Baker v. Save Mart Supermarkets

Background

Katherine Baker, Jose Luna, Edgar Popke, and Denny Wraske, described as former Save Mart employees, filed a proposed class action against Save Mart Supermarkets. Their amended complaint asserted one claim: that Save Mart breached its fiduciary duty under the Employee Retirement Income Security Act of 1974 (ERISA).

The Save Mart Select Retiree Health Benefit Plan provided health care benefits to eligible non-union retirees and their spouses. Beginning in 2016, the plan used monthly contributions to health reimbursement accounts instead of premium contributions. The complaint alleged that Save Mart representatives repeatedly said the health reimbursement account benefit could accumulate until the retiree’s death. It also alleged that Save Mart represented that non-union employees would receive benefits, including retirement benefits, as good as or better than those provided to union employees.

The complaint further alleged that Save Mart told employees who retired by December 31, 2017, that they could retain the spousal health reimbursement benefit for the retiree’s life. The named plaintiffs allegedly retired on or before that date, earlier than they had planned, to preserve that benefit. In April 2022, Save Mart announced that it would terminate the benefit as of June 2022 and that accumulated funds would revert to Save Mart.

Motion to dismiss

Save Mart moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not state a legally sufficient claim. Save Mart argued that the plaintiffs had not adequately pleaded actionable misrepresentations, omissions, reliance, or a remediable wrong under ERISA. It also challenged the requested remedies and argued that the claim was barred by the statute of limitations.

The court denied Save Mart’s requests for judicial notice of two plan documents for the time being. The court noted that the plaintiffs questioned the documents’ accuracy and that their claim was based on alleged misrepresentations rather than reliance on those documents.

Court’s analysis

The court held that the plaintiffs plausibly alleged a remediable wrong under ERISA. ERISA permits certain participants, beneficiaries, or fiduciaries to seek an order stopping violations or other appropriate equitable relief. The court explained that a misrepresentation-based fiduciary-duty claim requires allegations that the defendant was acting as an ERISA fiduciary, made a material misrepresentation, and that the plaintiff detrimentally relied on it.

The court concluded that the complaint sufficiently described two alleged misrepresentations. First, it explained why the statement that non-union benefits would be as good as or better than union benefits was allegedly false: union retiree benefits were allegedly more secure because Save Mart could not unilaterally eliminate them or take back the money funding them. Second, the complaint identified the alleged statements that employees retiring by December 31, 2017, would retain the spousal health reimbursement benefit for life, as well as the circumstances in which those statements were made.

The court also found that the plaintiffs plausibly alleged omissions. Although Save Mart allegedly told employees that the benefit would last for the retiree’s life, the complaint alleged that Save Mart did not disclose that the plan could be terminated at any time. The court said that an employer’s communications with employees about a benefit plan can trigger fiduciary responsibilities, including a duty to provide complete and accurate answers to questions about benefits.

On reliance, the court found that Baker plausibly alleged that she gave up union status to become a store manager because Save Mart assured her that her non-union benefits would be as good as or better than union benefits. The court noted that the complaint did not expressly connect the union-benefit statements to Luna’s, Popke’s, or Wraske’s decisions to accept or remain in non-union positions. However, the complaint plausibly alleged that all four named plaintiffs relied on the statements about the duration of the health reimbursement benefit when deciding when to retire.

The court also held that the requested equitable remedies were plausibly available. Reformation, which means changing a written agreement or plan to reflect the parties’ actual agreement or to correct fraud or mistake, could potentially be supported by the alleged misrepresentation about the duration of the benefit. Surcharge, an equitable form of monetary compensation for a loss caused by a fiduciary’s breach or to prevent unjust enrichment, was also plausibly alleged. The complaint alleged that the plaintiffs lost income and employee benefits by retiring earlier than planned and that Save Mart may have saved money by inducing early retirements.

Finally, the court rejected Save Mart’s statute-of-limitations argument at the pleading stage. The court concluded that the plaintiffs plausibly alleged they did not have actual knowledge that Save Mart could eliminate the health reimbursement benefit until Save Mart announced the termination in April 2022. Because they filed suit in August 2022, the claim was timely under the three-year limitations period discussed by the court. The court also concluded that alleged earlier plan changes did not, at this stage, establish that the plaintiffs deliberately avoided learning that the benefit could be terminated.

Disposition

The court denied Save Mart’s motion to dismiss. The order allowed the plaintiffs’ ERISA fiduciary-duty claim to proceed; it did not decide the ultimate merits of that claim. The court’s conclusion was based on the complaint’s plausibility at the motion-to-dismiss stage.