Opinion
23-cv-12139-NMG
07-05-2024
ROSS KOVANDA and JAMES LaROSE, As Executors of the Estate of Karen Ann Kovanda and as Trustees Of The Karen Ann Kovanda Revocable Living Trust, Plaintiffs, v. HEITMAN LLC, as Administrator of the HEITMAN EMPLOYEES ADVANTAGE RETIREMENT PLAN, and HEIDI HALLISEY, Defendants.
REPORT AND RECOMMENDATION ON DEFENDANTS' MOTIONS TO DISMISS
DONALD L. CABELL, U.S.M.J.
I. INTRODUCTION
This action arises from a dispute over the distribution of an employer-sponsored retirement savings plan account that belonged to Karen Ann Kovanda (“Kovanda”). Following Kovanda's death in 2021, her former employer, Heitman LLC (“Heitman”), distributed the proceeds of her retirement account to Kovanda's sister, Heidi Hallisey (“Hallisey”), based on a beneficiary designation Kovanda had made in 2002. Plaintiffs Ross A. Kovanda and James P. LaRose (collectively, “Plaintiffs”) are the executors of Kovanda's last will and testament and trustees of the Karen Ann Kovanda Revocable Living Trust. (D. 22, Amended Complaint, at ¶¶ 1-2). Citing the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001 et seq. (“ERISA”), they contend that Heitman should have distributed the funds to Kovanda's estate instead of Hallisey and have brought various claims against Heitman and Hallisey in an effort to recover the value of the distributed proceeds. Both defendants have moved to dismiss the complaint against them and the motions have been referred to this court for a report and recommendation. For the reasons that follow, I recommend that Heitman's motion to dismiss (D. 29) be granted in part and denied in part, and that Hallisey's motion to dismiss (D. 25) be granted.
When faced with a motion to dismiss, the court typically “consider[s] only the ‘facts alleged in the complaint, and the exhibits attached thereto.'” Newman v. Lehman Brothers Holdings Inc., 901 F.3d 19, 25 (1st Cir. 2018) (quoting Freeman v. Town of Hudson, 714 F.3d 29, 35 (1st Cir. 2013)) . “However, there are some ‘narrow exceptions' in which a court may, if it chooses, consider extrinsic documents.” Id. (quoting Freeman, 714 F.3d at 36). “These exceptions include ‘documents the authenticity of which are not disputed by the parties; . . . official public records; . . . documents central to plaintiffs' claim; [and] . . . documents sufficiently referred to in the complaint.'” Freeman, 417 F.3d at 36 (quoting Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993)) (alterations in original). In connection with its motion to dismiss, Heitman submitted a declaration from Darrah Bixler. (D. 31). The Bixler Declaration has 27 exhibits, each of which comes from the administrative record in this case. (Id. at ¶ 4). The plaintiffs rely on these exhibits in their opposition to Heitman's motion to dismiss. (D. 36, p. 2). Because the parties do not dispute the authenticity of these exhibits, and because they are central to the plaintiffs' claims, the court will consider them here.
Kovanda worked for Heitman for over 22 years. (D. 22, ¶ 13).
During her employment, she contributed to the company's Heitman Employees Advantage Retirement Plan (the “Plan”). (Id. at ¶ 14). In 2002, Kovanda completed a “Beneficiary Designation Form” (the “2002 Beneficiary Form”) in which she designated her parents as the primary beneficiaries of her retirement account in the event of her death, and Hallisey as a secondary beneficiary. (D. 2213). By design, Heitman retained the 2002 Beneficiary Form and did not provide it or the information it contained to Merrill Lynch, which acted as the Plan's trustee, custodian, and records administrator at the time. (D. 22, ¶¶ 60-62).
Kovanda retired from Heitman in or around July 2017. (Id. at ¶ 16). In September 2017 Heitman changed the Plan's record keeper from Merrill Lynch to John Hancock Retirement Plan Services (“JHRPS”). (Id. at ¶ 20). Heitman and JHRPS executed a Service Agreement to govern the relationship between them. (D. 22-5). The agreement did not specify whether Heitman would provide JHRPS with plan participants' existing beneficiary designations. (D. 22, ¶ 31). It did, however, list certain “On-going Services” that JHRPS would provide, including “Beneficiary Election Processing and Maintenance” and “Participant Account Statements.” (Id. at ¶ 29). Pursuant to the agreement, Heitman remained the Plan “administrator.” (D. 22-5, § II.E).
In or around September 2017, JHRPS sent Kovanda an “information/welcome packet” informing her that JHRPS would be the new “provider” for her Plan. (D. 22, ¶ 32). The welcome packet mentioned the importance of maintaining updated beneficiary designations and informed Kovanda that she could view and change her beneficiary designations through the John Hancock website. (Id. at ¶ 33). Additionally, beginning in September 2017, JHRPS sent Kovanda quarterly statements with information about her retirement account. (Id. at ¶ 44). Each of these quarterly statements indicated that Kovanda had not made any beneficiary designations. (Id. at ¶¶ 45-47).
In or around April 2018, JHRPS mailed a Summary Plan Description to Kovanda. (Id. at ¶ 34). The Summary Plan Description indicated that unmarried plan participants (including Kovanda) could designate a beneficiary online. (Id. at ¶ 35).
The Summary Plan Description also indicated what would happen if a plan participant died without designating a beneficiary:
At the time of your death, if you have not designated a beneficiary or the individual named as your beneficiary is not alive, then the death benefit will be paid in the following order of priority to: surviving spouse of the Participant, or, if no surviving spouse, to the Participant's trust, or, if none, to the Participant's surviving issue, by right of representation, or, if none, to the Participant's estate.(Id. at ¶ 35). The Summary Plan Description did not mention anything about beneficiary designations made prior to September 2017. (Id. at ¶ 37).
In or around August 2018, JHRPS informed Heitman that Kovanda was one of 72 “terminated participants” with no beneficiary designation on file. (Id. at ¶ 38). Heitman did not inform JHRPS that Kovanda had indeed designated a beneficiary, nor does it appear that Heitman checked its own records for any beneficiary designations at that time. (Id. at ¶ 39). Heitman directed JHRPS to mail its “standard flyer” to these 72 terminated participants, including Kovanda. (Id. at ¶ 41). The flyer again indicated that participants could review and manage their beneficiary designations online or contact the Plan Administrator for more information. (Id. at ¶ 42). It also indicated that single plan participants could name anyone they wanted as a beneficiary and that, if no one were named, the account would pass to the participant's estate. (Id. at ¶ 43).
In 2020, Kovanda retained Attorney Natalie Feldman (“Attorney Feldman”) to prepare an estate plan. (Id. at ¶ 64). Kovanda explicitly informed Attorney Feldman that she wanted all her assets to pass to three of her siblings (Ross Kovanda, Kevin Kovanda, and Joe'l LaRose) but not her other three siblings (Hallisey, James Kovanda, and Brian Kovanda). (Id. at ¶ 65). Kovanda also completed an estate planning questionnaire that expressed the same intention. (Id. at ¶ 66). At that time, Kovanda's largest asset was her retirement account with Heitman. (Id. at ¶ 67).
As part of the estate-planning process, Attorney Feldman and Kovanda spoke over the phone about two unspecified retirement accounts. (D. 22-14, Affidavit of Natalie Feldman, ¶¶ 4-5). Attorney Feldman told Kovanda that “these accounts are typically passed outside of an estate based on a beneficiary designation form.” (Id. at ¶ 4). She advised Kovanda to contact the account managers to determine if the accounts had designated beneficiaries and to make any necessary updates. (Id.). Kovanda later informed Attorney Feldman that one account had a beneficiary designation and that she was working on changing the designation. (Id. at ¶ 5). Kovanda told Attorney Feldman that the other account had no designation, and so it would pass to Kovanda's estate or trust. (Id.). Attorney Feldman told Kovanda that she would complete a beneficiary designation form for that second account once Kovanda decided whether to have the account pass to a trust or directly to her intended beneficiaries. (Id.). Ultimately, neither Attorney Feldman nor Kovanda ever submitted any updated beneficiary designation form.
The amended complaint suggests that this first account was an IRA held by Wells Fargo. (D. 22, ¶ 69). The plaintiffs assert, upon information and belief, that Kovanda contacted Wells Fargo and learned that her deceased parents were listed as the primary beneficiaries of her IRA and that Hallisey was listed as the contingent beneficiary. (Id. at ¶ 70). They likewise assert that Kovanda expressed her intent to Wells Fargo to name Ross Kovanda, Kevin Kovanda, and Joe'l LaRose as the beneficiaries of the account but died before she was able to execute a change of beneficiary form. (Id. at ¶¶ 73-75). The fate of the Wells Fargo IRA is not a part of this suit.
In accordance with Kovanda's instructions, Attorney Feldman prepared both a will and a trust declaration. (Id. at ¶ 68). The will was a “pour-over will” that devised all of Kovanda's probate assets to the trust. (D. 22-1, Last Will and Testament of Karen Ann Kovanda, § II.A). The trust declaration provided that, as soon as practicable after Kovanda's death, the trustees would distribute the trust property to Joe'l LaRose, Kevin Kovanda, and Ross Kovanda. (D. 22-2, Karen Ann Kovanda Revocable Living Trust Agreement, § 3.1). Kovanda executed both the will and the trust declaration on May 28, 2021. (D. 22-1; D. 22-2). She died the following day. (D. 22, ¶ 10). Kovanda was predeceased by her parents and survived by her six siblings. (Id. at ¶ 12). She also was not married at the time of her death and did not have any children. (Id.).
On or about January 14, 2022, Kevin Kovanda spoke with a JHRPS representative about the distribution of Kovanda's retirement account. (D. 22-12, Affidavit of Kevin Kovanda, ¶ 3). The representative indicated that JHRPS had no beneficiary designation on file for the account and advised Kevin Kovanda to obtain a “Death Benefit distribution form” from Heitman. (Id. at ¶ 4).
Kevin Kovanda then contacted Heitman's Chief Financial Officer, Larry Christensen (“Christensen”). (Id. at ¶ 5). Initially, Christensen indicated that there was no beneficiary designation for Kovanda in the system, but he also said that Heitman had recalled her personnel file from storage for review. (Id.). Five days later, Christensen informed Kevin Kovanda that Heitman had located the 2002 Beneficiary Form in Kovanda's personnel file. (Id. at ¶ 6).
The plaintiffs (as the executors of Kovanda's estate) and Hallisey each filed a formal claim for distribution of Kovanda's Heitman retirement account. (D. 22, ¶¶ 79, 81). Heitman told the claimants that it intended to file an interpleader action unless the claimants were able to reach an agreement about how to distribute the account funds. (Id. at ¶ 80). Both claimants objected. (Id. at ¶¶ 81-82).
The amended complaint asserts that Hallisey asserted her claim for distribution on February 9, 2023, after Heitman indicated that it intended to file an interpleader action. (D. 22, ¶¶ 80-81). Other materials in the record (the authenticity of which the plaintiffs do not challenge) show that Hallisey submitted a claim to Heitman in a letter dated December 27, 2022. (D. 31-16, Hallisey Claim Letter). It is immaterial whether Hallisey filed her claim in December 2022 or February 2023.
On May 5, 2023, Heitman determined that Hallisey was the proper beneficiary of the account based on the 2002 Beneficiary Form. (D. 22-23, Heitman Decision Letter to Plaintiffs).
Thereafter, the plaintiffs requested additional documentation from Heitman. (D. 22, ¶¶ 86-87, 90-91). Heitman produced some, but not all, of the requested documents. (Id. at ¶¶ 88-89, 92-94).
On June 30, 2023, the plaintiffs filed an administrative appeal of Heitman's distribution decision. (Id. at ¶ 96). On August 29, 2023, Heitman denied the appeal. (Id. at ¶ 97). Heitman ultimately distributed the account funds to Hallisey at some point after May 5, 2023, although it is not clear (and of no import here) whether it was before or after Heitman denied the plaintiffs' appeal. (D. 26-1, Affidavit of Heidi Hallisey, ¶ 7; D. 31-21, Heitman Decision Letter to Hallisey).
The court relies on the Hallisey Affidavit only to the extent that it confirms facts asserted in the amended complaint. (D. 22, ¶ 120) (“Upon information and belief, the funds in Ms. Kovanda's Heitman Account were distributed to Ms. Hallisey by Heitman or its agent prior to the filing of this Amended Complaint.”).
The plaintiffs thereafter initiated this action on September 19, 2023. The operative amended complaint asserts five claims against Heitman and Hallisey. (D. 1; 22). Count I relates to Heitman and seeks a declaratory judgment that Heitman essentially acted improperly and should have distributed the proceeds of the account to the plaintiffs; Count II relates to both Heitman and Hallisey and seeks a distribution of the Heitman account to the plaintiffs pursuant to ERISA § 502(a)(1)(B); Count III alleges breach of fiduciary duty against Heitman pursuant to ERISA § 502(a)(3); Count IV alleges Heitman violated the Plan's terms pursuant to ERISA § 502(a)(3); and Count V alleges unjust enrichment against Hallisey pursuant to Florida common law. (Id. at ¶¶ 123-169).
III. LEGAL STANDARD
To survive a motion to dismiss for failure to state a claim, “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, 667 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Likewise, the complaint must also state a claim for relief that is “actionable as a matter of law.” McEntee v. Beth Israel Lahey Health, Inc., 685 F.Supp.3d 43, 48 (D. Mass. 2023). A claim is facially plausible if, after accepting as true all non-conclusory factual allegations, the court can draw the reasonable inference that the defendants are liable for the misconduct alleged. Ocasio-Hernandez v. Fortuna-Burset, 640 F.3d 1, 12 (1st Cir. 2011). The court may not disregard properly pled factual allegations in the complaint even if actual proof of those facts is improbable. Id. Rather, the court's inquiry must focus on the reasonableness of the inference of liability that the plaintiff is asking the court to draw. Id. at 13.
IV. DISCUSSION
Because Count I's declaratory judgment claim is essentially derivative of the plaintiffs' substantive claims against Heitman, the court considers those claims first.
A. Count II: Distribution of the Heitman Account
The parties agree that the Plan is an employee benefit plan governed by ERISA. See 29 U.S.C. § 1003(a). ERISA “generally obligates administrators to manage ERISA plans ‘in accordance with the documents and instruments governing' them.” Kennedy v. Plan Adm'r for DuPont Sav. and Inv. Plan, 555 U.S. 285, 288 (2009) (quoting 29 U.S.C. § 1104(a)(1)(D)). The plaintiffs assert that Heitman's decision to disburse the funds from Kovanda's retirement account to Hallisey did not accord with the plan documents. The defendants, of course, disagree.
Before examining Heitman's choice of Hallisey as the proper beneficiary, a threshold question emerges: what is the appropriate standard of review? Typically, “[w]hen an ERISA plan gives an administrator discretionary authority to determine eligibility for benefits or construe the plan's terms [as is the case here], the district court must uphold the administrator's decision unless it is arbitrary, capricious, or an abuse of discretion.” D&H Therapy Assocs., LLC v. Bos. Mut. Life Ins. Co., 640 F.3d 27, 34 (1st Cir. 2011) (internal quotation marks omitted). Even so, “when a plan administrator labors under a conflict of interest, courts may cede a diminished degree of deference -- or no deference at all -- to the administrator's determinations.” Leahy v. Raytheon Co., 315 F.3d 11, 16 (1st Cir. 2002). Of course, “a chimerical, imagined, or conjectural conflict will not strip the fiduciary's determination of the deference that would otherwise be due.” Id. The burden of demonstrating a conflict of interest is on the claimant. Wright v. R.R. Donnelley & Sons Grp. Benefits Plan, 402 F.3d 67, 74 n.4 (1st Cir. 2005).
The plaintiffs argue that Heitman labored under a conflict of interest in that it decided to choose Hallisey as the rightful beneficiary as a means of insulating itself from liability arising from its failure to properly maintain Kovanda's beneficiary designations. The court finds this proposition somewhat dubious, especially considering that Heitman currently faces liability through this lawsuit because it distributed the account proceeds to Hallisey. Ultimately, though, the court need not decide whether there is a true conflict of interest here, because Heitman's decision withstands scrutiny even under de novo review.
The parties do not dispute that Kovanda validly designated her parents in 2002 as the primary beneficiaries of her account, and Hallisey as the contingent beneficiary. They likewise agree that Kovanda never affirmatively changed her beneficiary designations. Under the Plan's terms, the most recent, non-revoked-or-amended beneficiary designation controls at the time of the participant's death. (D. 31-6, Heitman Employees Advantage Retirement Plan as of October 2, 2017, § 7.6). Consequently, the 2002 Beneficiary Form controls here. Because Kovanda's parents predeceased her, Heitman distributed the funds to Hallisey as Kovanda's designated contingent beneficiary. This result accords with the Plan documents and with a longstanding body of ERISA case law. See, e.g., Kennedy, 555 U.S. at 303-04 (affirming grant of benefits to participant's ex-wife as named beneficiary notwithstanding intervening divorce); Haslam v. McLaughlin, Civil Action No. 22-11268-RGS, 2022 WL 16823011, at *2-*3 (D. Mass. Nov. 8, 2022) (same); see also Unum Life Ins. Co. of Am. v. Allard, Case No. 2 0-cv-619-SM, 2023 WL 2665394, at *3 (D.N.H. Mar. 28, 2023) (noting ex-wife named as beneficiary on plan documents would have received benefits but for procedural default).
The version of the Plan in force when Kovanda made her beneficiary designations also implied that a designation remained in force unless and until it was revoked. (D. 31-1, Heitman Employees Advantage Retirement Plan as of January 1, 1997, § 12.7).
The plaintiffs argue that an important event interrupted this otherwise smooth sequence. As they see it, when Heitman transitioned to having JHRPS manage the Plan, Heitman disavowed all prior beneficiary designations (including Kovanda's) by not providing those designations to JHRPS for inclusion in its online system. This argument does not persuade. First, the idea that Heitman affirmatively disavowed Kovanda's 2002 Beneficiary Form is contradicted by Heitman's decision to recall Kovanda's hardcopy personnel file from storage before determining the proper beneficiary of her account. Second, based on the facts alleged, Heitman never explicitly told Kovanda or anyone else that it disavowed any preexisting beneficiary designations -- a position that would have been contrary to the Plan's terms. Third, the plaintiffs do not identify any authority in the law or the plan documents that would allow Heitman to unilaterally disavow Kovanda's otherwise valid 2002 Beneficiary Form even if it chose to do so. Thus, even accepting the plaintiffs' factual assertions as true, this court does not find the plaintiffs' disavowal theory to be plausible. See Ocasio-Hernandez, 640 F.3d at 12.
The plaintiffs' citation to Caples v. Prudential Ins. Co. of Am., Civil Action No. 08-4878, 2010 WL 5477151 (E.D. La. Dec. 30, 2010), is not to the contrary.
In short, even drawing all reasonable inferences in the plaintiffs' favor, Heitman's distribution of the account proceeds to Hallisey was clearly in accordance with the plan documents. See Kennedy, 555 U.S. at 288. Count II, which alleges to the contrary, therefore should be dismissed.
B. Count III: Breach of Fiduciary Duty
The plaintiffs assert that Heitman breached its fiduciary duties as plan administrator by (1) failing to maintain accurate beneficiary designation records, which in turn caused JHRPS to misrepresent to Kovanda that she had not designated a beneficiary, and (2) distributing the account proceeds to Hallisey. (D. 22, ¶¶ 151-55). Regarding the latter assertion, and as discussed above, Heitman's distribution to Hallisey accorded with the plan documents and ERISA so it did not breach any duty by making the distribution. However, the plaintiffs' first theory stands on firmer ground and does at this juncture assert a valid claim for relief.
In Caples, the decedent's employer explicitly informed plan participants that they needed to sign into an online platform to designate their beneficiaries and make insurance coverage choices notwithstanding their previous elections. Id. at *1. Additionally, Caples involved a significant fact not present here, namely the cancellation of one plan, which was replaced by benefits under an entirely different plan. Id. at *2. Moreover, it does not appear that the Caples court had occasion to consider whether the employer could require plan participants to make new beneficiary designations in the first instance.
ERISA sets forth certain fiduciary duties that apply to plan administrators like Heitman. Specifically, ERISA provides that
a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and -- . . . with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.29 U.S.C. § 1104(a)(1).
The precise scope of a plan administrator's fiduciary duties remains undefined as they relate to keeping plan participants informed. At a minimum, a plan administrator breaches its fiduciary duty of loyalty if it “participate[s] knowingly and significantly in deceiving a plan's beneficiaries in order to save the employer money at the beneficiaries' expense.” Varity Corp. v. Howe, 516 U.S. 489, 506 (1996); see also CIGNA Corp. v. Amara, 563 U.S. 421, 431-32 (2011) (affirming district court's determination that employer intentionally misled employees by omission but vacating on other grounds). Neither the Supreme Court nor the First Circuit has yet determined if plan administrators have an affirmative fiduciary duty to disclose truthful information. See Varity Corp., 516 U.S. at 506 (“[W]e need not reach the question whether ERISA fiduciaries have any fiduciary duty to disclose truthful information on their own initiative, or in response to employee inquiries.”). That said, some courts have found equitable relief for misrepresentations appropriate even where the plan fiduciary had no intent to deceive. See Laurent v. PricewaterhouseCoopers LLP, 945 F.3d 739, 748 (2d Cir. 2019)
(finding reformation of plan appropriate remedy where employer's definition of “normal retirement age” violated ERISA “even in the absence of mistake, fraud, or other conduct traditionally considered to be inequitable”); Pearce v. Chrysler Grp. LLC Pension Plan, 893 F.3d 339, 348 (6th Cir. 2018) (affirming grant of equitable estoppel based on unintentional misrepresentation in Summary Plan Documents about the plaintiff's eligibility for benefits after termination); see also Turner v. Liberty Mut. Ret. Benefit Plan, Civil Action No. 20-11530-FDS, 2023 WL 5179194, at *9-*10 (D. Mass. Aug. 11, 2023) (denying motion for summary judgment as to reformation and surcharge components of plaintiff's claim for equitable relief).
Here, there is at least a colorable argument that Heitman breached its fiduciary duty to Kovanda by failing to provide accurate beneficiary designation information to JHRPS, thereby causing JHRPS to misrepresent to Kovanda that she had not designated a beneficiary. The record reflects that (1) Heitman never gave the 2002 Beneficiary Form or the information therein to JHRPS; (2) Heitman knew by at least August 2018 that JHRPS believed Kovanda had no designated beneficiary; and (3) in or around August 2018, Heitman directed JHRPS to send a flyer to Kovanda that might tend to suggest that she had not designated a beneficiary. A fair reading of the correspondence between Christensen and Kevin Kovanda concerning Heitman's rediscovery of the 2002 Beneficiary Form further suggests that Heitman forgot about the form until after Kovanda's death. It is at least plausible that this conduct was inconsistent with Heitman's duty to act with reasonable care, skill, prudence, and diligence. See 29 U.S.C. § 1104(a)(1)(B).
Notwithstanding the above, Heitman argues that Count III must fail because the plaintiffs have not alleged facts sufficient to plausibly assert a theory of equitable estoppel against Heitman, that is, they cannot show that Kovanda ever saw any of Heitman's alleged misrepresentations or reasonably relied on them. See Estate of Smith v. Raytheon Co., 573 F.Supp.3d 487, 508 (D. Mass. 2021) (quoting Guerra-Delgado v. Popular, Inc., 774 F.3d 776, 782 (1st Cir. 2014)) (“An equitable estoppel claim has two elements: ‘(1) the first party must make a definite misrepresentation of fact with reason to believe the second party will rely on it, and (2) the second party must reasonable rely on that representation to its detriment.'”). Heitman's argument fails for at least four reasons.
First, it bears noting that Count III as pled is not limited to equitable estoppel. (D. 22, ¶ 156) (“Plaintiffs are entitled to equitable relief under ERISA § 502(a)(3), including but not limited to restitution, reformation, recission, estoppel, and disgorgement.”). Indeed, Heitman recognizes as much in its own memorandum. (D. 30, p. 16) (“Plaintiffs claim an entitlement to a litany of equitable remedies[.]”). Different forms of equitable relief have different elements. See, e.g., Estate of Smith, 573 F.Supp.3d at 510-12 (identifying elements of disgorgement under ERISA § 502(a)(3) as breach of fiduciary duty, harm, and causation). Here, Heitman's entire argument focuses on the plaintiffs' supposed failure to meet the elements of equitable estoppel and it has not developed or asserted any argument as to any other form of relief that the plaintiffs seek through Count III. This alone undermines the motion to dismiss Count III. See Higgins v. New Balance Athletic Shoe, Inc., 194 F.3d 252, 260 (1st Cir. 1999) (“The district court is free to disregard arguments that are not adequately developed.”).
But even focusing, as Heitman does, on equitable estoppel, Heitman's argument still does not carry the day. First, Heitman asserts that Kovanda never actually received any statements from JHRPS indicating that she had not designated a beneficiary, and thus could not have relied on those statements to her detriment. This is so, Heitman argues, because JHRPS did not mail these statements but only posted them to its online system, and JHRPS's records show that Kovanda never accessed her account through the system. Even assuming these facts are true, other facts nonetheless suggest that Kovanda saw at least some of the statements or learned the information they contained. Kovanda emailed Darrah Bixler (“Bixler”) on May 9, 2018, indicating that she had not received her account statement for the first quarter of 2018. (D. 31-8, Email Thread Between Kovanda and Bixler).
Given that Kovanda retired in July 2017, that JHRPS became the Plan's new record keeper in September 2017, and that Kovanda was inquiring specifically about a statement for Q1 2018, one can plausibly infer that Kovanda (1) had received at least one statement from JHRPS previously in 2017 and (2) made a point to view her quarterly statements. Additionally, Bixler informed Kovanda that she could access her statements online or call JHRPS directly, which suggests that Kovanda could have obtained her statements by calling JHRPS, without signing into the online system. (Id.). Thus, viewing the facts in a light most favorable to the plaintiffs, it is plausible that Kovanda accessed at least some of her account statements, which, if reviewed, would have reflected that she had no designated beneficiary and that her account would pass to her estate upon her death.
In response to Heitman's motion to dismiss, the plaintiffs submitted a declaration from James LaRose indicating that LaRose and others found multiple hardcopy JHRPS account statements among Kovanda's personal belongings after she died. (D. 37, LaRose Declaration, ¶¶ 7-9). Because this declaration is a document extrinsic to the operative complaint and does not fall neatly into one of the exceptions identified in note 2, supra, the court will not rely on it in considering the motion to dismiss.
Third, Heitman argues that, even if Kovanda received the account statements, she could not have reasonably relied on them because (1) she knew that she had filled out the 2002 Beneficiary Form and (2) Attorney Feldman advised her that she should designate a beneficiary. Again, drawing all reasonable inferences in the plaintiffs' favor, the court is not prepared to say that it would have been unreasonable for Kovanda to rely on JHRPS's representations that she had no designated beneficiary even though she had personally filled out a beneficiary designation form some 15 years earlier. As for Attorney Feldman, her affidavit indicates that she advised Kovanda it would be best to designate a beneficiary so that the account proceeds would pass outside of probate, not because there was a risk that the proceeds might pass to an unintended beneficiary. (D. 22-14, ¶ 5). Kovanda's apparent failure to act to avoid probate has little bearing on the reasonableness of her alleged reliance on the statements' representations that her account would pass to her estate upon her death.
Fourth, and relatedly, Heitman argues that the plaintiffs will not be able to establish by competent evidence that Kovanda actually relied on the account statements. Even assuming this is correct, it is beside the point. At the motion to dismiss stage, all that matters is whether the plaintiffs have plausibly alleged sufficient facts, not whether they will ultimately be able to prove them. See Ocasio-Hernandez, 640 F.3d at 12. Here, the plaintiffs have alleged that Kovanda received and relied on her quarterly account statements from JHRPS. (D. 22, ¶¶ 71, 116, 152-53). For the moment, nothing more is required.
Heitman suggests that, if necessary, the court should convert its motion to dismiss into a motion for summary judgment pursuant to Federal Rule of Civil Procedure 12(d) and decide the case based on the administrative record. Because, as discussed below, additional discovery is likely warranted in this action, the court declines Heitman's invitation.
The motion to dismiss should therefore be denied as to Count III.
C. Count IV: Equitable Relief for Violation of Plan Terms
Through Count IV, the plaintiffs seek equitable relief to redress Heitman's alleged violations of the Plan terms. However, the only such violation they identify is Heitman's distribution of the account proceeds to Hallisey. (D. 22, ¶¶ 158-59). Because, as discussed above, the distribution to Hallisey accorded with the Plan documents, Count IV is without merit and should be dismissed.
D. Count V: Unjust Enrichment
The plaintiffs assert a claim of unjust enrichment against Hallisey under Florida law, where Hallisey resides, based on their allegations that Kovanda intended for the proceeds of the account to pass to her trust and not to Hallisey. Hallisey argues both that the claim is legally defective and that the court lacks personal jurisdiction over her regarding the claim. This court agrees with the latter argument, albeit for slightly different reasons than those Hallisey articulates.
As an initial matter, the parties disagree on whether ERISA preempts the plaintiffs' state-law unjust enrichment claim. ERISA “supercede[s] any and all State laws insofar as they . . . relate to any employee benefit plan.” 29 U.S.C. § 1144(a). “A law relates to a covered employee plan for purposes of [29 U.S.C. § 1144(a)] if it [1] has a connection with or [2] reference to such a plan.” Cal. Div. of Labor Standards Enf't v. Dillingman Constr., N.A., Inc., 519 U.S. 316, 324 (1997) (cleaned up). ERISA's preemptive scope includes “common-law cause[s] of action premised on the existence of an ERISA plan.” Id. (citing Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 140 (1990)).
However, neither the Supreme Court nor the First Circuit has ever decided whether a personal representative may assert statelaw claims against a recipient of ERISA benefits after distribution of said benefits. See Kennedy, 555 U.S. at 229 n.10 (“Nor do we express any view as to whether the Estate could have brought an action in state or federal court against Liv to obtain the benefits after they were distributed.”). That said, every circuit to address the question thus far has held that “ERISA does not preempt such suits.” Gelschus v. Hogen, 47 F.4th 679, 685 (8th Cir. 2022); see Metlife Life & Annuity Co. of Conn. V. Akpele, 886 F.3d 998, 1007 (11th Cir. 2018); Andochick v. Byrd, 709 F.3d 296, 300 (4th Cir. 2013); Est. of Kensinger v. URL Pharma, Inc., 674 F.3d 131, 136-67 (3d Cir. 2012). This is so because post-distribution suits do not necessarily involve the plan administrator, nor do they expose the plan administrator to double liability. Andochick, 709 F.3d at 299; cf. Haslam v. McLaughlin, Civil Action No. 22-11268-RGS, 2022 WL 16823011, at *4 (D. Mass. Nov. 8, 2022) (finding state-law claims against plan trustees preempted by ERISA and dismissing state-law claims against beneficiary for lack of subject-matter jurisdiction). Based on this precedent, the court finds that ERISA does not preempt the plaintiffs' unjust enrichment claim against Hallisey.
Hallisey provides additional reasons why Count IV fails on the merits but most of those arguments lack citations to any applicable case law, and so the court does not consider them here. See Higgins, 194 F.3d at 260. The one argument on the merits that Hallisey adequately develops is the notion that the plaintiffs cannot recover in equity because they have “unclean hands.” “The ‘unclean hands' doctrine is . . . an affirmative defense by which a defendant may preclude a plaintiff from equitable relief due to the plaintiff's own engagement in relevant misconduct.” Padmanabhan v. Healey, 159 F.Supp.3d 220, 225 (D. Mass. 2016) (citing Vaqueria Tres Monjitas, Inc. v. Irizarry, 587 F.3d 464, 480 (1st Cir. 2009)) . To obtain dismissal based on an affirmative defense, “the facts establishing the defense must: (1) be ‘definitively ascertainable from the complaint and other allowable sources of information,' and (2) ‘suffice to establish the affirmative defense with certitude.'” Gray v. Evercore Restructuring L.L.C., 544 F.3d 320, 324 (1st Cir. 2008) (quoting Nisselson v. Lernout, 469 F.3d 143, 150 (1st Cir. 2006). It is not definitively ascertainable from the record before the court that the plaintiffs have unclean hands such that they cannot possibly succeed on an equitable unjust enrichment claim.
Preemption aside, Hallisey contends that the court lacks personal jurisdiction over her regarding the unjust enrichment claim because she resides in Florida and has traveled to Massachusetts only a few times for reasons completely unrelated to this suit. Additionally, post-distribution, the proceeds from the disputed account are located with Hallisey in Florida and not in Massachusetts.
The plaintiffs, for their part, do not argue that the court can exercise specific personal jurisdiction over Hallisey based on her contacts with Massachusetts. Instead, they note that the court certainly has jurisdiction over Hallisey as to Count II, as ERISA provides for nationwide service of process, 29 U.S.C. § 1132(e)(2), and Hallisey has sufficient minimum contacts with the United States to satisfy the Due Process Clause of the Fifth Amendment, see United Elec., Radio and Mach. Workers of Am. V. 163 Pleasant St. Corp., 960 F.2d 1080, 1085-86 (1st Cir. 1992). Because the court has personal jurisdiction over Hallisey regarding Count II, so the plaintiffs argue, the court can and should also exercise pendent personal jurisdiction over her as to Count V.
Where a plaintiff asserts a claim under federal law, as is the case with the ERISA claims in this action, “the constitutional limits of the court's personal jurisdiction are fixed, in the first instance, not by the Fourteenth Amendment but by the Due Process Clause of the Fifth Amendment.” United Elec., Radio & Mach. Workers of Am., 960 F.2d at 1085. “In such circumstances, the Constitution requires only that the defendant have the requisite ‘minimum contacts' with the United States, rather than with the particular forum state (as would be required in a diversity case).” Id.
Pendent personal jurisdiction is a doctrine under which
a court may assert . . . personal jurisdiction over a defendant with respect to a claim for which there is no independent basis of personal jurisdiction so long as it arises out of a common nucleus of operative facts with a claim in the same suit over which the court does have personal jurisdiction.Action Embroidery Corp. v. Atl. Embroidery, Inc., 368 F.3d 1174, 1180 (9th Cir. 2004). The First Circuit has not yet decided whether pendent personal jurisdiction exists, see Mojtabai v. Mojtabai, 4 F.4th 77, 88 (1st Cir. 2021), but “the majority of federal district courts and every circuit court of appeals to address the question have upheld the application of pendent personal jurisdiction,” United States v. Botefuhr, 309 F.3d 1263, 1273 (10th Cir. 2002) . See also Nahigian v. Leonard, 233 F.Supp.2d 151, 159-60 (D. Mass. 2002) (exercising pendent personal jurisdiction over defendants as to state claim where defendants were subject to personal jurisdiction as to ERISA claims). Assuming pendent personal jurisdiction is available, “[e]xercise of jurisdiction under this doctrine is in the Court's discretion, and ‘[i]ts justification lies in considerations of judicial economy, convenience and fairness to the litigants.'” Langone v. Son, Inc., Civil Action No. 12-11717-GAO, 2015 WL 3744419, at *5 (D. Mass. June 15, 2015) (quoting United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 726 (1966)).
The court presumes that it has the authority and discretion to exercise pendent personal jurisdiction, but but does not believe it is suitable to do so with respect to this claim. As discussed above, the court recommends that Count II be dismissed on the merits. Should that recommendation be adopted, Hallisey would only remain as a defendant to the state-law unjust enrichment claim. There is some question as to whether the court would be able to exercise pendent personal jurisdiction over her with no remaining federal claim asserted against her. See Mojtabai, 4 F.4th at 89 (noting that pendent personal jurisdiction is limited to remaining claims against the same defendant over whom the court already has personal jurisdiction as to other claims); Olin Corp. v. Fisons PLC, 47 F.Supp.2d 151, 155 (D. Mass. 1999) (declining to exercise pendent personal jurisdiction over defendant as to state crossclaims after plaintiff dismissed federal claims against defendant). But even if the court could exercise pendent personal jurisdiction under these circumstances, a consideration of the applicable factors noted above counsels against doing so.
To be sure, at first blush, it may seem that notions of “judicial economy” would favor adjudicating Count III's breach of fiduciary duty claim against Heitman and Count V's unjust enrichment claim against Hallisey in the same action. After all, the two claims are related in that they both concern Kovanda's Heitman retirement account. On closer inspection, though, the two claims present disparate questions. The fiduciary duty claim concerns Heitman's maintenance of Kovanda's beneficiary designations during her lifetime and the misrepresentations it allegedly caused JHRPS to make to her, as well as Kovanda's alleged reliance on those misrepresentations. The unjust enrichment claim implicates the different concerns as to whether Kovanda, at the time of her death, intended to leave the account proceeds to the plaintiffs rather than Hallisey, and whether it would be inequitable for Hallisey to retain the proceeds. See Doral Collision Ctr., Inc. v. Daimler Tr., 341 So.3d 424, 429 (Fla. Dist. Ct. App. 2022) (setting forth elements of unjust enrichment under Florida law). While there is to be sure one overlapping question -- whether Kovanda wanted Hallisey to receive the account proceeds -- the facts of the breach of fiduciary duty claim have little to do with Hallisey at all. Indeed, the two claims are legally independent. A finding that Heitman breached its fiduciary duty to Kovanda might require Heitman to make the plaintiffs whole, but it would not necessarily require Hallisey to give the account proceeds to the plaintiffs. In parallel, the plaintiffs could potentially succeed on their unjust enrichment claim against Hallisey even if a jury were to find that Heitman did not breach its duty to Kovanda. Trying both claims together is thus unnecessary.
The other factors to be considered -- convenience and fairness to the litigants -- clearly favor not exercising pendent personal jurisdiction in this case. Litigating the unjust enrichment claim here would not be convenient for Hallisey, who lives in Florida and has few meaningful contacts with Massachusetts. Similarly, forcing her to litigate here is less than fair considering that the plaintiffs do not allege that Hallisey affirmatively engaged in any wrongdoing. Additionally, it bears noting that resolution of the unjust enrichment claim would have no real impact in Massachusetts, as no party is at home here and the contested funds are not located here. See Cerner Middle E. Ltd. v. Al-Dhaheri, Civil Action No. 16-11984-FDS, 2017 WL 776409, at *6 (D. Mass. Feb. 28, 2017) (noting that exercise of pendent personal jurisdiction would be “troublesome” where dispute “ha[d] nothing whatsoever to do with Massachusetts”). For all these reasons, the more prudent course would be to decline to exercise pendent personal jurisdiction over Count V, thus allowing the plaintiffs to refile the claim in Florida, if they so choose.
Indeed, it is unclear that litigating the case in Massachusetts is convenient for the plaintiffs, notwithstanding their choice of this forum. The plaintiffs reside in Indiana and Ohio. (D. 22, ¶¶ 1-2).
The court recommends therefore that Count V be dismissed for lack of personal jurisdiction.
E. Count I: Declaratory Judgment
Count I is not a standalone count but rather seeks a declaratory judgment against Heitman for conduct also covered by Counts II through IV. In line with the discussion above regarding Counts II through IV, Heitman's motion to dismiss Count I should be denied where the court finds that Count III alleges a viable breach of fiduciary duty claim.
F. Further Discovery
Finally, the plaintiffs assert that they should be permitted to engage in additional discovery to support their claims against Heitman. Heitman naturally disagrees and argues that the administrative record is complete and sufficient for the court to resolve this case. Although arguably beyond the scope of this court's mandate to address the merits of the defendants' motion to dismiss, this court believes that limited further discovery would be appropriate as to the breach of fiduciary duty claim, assuming the claim is found to survive the motion to dismiss.
“ERISA cases are generally decided on the administrative record without discovery, and ‘some very good reason is needed to overcome the presumption that the record on review is limited to the record before the administrator.'” Morales-Alejandro v. Med. Card Sys., Inc., 486 F.3d 693, 698 (1st Cir. 2007) (quoting Liston v. Unum Corp. Officer Severance Plan, 330 F.3d 19, 23 (1st Cir. 2003)). However, the First Circuit “ha[s] declined in cases like this one to adopt an ironclad rule against new evidence.” Liston, 330 F.3d at 23. Indeed, “certain kinds of claims . . . may in their nature or timing take a reviewing court to materials outside the administrative record.” Id. Claims for breach of fiduciary duty seem to fall into this category. See Orndorf v. Paul Revere Life Ins. Co., 404 F.3d 510, 520 (1st Cir. 2005) (“Where the challenge is not to the merits of the decision to deny benefits, but to the procedure used to reach the decision, outside evidence may be of relevance.”); Turner, 2023 WL 5179194, at *9 (allowing “discovery as to the actual representations made by defendants to plaintiff and other employees[] and the context in which they were made”); Russo v. Valmet, Inc., Civil Action No. 2:19-00324-DBH, 2020 WL 4432364, at *2 (D. Me. July 31, 2020) (permitting “focused discovery” as to alleged misrepresentations made to plaintiff). Even when further discovery is appropriate in an ERISA case, it “must be narrowly tailored so as to leave the substantive record essentially undisturbed.” Denmark v. Liberty Life Assurance Co. of Bos., 566 F.3d 1, 10 (1st Cir. 2009).
Here, the plaintiffs allege that Heitman breached its fiduciary duties by failing to properly maintain Kovanda's beneficiary designations and failing to provide those designations to JHRPS, thus causing JHRPS to misrepresent to Kovanda that she had not designated a beneficiary. The administrative record was focused on determining the proper beneficiary of Kovanda's account, not on Heitman's alleged mismanagement. Consequently, as the plaintiffs argue (and Heitman does not meaningfully dispute), there may be materials relevant to Heitman's alleged failures that are not present in the administrative record. This court believes it would be reasonable to permit the plaintiffs to conduct limited discovery as to Heitman's maintenance of beneficiary designations and any alleged misrepresentations made to Kovanda.
Heitman argues that further discovery would be futile because the plaintiffs will never be able to offer competent proof that Kovanda reasonably relied on the alleged misrepresentations that undergird the breach of fiduciary duty claim. Again, at this early stage of the case, the court declines to prognosticate what evidence the plaintiffs may or may not be able to marshal.
V. CONCLUSION
For the foregoing reasons, the court RECOMMENDS that Heitman's motion to dismiss be GRANTED as to Counts II and IV and DENIED as to Counts I and III. The court further RECOMMENDS that Hallisey's motion to dismiss be GRANTED.
The parties are hereby advised that under the provisions of Federal Rule of Civil Procedure 72(b), any party who objects to this recommendation must file specific written objections thereto with the Clerk of this Court within 14 days of the party's receipt of this Report and Recommendation. The written objections must specifically identify the portion of the proposed findings, recommendations, or report to which objection is made and the basis for such objections. The parties are further advised that the United States Court of Appeals for this Circuit has repeatedly indicated that failure to comply with Rule 72(b) will preclude further appellate review of the District Court's order based on this Report and Recommendation. See Keating v. Secretary of Health and Human Servs., 848 F.2d 271 (1st Cir. 1988); United States v. Emiliano Valencia-Copete, 792 F.2d 4 (1st Cir. 1986); Scott v. Schweiker, 702 F.2d 13, 14 (1st Cir. 1983); United States v. Vega, 678 F.2d 376, 378-79 (1st Cir. 1982); Park Motor Mart, Inc. v. Ford Motor Co., 616 F.2d 603 (1st Cir. 1980); see also Thomas v. Arn, 474 U.S. 140 (1985).