Your ERISA Watch – Breach of Fiduciary Duty

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Raya v. Barka, No. 19-cv-2295-WQH-AHG, 2023 WL 27358 (S.D. Cal. Jan. 3, 2023) (Judge William Q. Hayes). On March 19, 2019, the Department of Labor informed the Calbiotech, Inc. 401(k) Profit Sharing Plan that it was opening an investigation into its operations. The Department’s letter informed the plan that it had found that Calbiotech and the other plan fiduciaries failed to timely remit employee contributions and loan payments and failed to make mandatory safe harbor employer contributions into the accounts of the eligible participants in violation of ERISA. Despite this conclusion, the Department of Labor informed the plan that it had decided not to take legal action. Nevertheless, the plan and its fiduciaries did face legal action, when on December 2, 2019, pro se plaintiff Robert Raya filed this ERISA lawsuit challenging defendants’ conduct in administering the plan. In addition to a claim for benefits and claims for breaches of fiduciary duties, Mr. Raya also included a retaliation claim, arguing that defendants unlawfully terminated him in retaliation for requesting plan documents. The court previously granted summary judgment to defendants on plaintiffs’ claim for benefits, leaving Mr. Raya’s claims for equitable relief pertaining to defendants’ breaches of fiduciary duties pursuant to Sections 502(a)(2) and (a)(3), along with his Section 510 retaliation claim. Defendants moved for summary judgment. The court addressed the breach of fiduciary duty claims first. To begin, the court agreed with defendants that the plan’s phrase about matching contributions describing “‘an amount…as determined by the Board,’ expressly gives the Board of Calbiotech discretion to set the amount of matching contribution and does not preclude the Board from setting the amount to zero.” Accordingly, the plan documents allowed the board not to allocate matching contributions, and thus the court found no breach of fiduciary duty on this basis. Thus, defendants were granted summary judgment on the breach of fiduciary duty claims to the extent they were based on defendants’ failure to make matching contributions to the plan. Next, the court found that uncontroverted evidence established that defendants remitted Mr. Raya’s loan payments to his account in their entirety. Although the Department of Labor had found wrongdoing by defendants for failing to remit loan payments to other participants, the remittance schedule the Department provided demonstrated that Mr. Raya’s account was unaffected because the first unremitted payment occurred after Mr. Raya’s loan was fully repaid. Accordingly, defendants were granted summary judgment on the loan payment remittances claims as well. However, the court determined that the final basis for Mr. Raya’s breach of fiduciary duty claims – that defendants failed to make safe harbor matching contributions to the plan – raised a genuine dispute of material fact precluding an award of summary judgment. Additionally, the court found Mr. Raya had standing to assert this claim as a plan participant. Nevertheless, the court permitted Mr. Raya to proceed only with his breach of fiduciary duty claim asserted under Section 502(a)(2), concluding that his Section 502(a)(3) claim was duplicative and without a distinct remedy. Finally, the court denied defendants’ summary judgment motion on Mr. Raya’s retaliation claim. The court concluded that this claim may be timely, as Mr. Raya provided evidence which could indicate fraudulent concealment justifying tolling the statute of limitations. For these reasons, defendants achieved mixed success and their summary judgment motion was granted in part and denied in part as described above.

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