Kurisu v. Svenhard Swedish Bakery Supplemental Key Management Retirement Plan

Background

Kerry Kurisu, Douglas Prola, and Bill Pruitt, former employees of Svenhard’s Swedish Bakery, sued the Svenhard’s Swedish Bakery Supplemental Key Management Retirement Plan and several alleged plan administrators or fiduciaries under the Employee Retirement Income Security Act (ERISA). They asserted claims for plan benefits, federal common-law estoppel, equitable relief for alleged fiduciary and disclosure violations, and statutory penalties for failure to provide plan documents.

The plaintiffs alleged that, from 1995 through 2019, individual defendants promised pension contributions of at least 10% of their gross pay and pensions paying at least 30% of yearly salary for life. The plaintiffs alleged that the benefits they received were lower than promised. They also alleged that requested plan documents were not provided until August 2019, and that they stopped receiving pension benefits after the bakery sold substantially all of its assets.

Written Plan and Rule 12(b)(6) Review

The court considered the written plan under the incorporation-by-reference doctrine, which can allow a court reviewing a motion to dismiss to consider a document described in the complaint when its authenticity is not disputed in the relevant sense. The court acknowledged that the plaintiffs disputed the plan’s circumstances and effect, including its differences from the oral promises, but concluded that considering the plan did not prevent them from contesting those issues.

Svenhard and Kunkel’s Motion

The court held that Svenhard and Kunkel could be proper defendants on the ERISA benefits claim. Under Ninth Circuit precedent, a proper defendant can include a plan, a formally designated or de facto administrator, or another entity with authority to decide benefit claims, pay benefits, or manage the plan. The complaint alleged that Svenhard and Kunkel were plan administrators and fiduciaries. Their alleged membership on the company’s board, the plan’s definition of administrator, and their alleged role in making promises about the plan supported a reasonable inference that they had authority or control over the plan.

The plaintiffs did not respond to Svenhard and Kunkel’s specific argument that they could not be held personally liable on the benefits claim. The court therefore held that the plaintiffs had waived any argument that Svenhard and Kunkel could be held personally liable on that claim.

Svenhard and Kunkel also argued that the benefits claim should be dismissed because the plaintiffs had not exhausted the plan’s internal administrative procedures. The court rejected dismissal on that ground. Even assuming the written plan’s procedures applied, exhaustion is not required when using the administrative process would be futile or the remedy inadequate. Because the plaintiffs had allegedly stopped receiving all pension benefits after the sale and the parties disputed who was responsible for paying them, the court found it plausible that pursuing the administrative process would be futile.

Estoppel Claim

The plaintiffs sought to prevent the defendants from denying the pension benefits allegedly promised orally, which exceeded the written plan’s benefits. The court explained that Ninth Circuit authority generally bars an ERISA estoppel claim when enforcing an oral promise would contradict an unambiguous written plan, because undisclosed promises could harm the plan’s financial soundness and other participants. The court noted that the claim appeared technically closer to promissory estoppel because it involved alleged promises about future benefits.

The parties disputed whether the written plan was a “top hat” plan. A top hat plan is an unfunded plan maintained mainly to provide deferred compensation to a select group of management or highly compensated employees. Such plans are exempt from some ERISA funding, participation, and fiduciary requirements. The court concluded that there was a factual question about whether this plan qualified as a top hat plan. If it was a regular funded ERISA plan, the alleged oral promises would conflict with the written plan under the court’s analysis. If it was a top hat plan, the court stated that the reasons for refusing to credit certain oral promises would be different, including because top hat plans may be created through oral promises.

The court dismissed the estoppel claim but did so without prejudice and gave the plaintiffs leave to amend. It stated that any amendment had to be made in good faith under Federal Rule of Civil Procedure 11.

Equitable-Relief Claim

The plaintiffs alleged that the defendants breached fiduciary duties and violated ERISA or the plan by failing to provide documents, identify the plan provisions supporting a benefits denial, and explain what information was needed to perfect their claims. They sought equitable relief, including an equitable surcharge for alleged losses.

Svenhard and Kunkel argued that they had no fiduciary responsibilities if the plan was a top hat plan. The court declined to dismiss this claim because whether the plan was a top hat plan remained factually disputed. The court also observed that determining whether participants formed a qualifying select group requires more than counting participants and considering compensation. The plaintiffs’ job titles, standing alone, suggested they might not have been able to influence the plan’s design or operation. The court therefore denied dismissal of the equitable-relief claim.

Statutory Penalty Claim

The plaintiffs alleged that Svenhard and Kunkel were plan administrators who violated ERISA by failing to provide requested plan documents. The court found that the plaintiffs had adequately alleged that Svenhard and Kunkel were administrators. It also rejected the argument that they could not be personally liable because the statute allows a court, in its discretion, to impose personal liability on an administrator who fails to provide required information. Finally, providing the written plan in August 2019 did not defeat the claim because the plaintiffs alleged that the documents were not provided within the required 30-day period. The motion was denied as to this claim.

Kohles’s Motion

James Kohles argued that all claims against him depended on his being a plan administrator or fiduciary, but that the complaint alleged this only conclusorily. The plaintiffs did not dispute that their claims against Kohles depended on that allegation. Because the complaint contained only a conclusory allegation and Kohles had not made a comparable concession to Svenhard and Kunkel’s board-membership concession, the court dismissed all claims against Kohles.

The court dismissed the claims against Kohles without prejudice but, at that point, without leave to amend. It stated that if discovery uncovered a good-faith basis to allege that Kohles was a plan administrator or fiduciary, the plaintiffs could move for leave to amend to add him back to the litigation.

Disposition

The court granted in part and denied in part Svenhard and Kunkel’s motion to dismiss. It dismissed the estoppel claim with leave to amend, held that the plaintiffs had waived any claim that Svenhard and Kunkel could be personally liable on the benefits claim, and otherwise denied their motion. The court granted Kohles’s motion to dismiss and dismissed all claims against him without prejudice and, at that point, without leave to amend. The plaintiffs’ amended complaint concerning the estoppel claim was due within 30 days of the order.