchased in the amount of $80,000.00 at the price of $24.0625 per share, and that the remaining $3,407.00 had not yet been used to purchase stock, but was held in cash. See id. at ¶ 5. Months later, Plaintiff received his July-September 30, 1998 quarterly statement which reported that Defendant converted the entire amount to Pepco stock. Plaintiff alleges the price at which the Pepco stocks were trading and valued was lower on September 1, 1998 than the amounts shown on the accounting statement for the purchases. Plaintiff thus asserts "Defendant artificially inflate[d] the stock price, pocketed the dividend of the stock and falsely reported to the Plaintiff." Id. at ¶ 8. Plaintiff also points to alleged inconsistencies in the dates of purchase according to the quarterly reports (by September 30, 1998) as compared to a Pepco representative's statement (some purchased in October). On April 11, 2000, Plaintiff filed a complaint in this Court for breach of contract, misrepresentation, fraud, breach of fiduciary duty, violations of ERISA, 29 U.S.C. § 1132, and unspecified violations of the Securities Exchange Act. Defendant filed a motion to dismiss the Complaint in its entirety, and the Court will discuss the motion below.
DISCUSSION Standard for Motion to Dismiss
It is well established that a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure should be denied unless it appears beyond doubt that the plaintiff can prove no set of facts in support of its claim which would entitle it to relief. See Conley v. Gibson, 355 U.S. 41, 45-46 (1957). In determining whether to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6), this Court must view the well-pleaded material allegations in a light most favorable to the plaintiff, and accept the factual allegations in the plaintiff's complaint as true. See Flood v. New Hanover County, 125 F.3d 249, 251 (4th Cir. 1997), citing Estate Constr. Co. v. Miller Smith Holding Co., 14 F.3d 213, 217-18 (4th Cir. 1994); Chisolm v. TranSouth Finan. Corp., 95 F.3d 331, 334 (4th Cir. 1996); J.C. Driskill, Inc. v. Abdnor, 901 F.2d 383 (4th Cir. 1990).
The Court, however, is "not bound to accept as true a legal conclusion couched as a factual allegation." See Papasan v. Allain, 478 U.S. 265, 286 (1986), citing Briscoe v. LaHue, 663 F.2d 713, 723 (7th Cir. 1981). Nor is the Court "bound to accept [Plaintiff's] conclusory allegations regarding the legal effect of the facts alleged." United Mine Workers of Am. v. Wellmore Coal Corp., 609 F.2d 1083, 1085-86 (4th Cir. 1979). As the Fourth Circuit explained, the purpose of Rule 12(b)(6) is to provide a defendant with a mechanism for testing the legal sufficiency of the complaint, and not the facts that support it. See Neitzke v. Williams, 490 U.S. 319, 326-27 (1989); Randall v. United States, 30 F.3d 518, 522 (4th Cir. 1994); United Mine Workers, 609 F.2d at 1085 (4th Cir. 1979). Thus, a complaint may be dismissed as a matter of law if it lacks a cognizable legal theory, or it alleges insufficient facts under a cognizable legal theory. See Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 533-34 (9th Cir. 1984) (citing 2A J. Moore, Moore's Federal Practice ¶ 12.08 at 2271 (2d ed. 1982)).
II. Defendant's Motion to Dismiss
Defendant contends this suit should be dismissed because (1) the plain language of the employee benefits savings plan does not create the obligation Plaintiff seeks to impose on it, and (2) the common law claims of breach of contract, fraud, and misrepresentation are preempted as a matter of law. Plaintiff, however, argues Defendant failed to discharge its fiduciary duty owed him, and the common law claims are not preempted by ERISA. In sum, Plaintiff argues Defendant's actions resulted in a denial of benefits. "[T]he validity of a claim to benefits under an ERISA plan is likely to turn on the interpretation of terms in the plan at issue." See Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). Courts may not disregard the plain language of a plan. See Coleman v. Nationwide Life Ins. Co., 969 F.2d 54, 57 (4th Cir. 1992). "In resolving claims under [ERISA], a court must follow Congress' command for adherence to the provisions of the written plan — lest ERISA become an administrator's nightmare and a litigator's dream." Id. at 63. Under the Pepco plan, the Administrative Board has discretionary authority "to interpret the Plan and determine eligibility for benefits." Plan, at 46. Administrators have discretionary authority to determine benefits and resolve questions pertaining to the administration, interpretation, and application of the Plan. The Administrator's or trustee's interpretation will not be disturbed if its is reasonable. See de Nobel v. Vitro Corp., 885 F.2d 1180 (4th Cir. 1989). The Court is guided by the principle that "one of the primary functions of ERISA is to ensure the integrity of written, bargained-for benefit plans." United McGill Corp. v. Stinnett, 154 F.3d 168, 172 (4th Cir. 1998). Therefore, "the plain language of an ERISA plan must be enforced in accordance with `its literal and natural meaning.'" Id. (quoting Health Cost Controls v. Isbell, 139 F.3d 1070, 1072 (6th Cir. 1997)). Accordingly, the Court will test the legal sufficiency of the Complaint by considering the plain language of the plan.
The Court construed the facts of this case in the light most favorable to the Plaintiff, but concludes Plaintiff's Complaint is not legally sufficient. Plaintiff asserts, "Defendant fraudulently and in violation of security exchange charged the Plaintiff with higher price. Also they breach the employee and employer contract, where the Plaintiff (the Employee) requested the transfer on the first week of August." Complaint, at ¶ 9. Plaintiff further contends, "The Defendant breach on contract, dual representation, violation of its fiduciary duty, Violation of Security Exchange and fraud has cause [sic] the Plaintiff to loss [sic] more than $6000 in stocks, over $1200 in dividend, and the market gain since September 1998." Id. at 14. The Court believes Plaintiff seeks redress under a benefits plan governed by ERISA, 29 U.S.C. § 1132 (a)(1)(B). This section of ERISA provides a right of action "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." Id. Plaintiff essentially alleges Pepco denied benefits due to him by diverting the funds for its own uses, misrepresenting the status of the fund transfer, and withholding dividend payments. Plaintiff alleges Pepco violated the plain terms of the Plan because it failed to purchase Pepco shares with Plaintiff's stock fund dollars on September 1. It is Plaintiff's contention that Pepco improperly waited several weeks to purchase Pepco shares at a time when shares were sold at a higher price than they were on September 1. See Complaint, at ¶¶ 7-9. However, under the pertinent language of the Plan, the Court finds Pepco discharged its duties to Plaintiff.
Pepco effectuated the transfer requested by Plaintiff by liquidating the shares in one fund and purchasing shares of stock in another. Plaintiff has failed to point to any source of authority, either in the Plan itself or in case law which imposed any additional obligations upon Pepco. In fact, the account records show Pepco fulfilled Plaintiff's request and used the full value of the transferred funds to purchase Pepco stock as Plaintiff chose. Plaintiff rests this suit on his belief that Pepco fraudulently maintained his account because the precise dates of the purchase of all shares occurred during both September and October. Even assuming Plaintiff's version of the facts is true, the Plan only required Pepco to value Plaintiff's funds on the first day of the month following the transfer request, which it did as shown in account statements presented by Plaintiff. See Plaintiff's Complaint, Exs. B, D. Furthermore, the Plan requires Pepco to use the full value of the transferred funds to purchase shares in the transferee fund pursuant to Plan procedures. The account documents presented by Plaintiff convince the Court that this procedure was followed. Upon a plain reading of the Plan, and an interpretation of its literal meaning, the Court concludes it requires Pepco to value the employee's transferred savings as of the first day of the following month. Furthermore, the plan states the Trustees may retain the transferred amount in "cash or shares of Pepco Common Stock." See Plan, at 14. Plaintiff's quarterly account statement shows the transferred savings were valued as of September 1, 1998, and a small portion of the savings was retained in cash as the policy allows. The Administrator's interpretation and administration of the plan is reasonable. The Plan governs the timing of the valuation of the transfer rather than the timing of the actual purchase of stocks. Upon a review of the Complaint and supporting documents, particularly the language of the Plan, the Court concludes Plaintiff failed to state a claim upon which relief may be granted under ERISA, and the Court will dismiss this claim. See In Re Unisys Corp. Retiree Medical Benefit Litigation, 58 F.3d 896, 902-05 (3rd Cir. 1995) (granting judgment as a matter of law where the plain language of ERISA plan shows that plan does not support interpretation advanced). Furthermore, the Court will dismiss Plaintiff's claims under the Securities Exchange Act. Plaintiff failed to allege specific facts or bases to recover under his unspecified "security laws" theory.
Plaintiff's Complaint purports to assert a claim for breach of fiduciary duty under ERISA. See Complaint, at 1. Only in limited circumstances may a participant or beneficiary sue for breach of fiduciary duty under ERISA. Such an action may only be brought when no other remedy is available under ERISA. See Rhorer v. Raytheon Engineers and Constructors, Inc., 181 F.3d 634, 639 (5th Cir. 1999). "To permit the suit to proceed as a breach of fiduciary duty action would encourage parties to avoid the implications of section 501(a)(1)(B) by artful pleading. . . ." Coyne Delany Co. v. Blue Cross Blue Shield of Virginia, Inc., 102 F.3d 712, 714 (4th Cir. 1996). In the instant case, it is clear from the allegations of the Complaint that section 502(a)(1)(B) is the applicable section upon which this action is based. Accordingly, there is no need for further equitable relief. See Varity Corp. v. Howe, 516 U.S. 489 (1996); Smith v. Sydnor, 184 F.3d 356, 362 (4th Cir. 1999). In the instant case, Plaintiff seeks recovery of benefits denied him in the course of the funds transfer. As Plaintiff's claims for redress rest on a provision of ERISA, the Court must dismiss the fiduciary duty claim.
The Court must also dismiss Plaintiff's common law claims. His claims for breach of contract, misrepresentation, and fraud are preempted by ERISA. ERISA preempts or supersedes "any and all State laws insofar as they may now or hereafter relate to an employee benefit plan. . . ." 29 U.S.C.A. § 1144(a); Shaw v. Delta Airlines, Inc., 463 U.S. 85, 96-97 (1983) (holding that law "`relates to' an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan"); Metropolitan Life Ins. Co. v. Pettit, 164 F.3d 857 (4th Cir. 1998); Board of Trustees of the Hotel and Restaurant Employees Local 25 v. Madison Hotel, Inc., 97 F.3d 1479, 1486-87 (D.C. Cir. 1996). The ERISA preemption provision is intended to be construed broadly. See Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 47-48 (1987).
Plaintiff contends his common law claims are not preempted by ERISA. He argues Defendant is not protected by ERISA because "[t]his case is not about loss of benefit," but is instead about an employer stealing money from its employee's 401(k) account. In his Response Brief, Plaintiff contends ERISA only protects an employer [sic] from a loss of benefit, and thus does not cover the instant case. See Response, at 3. State common law tort and contract claims which assert the improper administration of an employee savings plan are preempted by ERISA. See Dedeaux, 481 U.S. at 57. Plaintiff alleges Pepco failed to properly account for the amount of his 401(k) pension plan and misrepresented those amounts, giving rise to common law claims. Therefore, the instant dispute concerns the application of the pension plan, and thus, "relates to" an employee benefit plan. Consequently, the instant common law claims are preempted by ERISA. See Elmore v. Cone Mills Corp., 23 F.3d 855, 863 (4th Cir. 1994) (finding that breach of contract, fraud, breach of fiduciary duty, negligence, and other claims made in connection with employee stock ownership plan were preempted by ERISA). To the extent these claims or any other claims are not preempted by ERISA, they will nevertheless be dismissed as the Court will decline to exercise its supplemental jurisdiction over them. Upon a thorough review of the Complaint, supporting documents, and the arguments of the parties, for the reasons discussed above, the Court concludes the allegations in Plaintiff's Complaint fail under Rule 12(b)(6). Accordingly, Defendant's Motion to Dismiss will be granted, and the Court will close this case. A separate Order consistent with this Opinion will follow.