Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_06-cv-02408/USCOURTS-caed-2_06-cv-02408-3/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 29:1145 E.R.I.S.A.

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

MEDICAL BENEFITS

ADMINISTRATORS OF MD, INC., a

Maryland corporation; and

CUSTOM RAIL EMPLOYER WELFARE

TRUST FUND,

NO. CIV. S-06-2408 FCD DAD

Plaintiffs,

v. MEMORANDUM AND ORDER

SIERRA RAILROAD COMPANY, n/k/a

SIERRA NORTHERN RAILWAY; VANNA

M. WALKER; AMBER A. GILLES and

DAVID N. MAGAW,

Defendants.

----oo0oo----

 This matter is before the court on defendants Sierra

Railroad Company, n/k/a Sierra Northern Railway (“Sierra”), David

N. Magaw (“Mcgaw”), and Amber A. Gilles’ (“Gilles”)

(collectively, “defendants”) motions to dismiss plaintiffs’ first

amended complaint pursuant to Federal Rule of Civil Procedure

12(b)(6) for failing to state a claim upon which relief can be

///

///

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1 Defendant Gilles filed a separate motion to dismiss

that is nearly identical to the motion filed by Sierra and Magaw. 

The court jointly considers the motions herein. Defendant Vanna

M. Walker (“Walker”) has not appeared in this action and is not a

moving party on the motions.

2 Because the court finds that oral argument will not be

of material assistance, it submits these matters on the papers. 

E.D. Cal. L.R. 78-230(h).

3 The following facts are derived from plaintiffs’ first

amended complaint filed May 24, 2007.

2

granted.1 Defendants contend that plaintiffs’ state law claims

are barred by ERISA sections 502(a) and 514(a), and that

plaintiffs fail to state a claim under ERISA section 502(a)(3)

for restitution. Plaintiffs oppose defendants’ motions to

dismiss. 

For the reasons discussed below, defendants’ motions to

dismiss are GRANTED as to plaintiffs’ state law claims, but

DENIED as to plaintiffs’ ERISA section 502(a)(3) claim.2 

BACKGROUND3

Plaintiff Custom Rail Employer Welfare Trust Fund (“CREW”)

is a multiple employer welfare arrangement for certain railroad

employers which has established an Employee Welfare Benefit Plan

(the “Plan”) within the meaning of the Employee Retirement Income

Security Act of 1974, 29 U.S.C. section 1001 et. seq. (“ERISA”). 

CREW provides health benefits to qualified and properly enrolled

active employees of participants and is a fiduciary as defined by

ERISA. (First Amended Complaint (“Am. Comp.”) at ¶ 16.) The

Plan is administered by plaintiff Medical Benefits Administrators

(“MBA”). (Id. at ¶ 15.)

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3

Sierra is a short line railroad company in California that

qualifies to participate in CREW through membership in the Small

Railroad Business Owners Association of America. (Id. at ¶ 17.) 

Sierra submitted an application for group insurance coverage

through CREW in approximately December 2003. (Id. at ¶ 29.) 

Sierra and CREW reached an agreement, and Sierra’s participation

in the Plan became effective on January 1, 2004. (Id.) Under

the agreement, an eligible employee is one who works normally at

least 24 hours per week and is on the regular payroll of the

employer for that work or is under a contract or a full-time

written appointment with a member employer. (Id. at Ex. A.) 

During the relevant time period, Gilles was the Manager of

Accounting and Human Resources, Magaw was the Vice President, and

Walker was represented to be the Safety Manager for Sierra. (Id.

at ¶ 18.) On July 17, 2003, Sierra submitted a Group Benefit

Plan Questionnaire (the “Questionnaire”) to MBA for participation

in CREW. Magaw signed the Questionnaire and attached a list of

Sierra’s fifty employees, thirty-five of which were to be

enrolled in CREW. (Id. at ¶ 23.) 

In response to the Questionnaire, CREW began discussions

with Sierra, and Sierra was required to submit supplemental lists

of employees who were eligible for the Plan. From July through

December 2003, Gilles submitted lists of employees to CREW for

consideration and rating of the Plan. (Id. at ¶ 24-26.) Gilles

also submitted information to CREW regarding which employees were

covered under Sierra’s existing employee benefit plan with Kaiser

Permanente, which did not include Walker as of January 1, 2004. 

(Id. at ¶ 28.) 

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4

On December 10, 2003, Magaw signed the Participation

Application and Agreement (the “Agreement”) between Sierra and

CREW, and Gilles faxed it to CREW. (Id. at ¶ 29.) The Agreement

certified that Sierra read and understood that CREW would rely on

the information set forth by Sierra as a basis for approval. 

(Id. at ¶ 30.) On January 1, 2004, the Plan between CREW and

Sierra became effective. (Id. at ¶ 29.) On January 7, 2004,

Gilles submitted an Employee Enrollment Form (“Employee Form”),

signed by Walker, seeking to add Walker as an enrollee in CREW

and verifying that all the information contained therein was

correct. (Id. at ¶ 32.) The Employee Form, plaintiffs allege,

misrepresented that Walker was employed full-time by Sierra as a

Safety Manager since December 19, 2002. (Id. at ¶ 34.) After

Walker enrolled in CREW, she, along with healthcare providers,

began submitting claims for medical benefits stemming from her

treatment of Multiple Myeloma, with which she had been diagnosed

prior to January 7, 2004. (Id. at ¶¶ 35-36.) Neither Walker nor

Gilles disclosed Walker’s illness prior to her enrollment in

CREW. (Id. at ¶ 37.)

On September 8, 2004, Ronald J. Wilson, the CEO of MBA,

asked Gilles and Magaw during a telephone call whether Walker was

an employee of Sierra. Magaw responded that Walker was a

“contract employee” of Sierra and that Sierra had an agreement to

cover her because she was Sierra’s Safety Director. (Id. at ¶

38.) Plaintiffs allege that Walker did not meet the criteria as

defined in the Summary Plan Description in order to enable her to

receive coverage. (Id. at ¶ 39.) In reliance on

misrepresentations by Sierra, MBA made payments from CREW to

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5

healthcare providers on behalf of Walker in the amount of

$177,740.35. (Id. at ¶ 42.) 

STANDARD

On a motion to dismiss, the allegations of the complaint

must be accepted as true. Cruz v. Beto, 405 U.S. 319, 322

(1972). The court is bound to give plaintiff the benefit of

every reasonable inference to be drawn from the “well-pleaded”

allegations of the complaint. Retail Clerks Int'l Ass'n v.

Schermerhorn, 373 U.S. 746, 753 n.6 (1963). Thus, the plaintiff

need not necessarily plead a particular fact if that fact is a

reasonable inference from facts properly alleged. See id. 

Nevertheless, it is inappropriate to assume that the

plaintiff “can prove facts which it has not alleged or that the

defendants have violated the . . . laws in ways that have not

been alleged.” Associated Gen. Contractors of Calif., Inc. v.

Calif. State Council of Carpenters, 459 U.S. 519, 526 (1983). 

Moreover, the court “need not assume the truth of legal

conclusions cast in the form of factual allegations.” United

States ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n.2 (9th

Cir. 1986).

Ultimately, the court may not dismiss a complaint in which

the plaintiff alleged “enough facts to state a claim to relief

that is plausible on its face.” Bell Atlantic Corp. v. Twombly,

127 S. Ct. 1955 (2007). Only where a plaintiff has not “nudged

[his or her] claims across the line from conceivable to

plausible,” is the complaint properly dismissed. Id. “[A] court

may dismiss a complaint only if it is clear that no relief could

be granted under any set of facts that could be proved consistent

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4 ERISA section 502(a)(3) is codified at 29 U.S.C.

section 1132(a).

6

with the allegations.” Swierkiewicz v. Sorema N.A., 534 U.S.

506, 514 (2002) (quoting Hudson v. King & Spalding, 467 U.S. 69,

73 (1984)). 

In ruling upon a motion to dismiss, the court may consider

only the complaint, any exhibits thereto, and matters which may

be judicially noticed pursuant to Federal Rule of Evidence 201. 

See Mir v. Little Co. Of Mary Hospital, 844 F.2d 646, 649 (9th

Cir. 1988); Isuzu Motors Ltd. v. Consumers Union of United

States, Inc., 12 F.Supp.2d 1035, 1042 (C.D. Cal. 1998).

ANALYSIS

Plaintiffs argue that defendants’ alleged misrepresentations

regarding Walker’s employment status and eligibility for coverage

under the Plan give rise to several claims. First, plaintiffs

claim that they are entitled to restitution against Sierra and

Walker under ERISA section 502(a)(3).4 Plaintiffs also seek

relief under state law, asserting the following claims: 

(1) breach of fiduciary duty against Sierra; (2) fraud against

Sierra, Walker, Gilles, and Magaw; (3) contractual fraud against

Sierra; and (4) negligent misrepresentation against Sierra,

Walker, Gilles, and Magaw. In response, defendants assert that

plaintiffs’ state law claims are preempted by ERISA. Defendants

further allege that plaintiffs’ claim for relief under ERISA does

not seek restitution; rather, defendants argue that plaintiffs

are seeking monetary damages which are not recoverable as

“equitable relief” under ERISA section 502(a)(3) and therefore

/// 

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5 Because the court finds that plaintiffs’ state law

claims are preempted by ERISA section 514(a), it does not address

whether the claims are alternatively preempted by section 502(a).

7

plaintiffs’ ERISA claim fails to state a cause of action upon

which relief can be granted.

A. Plaintiffs’ State Law Tort Claims are Preempted by

ERISA.5

The Ninth Circuit has consistently recognized that “ERISA

contains one of the broadest preemption clauses ever enacted by

Congress.” Security Life Ins. Co. of America v. Meyling, 146

F.3d 1184, 1188 (9th Cir. 1998) (quoting Evans v. Safeco Life

Ins. Co., 916 F.2d 1437, 1439 (9th Cir. 1988)). ERISA section

514(a) unequivocally preempts all state laws “insofar as they may

now or hereafter relate to any employee benefit plan.” 29 U.S.C.

§ 1144(a). Further, the scope of section 514(a) preemption

encompasses common law causes of action that “relate to” ERISA

plans. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 47-48

(1987). Even though state laws “which regulate insurance,

banking or securities” are not preempted under 29 U.S.C. section

1144(b)(2)(A), plaintiff CREW’s claim that it is fully insured

under a reinsurance agreement does not save it from preemption. 

See Kentucky Ass’n of Health Plans, Inc. v. Miller, 538 U.S. 329

(2003) (recognizing that for laws to be deemed regulating

insurance and therefore not preempted by ERISA, they must be

“specifically directed toward” the insurance industry; “laws of

general application that have some bearing on insurers do not

qualify.”)

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8

The United States Supreme Court has repeatedly held that the

“relate to” standard of section 514(a) is a broad one. “The

phrase ‘relate to’ was given its broad common-sense meaning, such

that a state law ‘relate[s] to a benefit plan’ in the normal

sense of the phrase, if it has a connection with or reference to

such a plan.” Metropolitan Life Ins. Co. v. Massachusetts, 471

U.S. 724, 739 (1985) (citing Shaw v. Delta Air Lines, Inc., 463

U.S. 85, 97 (1983)). A state law claim has a “connection with” a

plan regulated by ERISA when the action has an impact on a

relationship between traditional ERISA entities, such as between

a participant and the plan or an employer. Abraham v. Norcal

Waste Sys., Inc., 265 F.3d 811, 820-21 (9th Cir. 2001); Blue

Cross of California v. Anesthesia Care Assocs. Med. Group, Inc.,

187 F.3d 1045, 1052 (9th Cir. 1999). A state law claim has a

“reference to” a plan regulated by ERISA when the claim depends

on the existence of an ERISA plan, and the plan must exist in

order for the claim to survive. California Div. Of Labor

Standards Enforcement v. Dillingham Constr., N.A., Inc., 519 U.S.

316, 324-25 (1997), (citing Ingersoll-Rand Co. v. McClendon, 498

U.S. 133, 140 (1990)). If interpretation of an ERISA plan is

required by a state law claim, that claim is preempted. See

Metropolitan, 471 U.S. at 739.

Plaintiffs’ allegations in the first amended complaint, and

the exhibits attached thereto, demonstrate that plaintiffs’ state

law claims are interwoven with the Plan. For instance,

plaintiffs allege “Walker, Gilles and Magaw knew that Walker was

not an active employee of Sierra, as defined by the Summary Plan

Description, and that Walker was not an eligible employee of

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9

Sierra at the time that they submitted Walker’s Employee

Enrollment Form and as of the September 8, 2004 conversation with

Ronald J. Wilson.” (Am. Comp., at ¶ 40.) Further, plaintiffs

assert, “In fact, Walker was not an active employee of Sierra, as

defined by the Summary Plan Description.” (Id. at ¶ 39; see also

Id. at ¶¶ 20-51; 54-62; 65-71; 74-80; 83-88.) Thus, Walker’s

eligibility for Plan benefits is the gravamen of plaintiffs’

state law claims, and the resolution of this action requires

interpretation of the Plan.

Because plaintiffs’ state law claims have a connection with

and relate to the Plan, they are the sort of claims that ERISA

section 514(a) was designed to address. See Metropolitan, 471

U.S. at 739 (“The pre-emption provision was intended to displace

all state laws that fall within its sphere, even including state

laws that are consistent with ERISA’s substantive requirements”). 

Plaintiffs’ state law claims specifically have a connection with

the Plan because they have an impact on the relationship between

the Plan and the employer, precisely the traditional ERISA

entities described in Abraham. 265 F.3d at 820-21; (Am. Comp.,

at ¶¶ 5-11; 15-18.) Further, plaintiffs’ state law claims have a

reference to an employee benefit plan because the claims are

premised on the existence of an ERISA plan. See (Am. Comp., at

¶¶ 20-51; 54-62; 65-71; 74-80; 83-88); see also Providence Health

Plan v. McDowell, 361 F.3d 1243 (9th Cir. 2004) (“In evaluating

whether a common law claim has ‘reference to’ a plan governed by

ERISA, the focus is whether the claim is premised on the

existence of any ERISA plan, and whether the existence of the

Plan is essential to the claim’s survival”). 

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10

Despite the express allegations in the first amended

complaint, in their opposition to defendants’ motions, plaintiffs

raise additional facts, not alleged in their complaint, to argue

their claims are not preempted. (Pls.’ Opp’n. at 3, 6-7, 16-18.) 

Specifically, plaintiffs reference an internal “Adverse Benefit

Determination” issued on November 5, 2005 and suggest that

because Walker did not appeal this determination, her eligibility

for enrollment in the Plan can no longer be disputed. (Id. at

6.) In ruling upon a motion to dismiss, the court may consider

only the complaint, any exhibits thereto, and matters which may

be judicially noticed pursuant to Federal Rule of Evidence 201. 

See Mir, 844 F.2d at 649; Isuzu Motors Ltd., 12 F. Supp. 2d at

1042. Thus, facts not alleged in the complaint cannot be

considered, and accordingly, the court properly disregards

plaintiffs’ arguments based on these new facts.

Nevertheless, even if the court allowed plaintiffs to

further amend their complaint to include the additional facts,

the court’s finding of preemption would remain the same. The

Adverse Benefit Determination, an internal administrative

decision, is a fiduciary decision subject to review by the

federal courts under ERISA section 502(a)(1)(b). 29 U.S.C. §

1132(a)(1)(B); Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101

(1989)(addressing the appropriate standard of review to be

applied to section 501(a)(1)(B) actions stemming from benefits

claim determinations). Therefore, plaintiffs’ eligibility

determination is subject to review by the federal courts, and

such review would require interpretation of and reference to the

Plan. The court would not, as plaintiffs suggest, simply rely on

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plaintiffs’ internal finding that Walker was ineligible to

receive benefits. Contrary to plaintiffs’ protestations, there

is no legal basis to conclude that plaintiffs’ determination as

to Walker’s eligibility is conclusive as to Sierra, Magaw or

Gilles, let alone the court, which has the ultimate authority to

determine the propriety of the benefits determination. Given the

breadth of ERISA preemption generally, even if the court

considered the Adverse Benefit Determination, plaintiffs’ state

law claims are preempted by ERISA section 514(a) because they

relate to or reference the Plan as defined by ERISA.

In sum, each of plaintiffs’ state law claims relate to the

Plan and are therefore preempted. Plaintiffs’ state law claims

rest on the foundation that defendants misrepresented facts to

plaintiffs or that Walker was ineligible to enroll in the Plan. 

Each claim requires interpretation of the Plan’s eligibility

requirements in order to resolve the issues at stake, regardless

of any alleged misrepresentation. That is, if Walker met the

eligibility requirements, plaintiffs would have no claim. Thus,

each state law cause of action is preempted by ERISA section

514(a).

B. Plaintiffs Allege an Equitable Remedy, and therefore,

their ERISA Claim Survives.

Defendants assert that plaintiffs have failed to state a

claim under ERISA section 502(a)(3) because they impermissibly

seek money damages, not equitable restitution. In order to

sustain a claim under section 502(a)(3), a plaintiff must plead

that (1) it is an ERISA fiduciary; and (2) it is seeking

equitable relief to redress violations or enforce provisions of

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the plan. Reynolds Metals Co. v. Ellis, 202 F.3d 1246, 1247 (9th

Cir. 2000); Carpenters Health and Welfare Trust for Southern CA

v. Vonderharr, 384 F.3d 667, 672 (9th Cir. 2004). 

Defendants primarily rely on two United States Supreme Court

decisions to support their argument that plaintiffs do not seek

an “equitable” remedy because their ERISA claim is in essence a

disguised claim for money damages–-a legal remedy not permitted

by ERISA. In Mertens v. Hewitt Assocs., 508 U.S. 248, 256 (1993)

the court established that “equitable relief” under section

502(a)(3) includes only “those categories of relief that were

typically available in equity (such as injunction, mandamus, and

restitution, but not compensatory damages).” (emphasis in

original). In Great-West Life & Ann. Ins. Co. v. Knudson, 534

U.S. 204 (2002), the Court elaborated on Mertens’ construction of

502(a)(3) and explained that one feature of equitable restitution

was that it sought to impose a constructive trust or equitable

lien “on particular funds or property in the defendant’s

possession.” Id. at 213. Defendants, in reliance on these

cases, among others, assert that plaintiffs’ section 502(a)(3)

claim is impermissible because defendants are not in possession

of the funds plaintiffs paid to Walker’s healthcare providers.

(Def.’s Mot. Dismiss at 16-17.)

Both Mertens and Great-West are distinguishable from the

present case because neither involved an allegation of fraud or

wrongdoing. In Mertens, a class of former employees who

participated in a retirement plan brought suit against the plan’s

actuary for losses caused by allowing the employer to select the

plan’s actuarial assumptions, failing to disclose the plan’s

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6 (Am. Comp. at ¶ 34)(“By submitting the Employee

Enrollment Form, Walker and Gilles misrepresented to CREW that

Walker was employed full-time by Sierra Railroad Company as a

safety manager and that her date of hire was December 19,

2002.”); (Id. at ¶ 45)(“By misrepresenting that Walker was hired

on December 19, 2002 as a safety manager and that Walker was a

full-time Sierra employee, Sierra and Walker defrauded CREW into

paying Walker’s healthcare providers and Sierra was thereby able

to retain the money that Sierra should have paid to Walker’s

healthcare providers.”); (Id. at ¶ 51)(“By defrauding CREW to

make the payments to Walker’s healthcare providers, Sierra and

Walker now have possession of funds that Sierra and Walker should

have paid to Walker’s healthcare providers.”)

13

funding shortfall, and failing to disclose that the employer was

one of the actuary’s clients. 508 U.S. at 250. The Court held

that “appropriate equitable relief” under section 502(a) does not

include suits for money damages against a non-fiduciary who

knowingly participated in a fiduciary’s breach of fiduciary duty. 

Id. at 260-61. Great-West involved a claim for specific

performance of a reimbursement provision contained in an ERISA

plan. 534 U.S. at 206. The Court held that “appropriate

equitable relief” under section 502(a) does not authorize a

benefit plan to bring an action for specific performance of a

reimbursement provision, nor does it compel a plan beneficiary

who had recovered from a third-party tortfeaser to make

restitution. Id. at 210. While Mertens and Great-West can

accurately be viewed as limiting restitutionary remedies under

section 502(a)(3), neither case is on point with regard to

remedies under 502(a)(3) in a circumstance involving fraud or

wrongdoing. Because plaintiffs allege facts supporting fraud or

wrongdoing and Sierra’s receipt of “ill-gotten gains,” (Am. Comp.

at ¶¶ 34-42; 45; 51-52 )6 this claim for relief is allowable

under Ninth Circuit authority.

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Admittedly, defendants do not possess the actual funds that

plaintiffs paid to Walker’s healthcare providers, as those

precise monies are in the hands of the healthcare providers;

however, several Ninth Circuit cases have held that claims for

restitution relating to “ill-gotten gains” of a defendant are

permissible when a plaintiff alleges fraud or wrongdoing. In FMC

Med. Plan v. Owens, 122 F.3d 1258, 1261 (9th Cir. 1997) (citing

Mertens, 508 U.S. at 260), the court noted, “[r]estitution is

referred to in Mertens as the return of ‘ill-gotten’ assets or

profits taken from a plan.” In Carpenters Health and Welfare

Trust for Southern California v. Vonderharr, 384 F.3d 667, 672

(9th Cir. 2004), the court held that “Owens was based on Mertens

and did not preclude all claims for relief, but appropriately

limited restitution and constructive trust remedies to those

situations in which fraud or wrongdoing is shown.” Further, in

Reynolds where the appellant argued that Owens precludes all

forms of monetary relief under section 502(a)(3), the court held,

“This badly mischaracterizes the Owens opinion--the opinion

accepts, as does Mertens, that restitution and constructive trust

remedies may be appropriate under § 1132 (a)(3) [ERISA §

502(a)(3)], provided some fraud or wrongdoing is shown.” 202

F.3d at 1249. 

Indeed, in a case strikingly similar to this case, the

Northern District court found that the plaintiff plan fiduciary

had a viable restitution claim under ERISA section 502(a)(2). 

Northern California Food Employers & Retail Clerks Unions Benefit

Fund v. Dianda’s Italian-American Pastry Co., Inc., 645 F. Supp.

160 (N.D. Cal. 1986). The court finds this case persuasive. In

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7 For this reason, Trustees ex rel. Teamsters Benefit

Trust v. Doctors Medical Center of Modesto, Inc., 286 F. Supp. 2d

1234 (N.D. Cal. 2003), relied on by defendants, is

distinguishable. In Teamsters Benefit Trust, a trustee of a

union benefit trust brought suit against a health care provider

over a contract dispute regarding the interpretation of the

discount agreement between them. Unlike this case, there were no

allegations of fraud, but the court in Teamsters Benefit Trust

recognized, like Food Employers, that equitable restitution was

permissible in instances of fraud or wrongdoing. Id. at 1239.

8 Giving plaintiff the benefit of every reasonable

inference to be drawn from the well-pleaded allegation s of the

complaint, the court assumes for the purposes of its analysis

that, but for defendant Walker’s enrollment in the Plan, Sierra

was obligated to pay Walker’s medical fees. However, nothing in

this order precludes defendants from disputing this assumption at

a later stage in the litigation.

15

Food Employers, a benefit fund and administrator brought an

action against an employer to recover amounts mistakenly paid to

an ineligible employee based on the employer’s willful and false

reporting of hours worked. Id. at 161. The court held that

section 502(a)(3) allows for the redress of plan violations of

this sort and that such redress includes compensating the plan

for lost monies due to the violation. Id. Therefore, the court

held that the plaintiffs stated a claim under section 502(a)(3). 

The determinative factor in Food Employers, as well as this case,

is that fraud or wrongdoing are alleged.7

 

Viewing the facts in the light most favorable to plaintiffs,

the court finds that plaintiffs have properly stated a claim for

restitution under ERISA section 502(a)(3).8

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CONCLUSION

For the foregoing reasons, defendants’ motions to dismiss,

pursuant to Federal Rule of Civil Procedure 12(b)(6), are GRANTED

as to plaintiffs’ state law claims. Defendants Magaw and Gilles

are therefore dismissed as defendants, as only state law claims

are asserted against them. Defendants’ motions are DENIED as to 

plaintiffs’ claim under ERISA section 502(a)(3).

IT IS SO ORDERED.

DATED: October 5, 2007.

Case 2:06-cv-02408-KJM-KJN Document 63 Filed 10/05/07 Page 16 of 16