Moore v. Raytheon Company et al

MOTION to Dismiss for Failure to State a Claim

D. Ariz.May 5, 2017

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 James P. Gillespie, Admitted Pro Hac Vice Daniel A. Bress, Admitted Pro Hac Vice KIRKLAND & ELLIS LLP 655 15th Street, N.W., Suite 1200 Washington, D.C. 20005 (202) 879-5000 james.gillespie@kirkland.com daniel.bress@kirkland.com Jeffrey Willis State Bar No. 4870 SNELL & WILMER LLP One South Church Avenue, Suite 1500 Tucson, AZ 85701-1630 (520) 882-1200 jwillis@swlaw.com Attorneys for Defendant Raytheon Company IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Daniel Moore, on behalf of himself and a class of persons similarly situated, Plaintiffs, vs. Raytheon Company, et al., Defendants. No. 4:16-cv-00470-RM RAYTHEON COMPANY’S MOTION TO DISMISS PLAINTIFF’S CORRECTED SECOND AMENDED COMPLAINT (DKT. #48) AND MEMORANDUM IN SUPPORT Oral Argument Requested Case 4:16-cv-00470-RM Document 52 Filed 05/05/17 Page 1 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF CONTENTS INTRODUCTION .......................................................................................................... 1 BACKGROUND ............................................................................................................ 2 A. Plaintiff’s Employment and Retirement Benefits .......................................... 2 B. Plaintiff’s Putative Class Action Lawsuit ...................................................... 3 LEGAL STANDARD .................................................................................................... 4 ARGUMENT ................................................................................................................. 4 I. THE COMPLAINT FAILS TO STATE A CLAIM FOR RETIREE MEDICAL BENEFITS .......................................................................................... 4 A. Plaintiff Has No Vested Right To 100% Company-Paid Medical Coverage Under A 1987 CBA ....................................................................... 4 B. Plaintiff Has No Vested Right To 100% Company-Paid Medical Coverage Under A 1990 Communication To Employees ............................. 8 II. THE COMPLAINT FAILS TO STATE A CLAIM FOR PENSION BENEFITS ........................................................................................................... 10 A. Plaintiff Fails To Identify Any Basis In ERISA For His Actuarial Equivalence Claim ....................................................................................... 10 B. Even If Plaintiff Could Identify A Basis in ERISA For His Actuarial Equivalence Challenge, He Fails To State A Claim .................................... 12 III. THE COMPLAINT FAILS TO ALLEGE RAYTHEON VIOLATED ERISA IN PROCESSING PLAINTIFF’S CLAIMS OR RESPONDING TO HIS DOCUMENT REQUESTS .................................................................... 15 CONCLUSION ............................................................................................................ 17 Case 4:16-cv-00470-RM Document 52 Filed 05/05/17 Page 2 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES Page(s) Cases Alday v. Raytheon Co., 619 F. Supp. 2d 726 (D. Ariz. 2008) ........................................................................ 8 Alday v. Raytheon Co., 693 F.3d 772 (9th Cir. 2012) ................................................................................ 7, 8 Armour v. IP Unity Long Term Disability Plan, 2010 WL 3341107 (N.D. Cal. Aug. 25, 2010) ....................................................... 10 Ashcroft v. Iqbal, 556 U.S. 662 (2009) ...................................................................................... 4, 12, 15 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ............................................................................................ 4, 10 Bender v. Newell Window Furnishings, Inc., 681 F.3d 253 (6th Cir. 2012) .................................................................................... 7 Brengettsy v. LTV Steel (Republic) Hourly Pension Plan, 241 F.3d 609 (7th Cir. 2001) .................................................................................. 11 Burstein v. Ret. Account Plan, 334 F.3d 365 (3d Cir. 2003) ..................................................................................... 9 Cinelli v. Security Pac. Corp., 61 F.3d 1437 (9th Cir. 1995) .............................................................................. 5, 10 Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73 (1995) .................................................................................................... 5 Doca v. Marina Mercante Nicaraguense, S. A., 634 F.2d 30 (2d Cir. 1980) ..................................................................................... 13 Ewing v. Wells Fargo Bank, 2012 WL 4514055 (D. Ariz. Oct. 2, 2012) ............................................................... 2 Gallo v. Amoco Corp., 102 F.3d 918 (7th Cir. 1996) .................................................................................. 16 Great-W. Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002) ................................................................................................ 12 Case 4:16-cv-00470-RM Document 52 Filed 05/05/17 Page 3 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Grosz-Salomon v. Paul Revere Life Ins. Co., 237 F.3d 1154 (9th Cir. 2001) ............................................................................ 5, 10 Hancock v. Montgomery Ward Long Term Disability Trust, 787 F.2d 1302 (9th Cir. 1986) ................................................................................ 16 Hinds Investments, L.P. v. Agioli, 654 F.3d 846 (9th Cir. 2011) .................................................................................... 4 Hughes Salaried Retirees Action Comm. v. Adm’r of Hughes Non- Bargaining Ret. Plan, 72 F.3d 686 (9th Cir. 1995) .................................................................................... 17 Kepner v. Weyerhaeuser Co., 2016 WL 5939153 (D. Or. Oct. 10, 2016) .......................................................... 5, 10 Litton Fin. Printing Div. v. N.L.R.B., 501 U.S. 190 (1991) .................................................................................................. 5 Leung v. Skidmore, Owings & Merrill LLP, 213 F. Supp. 2d 1097 (N.D. Cal. 2002) .................................................................. 17 M&G Polymers USA, LLC v. Tackett, 135 S. Ct. 926 (2015) ................................................................................................ 5 McDaniel v. Chevron Corp., 1998 WL 355534 (N.D. Cal. June 30, 1998) .......................................................... 12 Perlman v. Fidelity Brokerage Servs. LLC, 932 F. Supp. 2d 397 (E.D.N.Y. 2013) .................................................................... 11 Pisciotta v. Teledyne Indus., Inc., 91 F.3d 1326 (9th Cir. 1996) .................................................................................... 9 Reklau v. Merchs. Nat’l Corp., 808 F.2d 628 (7th Cir. 1986) .................................................................................. 11 Suozzo v. Bergreen, 2003 WL 256788 (S.D.N.Y. Feb. 5, 2003) ............................................................. 11 Tuttle v. Varian Med. Sys. Inc., 15 F. Supp. 3d 944 (D. Ariz. 2013) .......................................................................... 9 Winnett v. Caterpillar, Inc., 553 F.3d 1000 (6th Cir. 2009) .............................................................................. 6, 7 Winnett v. Caterpillar, Inc., 703 F. Supp. 2d 745 (M.D. Tenn. 2010) ................................................................... 6 Case 4:16-cv-00470-RM Document 52 Filed 05/05/17 Page 4 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Yolton v. El Paso Tenn. Pipeline Co., 435 F.3d 571 (6th Cir. 2006) .................................................................................... 6 Statutes 26 U.S.C. § 401 ............................................................................................................ 11 26 U.S.C. § 501(a) ........................................................................................................ 11 29 U.S.C. § 185(a) .......................................................................................................... 5 29 U.S.C. § 1024(b)(4) ................................................................................................. 16 29 U.S.C. § 1055(d)(1)(B) ............................................................................................ 10 29 U.S.C. § 1132(a)(1)(B) .............................................................................................. 5 29 U.S.C. § 1132(c)(1) ................................................................................................. 16 29 U.S.C. § 1133(1) ...................................................................................................... 16 Case 4:16-cv-00470-RM Document 52 Filed 05/05/17 Page 5 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 Defendant Raytheon Company hereby moves pursuant to Federal Rule of Civil Procedure 12(b)(6) to dismiss plaintiff’s Corrected Second Amended Complaint (“Complaint”) (Dkt. #48), for failure to state a claim upon which relief may be granted. Raytheon’s motion is supported by the following Memorandum of Points and Authorities. Raytheon respectfully requests oral argument on this motion. MEMORANDUM OF POINTS AND AUTHORITIES INTRODUCTION This is a case brought by a former Raytheon employee who is receiving substantial medical and pension benefits, but who is disappointed with benefit elections he made when he retired. Unfortunately, plaintiff is attempting to package dissatisfaction with his own decisions into a putative class action brought on behalf of certain employees who worked at Raytheon’s Tucson facility. That effort fails because plaintiff’s allegations do not state claims for relief under the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq., or the Labor Management Relations Act (“LMRA”), 29 U.S.C. § 141 et seq. Retiree Medical Benefits: Plaintiff claims he was promised a “vested” right to 100% company-paid retiree medical benefits until age 65 under a 1987 collective bargaining agreement (“CBA”) between his employer and the union that represented him. But plaintiff transferred to a non-union position in 1990 and was not covered by any CBA for the next 25 years, or when he retired in 2015. The law plainly prohibits plaintiff’s claim to a vested right under a CBA that was not in place when he retired, and that did not cover him for the previous 25 years. The CBA does not provide for such a vested right, nor does plaintiff meet the eligibility requirements in the long- extinct CBA. Plaintiff’s effort to claim a vested right through non-plan brochures likewise fails because those brochures did not promise 100% company-paid medical benefits, and they are not enforceable ERISA plan documents anyway. Pension Benefits: Plaintiff offers no well-pleaded allegations that his pension benefits are being miscalculated. Instead, plaintiff argues that the qualified joint and Case 4:16-cv-00470-RM Document 52 Filed 05/05/17 Page 6 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2 survivor annuity that he elected at his retirement is not “actuarially equivalent” to another pension distribution option that involved full payout over 5 years. But plaintiff does not allege a violation of any ERISA provision, and instead invokes regulations governing tax treatment of pension plans. That effort fails because an ERISA plaintiff cannot claim rights under the tax laws, as case law has long recognized. And even if plaintiff could do so, his claims would still fail. Plaintiff alleges it was improper for a booklet that Raytheon provided him to portray the two pension distribution options with a 4% cost of living adjustment (“COLA”), but he offers no well-pleaded allegations suggesting why that is so. Moreover, the very booklet he points to clearly demonstrated that in the short-term, the 5-year payout could be more beneficial. It is unclear why plaintiff did not elect the 5-year payout, but that was his decision, not a violation of ERISA by Raytheon. BACKGROUND A. Plaintiff’s Employment and Retirement Benefits1 Plaintiff Daniel Moore was hired by Hughes Aircraft in March 1983. Compl. ¶ 13. He was a union employee until “early 1990, at which time [he] was transferred directly to a salaried/non-bargaining position.” Id. ¶ 28. “Salaried employees, such as Moore was from 1990 until his retirement, were not subject to collective bargaining agreements.” Id. ¶ 41. In 1997, Raytheon acquired Hughes. Id. ¶ 3. Approximately 25 years after he was last covered by a CBA, plaintiff took early retirement from Raytheon at age 55, effective January 1, 2015. Id. ¶¶ 13, 44, 70. At retirement, plaintiff and his spouse became eligible for medical coverage in Raytheon’s retiree health plan; this included a substantial company contribution toward the cost of their medical coverage. Id. Ex. 5. In addition, plaintiff was given different pension distribution options to choose from, including a 5-year payout 1 Raytheon assumes the truth of the allegations in the complaint for purposes of this motion only. See, e.g., Ewing v. Wells Fargo Bank, 2012 WL 4514055, at *1 (D. Ariz. Oct. 2, 2012). Case 4:16-cv-00470-RM Document 52 Filed 05/05/17 Page 7 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 option, known as the “5 Year Temporary Modified Cash Refund Annuity,” and a 50% Joint and Survivor Annuity, also referred to as a Qualified Joint and Survivor Annuity, or “QJSA.” Id. ¶¶ 74, 79. The 5-year payout option “provides a relatively large monthly payment for a relative short period of time, terminating after 5 years or upon the death of the retiree if sooner than 5 years.” Id. ¶ 80. The QJSA, meanwhile, “provides a much smaller monthly payment for the lifetime of the retiree, with the retiree’s surviving spouse entitled to receive 50% of the monthly payment after the death of the retiree.” Id. ¶ 81. In evaluating which pension distribution option to choose, plaintiff reviewed materials provided by Raytheon regarding the relative values of the different plan distribution options. E.g., id. ¶¶ 105-06, 111-12. Plaintiff also contacted Raytheon and requested and received relative value information specific to his situation, because his “spouse is not the same age as he is.” Id. ¶ 116. Under the plans, the QSJA was the default option and plaintiff elected to stick with that. Id. ¶ 119. Shortly after he retired, plaintiff began to raise questions with Raytheon about his benefits. Id. ¶ 128. On January 21, 2015, plaintiff emailed Raytheon and Raytheon responded asking plaintiff to “send an e-mail stating the reason for the challenges.” Id. Ex. 4. Raytheon informed plaintiff that upon receipt of his challenges, “[a]n answer will be provided in writing” and “will include the Appeals process.” Id. Plaintiff sent Raytheon a list of grievances on February 11, 2015. Id. Ex. 5. Raytheon responded at length on March 20, 2015, denying plaintiff’s claims. Id. Raytheon’s March 20, 2015 letter detailed the appeals process and attached the plan provisions for appeals. Id. Plaintiff pursued the internal appeal process and his appeal was denied in July 2015. B. Plaintiff’s Putative Class Action Lawsuit On July 13, 2016, plaintiff filed his first complaint in this action. Dkt. #1. Plaintiff filed an amended complaint on October 14, 2016. Dkt. #10. Because the complaint was 124 pages long and unintelligible, Raytheon filed, inter alia, a motion Case 4:16-cv-00470-RM Document 52 Filed 05/05/17 Page 8 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4 for a more definite statement. Dkt. #20. After the withdrawal of plaintiff’s original counsel, a period of pro se status, and a generous extension of time, see Dkt. #39, plaintiff retained new counsel and filed a second amended complaint. Dkt. #48. This complaint alleges violations of ERISA with respect to both retiree medical and pension benefits, see id. ¶¶ 144-62 (Count 1), and a violation of the LMRA with respect to retiree medical benefits, id. ¶¶ 163-68 (Count 2). The details of these allegations are set forth below. Plaintiff also purports to bring this case as a class action on behalf of certain employees at Raytheon’s Tucson facility. Id. ¶¶ 169-78. LEGAL STANDARD To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), “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) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The “mere possibility of misconduct” does not suffice, and a complaint “stops short of the line between possibility and plausibility of ‘entitlement to relief’” where it “pleads facts that are ‘merely consistent with’ a defendant’s liability.” Id. (quoting Twombly, 550 U.S. at 557); see also id. (“Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”). Dismissal is warranted where, as here, “there is either a lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal claim.” Hinds Invs., L.P. v. Agioli, 654 F.3d 846, 850 (9th Cir. 2011). ARGUMENT I. THE COMPLAINT FAILS TO STATE A CLAIM FOR RETIREE MEDICAL BENEFITS A. Plaintiff Has No Vested Right To 100% Company-Paid Medical Coverage Under A 1987 CBA Raytheon is providing retiree medical coverage to plaintiff and his spouse, and providing a substantial contribution toward that coverage. See Compl. Ex. 5. Yet plaintiff claims that by virtue of a 1987 CBA, he has a “vested right” to 100% Case 4:16-cv-00470-RM Document 52 Filed 05/05/17 Page 9 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5 company-paid medical coverage from his retirement at age 55 until he reaches age 65. Compl. ¶¶ 46-47; see also id. ¶ 63. That is incorrect. The Supreme Court has made it clear that employers are not required under either ERISA or the LMRA to provide welfare benefits, such as retiree medical coverage. See, e.g., Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 78 (1995) (“ERISA does not create any substantive entitlement to employer-provided health benefits or any other kind of welfare benefits.”). Nor do employees automatically “vest” in rights to medical benefits upon retirement. See, e.g., M&G Polymers USA, LLC v. Tackett, 135 S. Ct. 926, 933 (2015) (explaining that welfare benefits are “explicitly exempt[ed]” from ERISA’s vesting rules). Instead, whether and to what extent an employer must provide welfare benefits such as retiree medical coverage—and whether that right was conferred irrevocably so that it “vested”—is purely a matter of contract. See, e.g., Grosz-Salomon v. Paul Revere Life Ins. Co., 237 F.3d 1154, 1160 (9th Cir. 2001) (“[A]n employee’s rights under an ERISA welfare benefit plan do not vest unless and until the employer says they do.”); see also Tackett, 135 S. Ct. at 933; Cinelli v. Security Pac. Corp., 61 F.3d 1437, 1441 (9th Cir. 1995). ERISA creates a mechanism for enforcing such promises made in ERISA plans, see 29 U.S.C. § 1132(a)(1)(B), and the LMRA creates such a mechanism for promises made in CBAs, see 29 U.S.C. § 185(a). Under the “ordinary principles of contract law” that govern the interpretation of CBAs and ERISA plans, it is a “traditional principle that ‘contractual obligations will cease, in the ordinary course, upon termination of the bargaining agreement.’” Tackett, 135 S. Ct. at 937 (quoting Litton Fin. Printing Div. v. N.L.R.B., 501 U.S. 190, 207 (1991)). Thus, to have a vested right, which “is an extra-ERISA commitment[,] [it] must be stated in clear and express language.” Grosz-Salomon, 237 F.3d at 1160; see also Cinelli, 61 F.3d at 1441 (same); Kepner v. Weyerhaeuser Co., 2016 WL 5939153, at *3-5 (D. Or. Oct. 10, 2016) (explaining post-Tackett that the “clear and express” standard applies). Case 4:16-cv-00470-RM Document 52 Filed 05/05/17 Page 10 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6 Plaintiff’s claim for vested benefits easily fails. Plaintiff attempts to locate a vested right to 100% company-paid retiree medical coverage in a CBA, see Compl. ¶¶ 32-33, but plaintiff did not even retire under a CBA and thus cannot claim vested rights under one. When he first joined Raytheon (at the time Hughes), plaintiff was a union employee subject to a series of CBAs that each expired and were replaced with new CBAs. Id. ¶ 30 (alleging he was subject to the 1981, 1984, and 1987 CBAs); id. Ex. 7 at 134 (1987 CBA stating that it shall “take effect” on October 23, 1987 and “remain in effect” until October 23, 1990). In “early 1990,” plaintiff became a non- union employee. Compl. ¶ 28. By the time he retired in 2015, the 1987 CBA that had last governed his employment had expired 25 years before, and no CBA had applied to plaintiff for that same approximately 25-year period. As plaintiff himself admits, “[s]alaried employees, such as Moore was from 1990 until his retirement, were not subject to collective bargaining agreements,” and “did not receive rights or benefits from collective bargaining agreements,” because the “CBAs from the time Moore became a salaried employee until his retirement in 2015 were not applicable to Moore as an employee or as a retiree.” Id. ¶¶ 41, 42, 43 (emphases added). That is the beginning and end of plaintiff’s claim to vested benefits under the 1987 CBA: a person who does not retire under a CBA cannot claim vested rights under it. See, e.g., Winnett v. Caterpillar, Inc., 553 F.3d 1000, 1011 (6th Cir. 2009) (no vested right to benefits because “the 1988 Collective Labor Agreement expired before Plaintiffs retired”); Yolton v. El Paso Tenn. Pipeline Co., 435 F.3d 571, 581 (6th Cir. 2006) (“Someone who retired after the expiration of a particular CBA would not be entitled to the previous benefits, but is rather entitled only to those benefits newly negotiated under a new CBA. Thus, the retirement package available to someone contemplating retirement will change with the expiration and adoption of CBAs.”); Winnett v. Caterpillar, Inc., 703 F. Supp. 2d 745, 759 (M.D. Tenn. 2010) (“[T]heir retirement benefits did not vest under the 1988 Agreement because they did Case 4:16-cv-00470-RM Document 52 Filed 05/05/17 Page 11 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 7 not retire under that Agreement.”). This makes sense, because an employee who remains employed receives the compensation and benefits under his current employment arrangement, which is often updated over time. Nor could plaintiff have “irrevocably vested in 1990,” when he transferred to a non-union position. Compl. ¶ 46. Retiree benefits vest, if at all, at retirement. See, e.g., Bender v. Newell Window Furnishings, Inc., 681 F.3d 253, 261 (6th Cir. 2012) (“Vesting occurs upon retirement, not eligibility for retirement.”). In this case, there is no allegation that anything in the CBAs conferred a vested right to 100% company-paid retiree medical coverage until age 65 on persons who did not even retire under the CBA, much less persons who retired 25 years after leaving the union. Certainly nothing in the 1987 CBA purported to do so clearly or expressly. See Winnett, 553 F.3d at 1011 (“[A]n employer and a union could agree to provide retiree medical benefits that vest upon retirement or pension-eligibility by writing explicit language into the contract. But the 1988 Collective Labor Agreement here is silent on that point. And it carries no inference that the benefits described in it would last beyond its expiration for workers who chose to continue to work.”). In fact, as of 2004, the union and Raytheon had “expressly limited Raytheon’s contributions towards future eligible retirees’ healthcare coverage.” Alday v. Raytheon Co., 693 F.3d 772, 779 (9th Cir. 2012). Plaintiff’s complaint is thus based on the implausible theory that the union negotiated a better deal for plaintiff—who left the union 25 years before retiring—than for employees who continued in union employment for their entire careers and retired under a post-2003 CBA. Confirming this point is the fact that plaintiff would not meet the eligibility requirements under the very provision of the 1987 CBA that he claims creates a vested right to 100% company-paid retiree medical coverage. See Compl. ¶ 33 (quoting Art. XII, Sec. D, entitled “Retired Employee Medical Benefits”). One of those requirements is that the employee have “‘at least three (3) years of continuous participation in the Retirement Plan immediately preceding the employee’s date of Case 4:16-cv-00470-RM Document 52 Filed 05/05/17 Page 12 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 8 retirement.’” Id. (quoting 1987 CBA, Art. XII, Sec. D). As plaintiff’s complaint recognizes, there are two different “retirement plans”: one covering union employees and one covering non-union employees. Id. ¶ 73. The 1987 CBA defines the “Retirement Plan” referenced in Article XII, Section D, as the “Bargaining Unit Retirement Plan which by its terms applies to employees covered by this Agreement,” i.e., union employees. Id. Ex. 7, Art. XIII, Sec. A.4. There is no allegation that plaintiff had three years of continuous participation in this union retirement plan “immediately preceding” his retirement, for the obvious reason that plaintiff, at the time of his retirement, had not been a union employee for 25 years. All of this makes plaintiff’s reliance on Alday v. Raytheon Co., 693 F.3d 772 (9th Cir. 2012), badly misplaced. See Compl. ¶ 48 (claiming that under Alday, “Raytheon is judicially collaterally estopped to deny liability”); id. ¶ 161 (claiming that Raytheon’s alleged non-compliance with Alday is “intentional bad faith”). Although Alday involved retirees from the same Tucson facility where plaintiff worked, the plaintiffs in Alday had actually retired under the CBAs that they claimed conferred a vested right to free health coverage. See Alday, 693 F.3d at 779 (“The district court certified a class of retirees, together with their eligible spouses and dependents, (‘Retirees’) who had retired under the 1990, 1993, 1996, and 1999 CBAs.”); id. (“[T]he class includes retirees who retired under four different CBAs— those entered into in 1990, 1993, 1996, and 1999.”); Alday v. Raytheon Co., 619 F. Supp. 2d 726, 735 (D. Ariz. 2008) (“[T]he proposed class is limited to those who retired under the CBAs …”) (all emphases added). Plaintiff is not similarly situated—which explains why he was not in the Alday class.2 B. Plaintiff Has No Vested Right To 100% Company-Paid Medical Coverage Under A 1990 Communication To Employees Separate and apart from the 1987 CBA, plaintiff tries to locate a vested right to 2 To the extent the Court decides to refer this motion to a magistrate, Raytheon notes that Magistrate Judge Macdonald has familiarity with some of these issues based on his prior involvement with the Alday case. Case 4:16-cv-00470-RM Document 52 Filed 05/05/17 Page 13 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 9 100% company-paid medical coverage in a 1990 communication to employees, entitled “Introducing a New Retirement Benefit … and a One-Time Opportunity for You.” Compl. ¶ 57; id. Ex. 8 (1990 brochure). According to plaintiff, this booklet confirmed that “contributory benefit structure participants (and their spouses and dependents) would receive company-paid medical coverage during early retirement from age 55-66.” Id. ¶ 63. That is incorrect. The 1990 brochure plainly states that “[t]his booklet shall not be construed as a contract for purposes of employment or payment of benefits.” Compl. Ex. 8 at 18 (emphasis added); see also id. Ex. 9 at 18 (same). The booklet further makes clear that it is not a plan document, and that any inconsistencies between the booklet and plan documents are to be resolved in favor of the plans: “In all cases of questions or discrepancies about benefits under these plans, the plan documents and the prospectus for the applicable plan will govern.” Id. Ex. 8 at 18. It is well-established that such non-plan documents cannot give rise to vested rights, particularly where they make clear that the plans govern. In Pisciotta v. Teledyne Indus., Inc., 91 F.3d 1326 (9th Cir. 1996), for example, the plaintiffs tried to locate a vested right to benefits in a benefits booklet. The Ninth Circuit held that the plaintiffs “could not justifiably rely on the language contained in the insurance booklets as creating a nonmodifiable benefit because the booklets contained the following disclaimer: ‘This booklet describes provisions of the group insurance program contained in the contract between the company and the insurance carrier. The contract shall be the controlling document.’” Id. at 1330-31. Numerous other cases are to the same effect. See, e.g., Tuttle v. Varian Med. Sys. Inc., 15 F. Supp. 3d 944, 954-55 (D. Ariz. 2013) (holding that open enrollment guide did not bind employer because it “gave clear notice to Plan participants that it was not a Plan document”); Burstein v. Ret. Account Plan, 334 F.3d 365, 375 n.14 (3d Cir. 2003) (“A plan brochure is distinct from a plan document in that it is neither comprehensive or detailed, and is more akin to a commonplace flyer. … Case 4:16-cv-00470-RM Document 52 Filed 05/05/17 Page 14 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10 Accordingly, a plan brochure cannot form the basis for plan benefits.”); Armour v. IP Unity Long Term Disability Plan, 2010 WL 3341107, at *5 (N.D. Cal. Aug. 25, 2010) (holding that booklet was not a plan document and could not give rise to benefits). Plaintiff has to source a vested right in an actual plan document, which he fails to do. Of course, even if it were a plan document, nothing in the 1990 brochure purported to offer 100% company-paid retiree medical coverage until age 65, and certainly not in the “clear and express” terms required to establish a vested right. Grosz-Salomon, 237 F.3d at 1160; Cinelli, 61 F.3d at 1441; Kepner, 2016 WL 5939153, at *3-5. Rather, the booklet refers to medical “coverage,” i.e., inclusion in Raytheon-sponsored plans, itself a considerable benefit. Plaintiff does not allege such coverage is not being provided to him. II. THE COMPLAINT FAILS TO STATE A CLAIM FOR PENSION BENEFITS A. Plaintiff Fails To Identify Any Basis In ERISA For His Actuarial Equivalence Claim With respect to his pension benefits, and although he styles this part of his complaint as “Raytheon’s Incorrect Calculation of Retirement Pension Benefits,” Compl. ¶ 70, plaintiff offers no well-pleaded allegations that Raytheon has improperly determined his pension payments.3 Instead, plaintiff claims Raytheon violated ERISA because the Qualified Joint and Survivor Annuity (QJSA) that he selected is not the “actuarial equivalent” of the 5-year payout option also made available to retirees. Id. ¶ 88-90. Plaintiff’s “actuarial equivalence” theory fails. Plaintiff identifies no basis in ERISA that supports his claim that the QJSA must be the actuarial equivalent of all other payment options. ERISA addresses this question specifically and directly, and requires only that a QJSA be the “actuarial 3 Plaintiff briefly alleges in one sentence that Raytheon “also used incorrect estimates of Moore’s earnings during his first several years as an employee in determining the Primary Insurance Amount (‘PIA’) to deduct from his gross benefit amount.” Compl. ¶ 124. But this barebones allegation is offered without supporting facts and thus fails to meet Rule 8’s pleading requirements. See Twombly, 550 U.S. at 555. Case 4:16-cv-00470-RM Document 52 Filed 05/05/17 Page 15 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 11 equivalent of a single annuity for the life of the participant.” 29 U.S.C. § 1055(d)(1)(B). Plaintiff does not allege that his QJSA is not the actuarial equivalent of the single life annuity offered under the plan. Instead, plaintiff cites two Treasury regulations—26 C.F.R. §§ 1.401(a)-11 and -20—in support of his assertion that the QJSA must be the actuarial equivalent of all other payment options under the Plan. See Compl. ¶¶ 88, 99, 155. Those regulations, in turn, interpret Section 401 of the Internal Revenue Code (“IRC”), 26 U.S.C. § 401, which sets forth criteria that pension plans must satisfy to qualify for beneficial tax treatment. See 26 U.S.C. § 501(a) (“An organization described in … section 401(a) shall be exempt from taxation under this subtitle.”). Plaintiff seeks to enforce these tax qualification provisions through an action under ERISA. See, e.g., Compl. ¶¶ 99-100. That effort fails because it is well established that IRC Section 401 does not create an individual cause of action under ERISA. See, e.g., Brengettsy v. LTV Steel (Republic) Hourly Pension Plan, 241 F.3d 609, 612 (7th Cir. 2001) (ERISA plan participant “has no right to make th[e] argument” that his employer’s plan violated Section 401); Reklau v. Merchs. Nat’l Corp., 808 F.2d 628, 631 (7th Cir. 1986) (“There is no basis … in ERISA, to find that the provisions of IRC § 401—which relate solely to the criteria for tax qualification under the Internal Revenue Code—are imposed on pension plans by the substantive terms of ERISA. … We hold that the district court’s refusal to find an implied cause of action under § 401 of the I.R.C. was proper.”) (quotations omitted); Perlman v. Fidelity Brokerage Servs. LLC, 932 F. Supp. 2d 397, 414 (E.D.N.Y. 2013) (“The sections of the IRC plaintiff points to, Sections 401 and 417, relate solely to tax qualification. Section 401 deals with obtaining tax deferred status of contributions to a plan, and Section 417 provides definitions and special rules for purposes of minimum survivor annuity requirements. However, these sections do not create a private right of action for [plaintiff].”); Suozzo v. Bergreen, 2003 WL 256788, at *2 (S.D.N.Y. Feb. 5, 2003) (“[T]here is no private right of action for an alleged violation of Section 401, and thus the plaintiff Case 4:16-cv-00470-RM Document 52 Filed 05/05/17 Page 16 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 12 has no claim based on the alleged failure of the Plan to comply with Section 401 [of the IRC].”) (second alteration in original). Disallowing plaintiff from invoking tax law provisions through ERISA is in keeping with ERISA’s comprehensive and reticulated remedial scheme. As the Supreme Court has directed, courts should be “especially reluctant to tamper with [the] enforcement scheme embodied in [ERISA] by extending remedies not specifically authorized by its text.” Great-W. Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 209 (2002) (quotations omitted). Plaintiff is suing under 29 U.S.C. § 1132(a), which in relevant part authorizes civil actions “to recover benefits due to him under the terms of his plan” or to enforce “this subchapter [of title 29, United States Code]”—not to enforce tax regulations. Permitting plaintiff to bring an ERISA claim to enforce a purported actuarial equivalence requirement in a tax regulation would be precisely the sort of “tampering” with ERISA’s remedial scheme that the Supreme Court has rejected.4 B. Even If Plaintiff Could Identify A Basis in ERISA For His Actuarial Equivalence Challenge, He Fails To State A Claim Even if plaintiff were able to identify a basis in ERISA for his actuarial equivalence challenge, he fails to plead “sufficient factual matter” to support this claim. See Iqbal, 556 U.S. at 678. The thrust of plaintiff’s argument is that the QJSA is not actuarially equivalent to the 5-year payout “when the values are calculated using reasonable, plan-mandated actuarial assumptions as regarding COLAs.” Compl. ¶ 90. According to plaintiff, while Raytheon’s retirement booklet presented the relative values of the pension plan options at 2%, 3%, and 4% COLAs, see id. ¶ 111, “[t]he actual COLAs and Future COLA assumptions mandated by the plans have been consistently and predictably substantially smaller for the single life annuity 4 Plaintiff’s complaint also alleges in passing violations of 26 U.S.C. §§ 401(a)(25) and 401(l)(5)(F). See Compl. ¶¶ 156-57. As subsections of the same IRC § 401, ERISA does not create an individual cause of action for these provisions either. Case 4:16-cv-00470-RM Document 52 Filed 05/05/17 Page 17 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 13 and the joint and survivor annuities, recently averaging less than 2%.” Id. ¶ 97. Plaintiff thus believes it was “materially misleading” for Raytheon to include relative values of pension plan options compared at a 4% COLA, which plaintiff’s theorizes suggest actuarial equivalence when none exists. Id. ¶ 113. Plaintiff is incorrect on numerous levels. As an initial matter, plaintiff’s argument that the COLA assumptions used to calculate the actuarial comparisons in the retirement booklet are unreasonable is based on nothing more than his observation that the COLA in recent years has been lower. See Compl. ¶ 97. But a period of low inflation that leads to lower COLAs cannot make the ex ante actuarial assumptions used to compare the pension distribution options unreasonable. Contrary to plaintiff’s contention, there is nothing “predictabl[e]” about the COLAs in recent years being less than 4%. Id. “There can be no doubt that predicting next year’s inflation rate is at least as hazardous a task as forecasting next year’s weather.” Doca v. Marina Mercante Nicaraguense, S. A., 634 F.2d 30, 38 (2d Cir. 1980). Nor has plaintiff pleaded sufficient facts for his contention that using a 4% COLA as one basis for comparing pension options in the retirement booklet was somehow “non-compliant with Plan requirements.” Compl. ¶ 113. Plaintiff identifies nothing in the retirement plan precluding Raytheon from including in a retirement booklet relative value calculations based on a 4% COLA, as well as other COLAs. Indeed, despite alleging that the plan somehow foreclosed this, plaintiff elsewhere acknowledges that under the plan, “[t]he pension payments are subject to yearly cost of living adjustments capped at +/- 4%.” Compl. ¶ 82 (emphasis added); see also id. Ex. 1 at 98-99 (non-bargaining Plan) & 183-84 (bargaining Plan). Moreover, plaintiff’s claim that he “received a pension benefit that was substantially less valuable than other options,” Compl. ¶ 120, is simply impossible to know at this point, and may be impossible to know for decades, based on, for example, how long plaintiff and his wife live. There are numerous assumptions that go into calculating the present or relative values of the different distribution options, Case 4:16-cv-00470-RM Document 52 Filed 05/05/17 Page 18 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 14 all of which affect the actuarial comparisons presented to plaintiff. Should any of these assumptions turn out differently over the period that his plan benefit is paid in the future, the value of plaintiff’s pension benefit could change. The actuarial calculations assume that plaintiff and wife will live to certain ages and that interest rates will be at certain levels. See Compl. Ex. 2 at 41. Plaintiff and his wife may live longer than this assumption and interest rates may be different than assumed, thus increasing the value of the QJSA. Similarly, the COLA added to the QJSA may be lower, which would lower the comparative value of the QJSA. All of this was explained to plaintiff in the materials Raytheon sent him before his retirement, belying his claim that the “relative value information provided to Moore was ambiguous, confusing, and self-contradictory.” Compl. ¶ 85. The very table from the retirement booklet reprinted in the complaint clearly shows that, based on the assumptions used in the booklet, in the earlier years after retirement the 5-year payout has a greater relative value than the QJSA. See id. ¶ 111. This is true not only at the 2% and 3% COLA assumptions, but at 4% as well. See id. The retirement booklet also clearly states (in a passage plaintiff omits from his complaint) that, based on the assumptions used in the booklet, “[a]s you will see in the following tables, the relative values of [various plan options, including the 5-year payout] can be more valuable than the 50% Joint & Survivor Annuity at certain ages and under certain assumptions about future COLAs.” Id. Ex. 2 at 41 (emphasis added). When plaintiff contacted Raytheon and asked for relative value comparisons specific to his situation (because his wife is older), plaintiff by his own allegations was again provided with information showing that, based on the assumptions used, in the short term, a 5-year payout could have a higher relative value. Id. ¶¶ 117-18 & Ex. 3. It is not clear why plaintiff did not opt out of the QJSA and select the 5-year payout, as the vast majority of employees did. Regardless of his reasons, the point is that the very documents plaintiff cites bely his allegations, as they clearly informed him that a 5-year payout plan could be more beneficial earlier on, using certain Case 4:16-cv-00470-RM Document 52 Filed 05/05/17 Page 19 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 15 assumptions. While plaintiff may be dissatisfied with the election he made, that is no basis for bringing an ERISA claim against Raytheon.5 III. THE COMPLAINT FAILS TO ALLEGE RAYTHEON VIOLATED ERISA IN PROCESSING PLAINTIFF’S CLAIMS OR RESPONDING TO HIS DOCUMENT REQUESTS Plaintiff also claims that Raytheon committed procedural violations of ERISA by (1) engaging in an “improper review” of plaintiff’s benefits claim, and (2) failing to provide plaintiff with certain documents. Neither allegation withstands scrutiny. First, Raytheon’s review of plaintiff’s benefits claim was not “[i]mproper.” Compl. at 17. After plaintiff raised concerns, Raytheon informed him on January 23, 2015 that he should “send an e-mail stating the reason for the challenge,” that “[a]n answer will be provided,” and an “appeals process” would follow. Id. Ex. 4. Although he does not attach it, plaintiff sent correspondence to Raytheon on February 11, 2015, and Raytheon responded on March 20, 2015, denying the claims. Id. Ex. 5. That letter attached the processes for appeal, which plaintiff pursued without success. In the face of this straightforward back-and-forth, plaintiff essentially claims that Raytheon’s January 23, 2015 correspondence left him confused as to whether his “email ‘challenge’ would be an administrative claim.” Id. ¶ 133. But the January 23, 2015 email plainly indicated that plaintiff should submit a “challenge” which Raytheon would respond to in writing, and that an appeals process would follow. Compl. Ex. 4. There was nothing unclear about this. The claims procedures were also set forth in plaintiff’s retirement plan, which he was sent to him on December 22, 2014, before he began to complain about his benefits. See id. Ex. 1 § 5.11 at 27-29. Nor is plaintiff correct to claim that “Raytheon’s March 20, 2015 letter did not 5 In any event, plaintiff lacks well-pleaded allegations that the two distribution options were not actuarially equivalent. See Iqbal, 556 U.S. at 678. The actuarial equivalence calculation is a complex one involving various assumptions about, inter alia, interest rates and life expectancy. Plaintiff does not allege that the two distribution options are not actuarially equivalent simply by claiming that at a given point in time as to one particular person (himself), one option has a higher relative value than the other one, under the assumptions used in the booklet. Case 4:16-cv-00470-RM Document 52 Filed 05/05/17 Page 20 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 16 provide Moore with any substantive explanation of the denial of benefits.” Id. ¶ 140. Plaintiff contends this letter violated 29 U.S.C. § 1133(1), which requires Raytheon to “provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant.” Raytheon fully complied with this provision. In its detailed three-page letter of March 20, 2015, Raytheon addressed eight different points plaintiff had raised about his benefits, citing relevant provisions of the plan. The “specific reasons” that Section 1131(a) requires “is not the same thing as the reasoning behind the reasons.” Gallo v. Amoco Corp., 102 F.3d 918, 922 (7th Cir. 1996). Because that is the level of detail plaintiff apparently desired, his allegations fail to state a violation of Section 1131(1). In all events, none of these complaints about Raytheon’s claim review process are of any significance because plaintiff neither alleges any prejudice nor seeks any remedy. As the the Ninth Circuit has explained, “[s]ubstantive remedies are available for procedural defects under ERISA only when the defects caused a substantive violation or themselves worked a substantive harm.” Hancock v. Montgomery Ward Long Term Disability Trust, 787 F.2d 1302, 1308 (9th Cir. 1986) (quotations omitted). Plaintiff not only fails to allege any prejudice, he also fails to ask for any relief as a result of the alleged procedural violations. Second, plaintiff seeks statutory penalties for alleged violations of 29 U.S.C. § 1132(c)(1), for Raytheon “wrongfully” withholding “documents listed in Exhibit-6” to plaintiff’s complaint. Compl. ¶¶ 143, 153. Under ERISA, Raytheon was required to “furnish a copy of the latest updated summary, plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated.” See 29 U.S.C. § 1024(b)(4); see also 29 U.S.C. § 1132(c). The Ninth Circuit has held that this provision is limited to its terms and does not create a general disclosure obligation. See Hughes Salaried Retirees Action Comm. v. Adm’r of Hughes Non- Case 4:16-cv-00470-RM Document 52 Filed 05/05/17 Page 21 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 17 Bargaining Ret. Plan, 72 F.3d 686, 691 (9th Cir. 1995) (“Thus we decline to interpret § 104(b)(4) [29 U.S.C. § 1024(b)(4)] to require general disclosure, subject only to specified exceptions. On the contrary, § 104(b)(4) requires the disclosure of only the documents described with particularity and ‘other instruments’ similar in nature.”). The 24 categories of documents and information in plaintiff’s cryptic Exhibit 6 are not remotely documents that Raytheon was required to provide under ERISA. For example, plaintiff allegedly sought plan documents and IRS determinations dating back 35 years, and CBAs dating back to 1952. Compl. Ex. 6 (Req. Nos. 1-15). The vast majority of these documents are obsolete, lack relevance to plaintiff, and fall far outside the statutory obligation to provide only “the latest” plan documents. 29 U.S.C. § 1024(b)(4); see also Leung v. Skidmore Owings & Merrill LLP, 213 F. Supp. 2d 1097, 1104-05 (N.D. Cal. 2002) (“Had Congress desired that section 1024(b)(4) provide for the disclosure of outdated documents, it would have been easy to adopt statutory language to that effect.”). Other alleged document requests are even further afield. Plaintiff allegedly sought “[a]ll records relating to prior challenges regarding denial (or attempted denial) of retiree medical benefit coverage or premium-payment by company,” and “[e]very document of every kind (historical, current, or yet future until all else provided) useful for discovering other detrimental plan-operation issues.” Compl. Ex. 6 (Req. Nos. 18 & 24). Some requests are not even for documents, but for information plaintiff wanted Raytheon to prepare. E.g., id. (Req. Nos. 16 & 20). Suffice to say, these requests are without basis and vastly exceed what Raytheon is obligated to provide. And plaintiff does not allege that he lacks any of the documents to which he entitled under 29 U.S.C. § 1024(b)(4). It is apparent from his complaint that plaintiff has at least some of them, such as his operative plan. As it stands, however, plaintiff fails to make well-pleaded allegations that he has not received any plan documents to which he is entitled under Section 1024(b)(4). CONCLUSION Plaintiff’s complaint should be dismissed with prejudice. Case 4:16-cv-00470-RM Document 52 Filed 05/05/17 Page 22 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 18 Dated: May 5, 2017 Respectfully submitted, /s/ Daniel A. Bress James P. Gillespie, Admitted Pro Hac Vice Daniel A. Bress, Admitted Pro Hac Vice KIRKLAND & ELLIS LLP 655 15th Street, N.W., Suite 1200 Washington, DC 20005 (202) 879-5000 james.gillespie@kirkland.com daniel.bress @kirkland.com Jeffrey Willis State Bar No. 4870 SNELL & WILMER LLP One South Church Avenue, Suite 1500 Tucson, AZ 85701-1630 (520) 882-1200 jwillis@swlaw.com Attorneys for Defendant Raytheon Company Case 4:16-cv-00470-RM Document 52 Filed 05/05/17 Page 23 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 CERTIFICATE OF SERVICE I hereby certify that on May 5, 2017, I electronically transmitted the foregoing RAYTHEON COMPANY’S MOTION TO DISMISS PLAINTIFF’S CORRECTED SECOND AMENDED COMPLAINT (DKT. #48) AND MEMORANDUM IN SUPPORT to the Clerk’s Office using the CM/ECF System for filing and transmitted a Notice of Electronic Filing to the following CM/ECF registrants: Brian A. Laird LAIRD LAW FIRM PLLC La Paloma Corporate Center 3573 E. Sunrise Drive, Suite 215 Tucson, AZ 85718 Andrew S. Friedman BONNETT FAIRBOURN FRIEDMAN & BALINT, P.C. 2325 Camelback Road, Suite 300 Phoenix, AZ 85016 Attorney for Plaintiffs Executed this 5th day of May, 2017. /s/ Daniel A. Bress Daniel A. Bress Case 4:16-cv-00470-RM Document 52 Filed 05/05/17 Page 24 of 24