Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_04-cv-01358/USCOURTS-caed-2_04-cv-01358-44/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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1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

JAMES P. DEFAZIO, et al.,

Plaintiffs,

 v.

 HOLLISTER, INC., et al.,

Defendants. /

NOS. CIV. 04-1358 WBS GGH

05-0559 WBS GGH

05-1726 WBS GGH

CONSOLIDATED

ORDER AND MEMORANDUM RE:

DEFENDANTS’ MOTION TO DISMISS

----oo0oo----

I. Factual and Procedural Background

To avoid repetition, the court will refrain from

reciting the entire factual and procedural background, which

essentially remains the same as in its April 8, 2008 Order. 

Defazio v. Hollister, Inc., No. 04-1358, 2008 WL 958185, at *1-2

(E.D. Cal. Apr. 8, 2008). 

Presently before the court is defendants’ motion to

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1 Plaintiff Ellis has filed a separate complaint from the

other plaintiffs. Ellis’s current complaint is the Fourth

Amended Complaint, filed January 23, 2008.

2

dismiss certain claims in the Fifth Amended Complaint (“HAC”).1

II. Discussion

A. Legal Standards

On a motion to dismiss, the court must accept the

allegations in the complaint as true and draw all reasonable

inferences in favor of the plaintiff. Scheuer v. Rhodes, 416

U.S. 232, 236 (1974), overruled on other grounds by Davis v.

Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322

(1972). To survive a motion to dismiss, a plaintiff needs to

plead “only enough facts to state a claim to relief that is

plausible on its face.” Bell Atl. Corp. v. Twombly, 127 S. Ct.

1955, 1974 (2007). Dismissal is appropriate, however, where the

plaintiff fails to state a claim supportable by a cognizable

legal theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696,

699 (9th Cir. 1990); see also Conley v. Gibson, 355 U.S. 41, 47

(1957), abrogated on other grounds by Twombly, 127 S. Ct. at 1968

(complaint must “give the defendant fair notice of what the

plaintiff’s claim is and the grounds upon which it rests”). 

Generally, materials outside the pleadings may not be

considered on a motion to dismiss pursuant to Federal Rule of

Civil Procedure 12(b)(6). Hal Roach Studios, Inc. v. Richard

Feiner & Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990). When

“matters outside the pleadings are presented to and not excluded

by the court, the motion must be treated as one for summary

judgment under Rule 56.” Fed. R. Civ. P. 12(d). However,

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2 Plaintiffs allege that the motion was filed on January

23 (HAC ¶ 135), while defendants contend that it was filed on

January 18. (Defs.’ Mem. Supp. Mot. Dismiss 2:13 n.3.) Since

they do not dispute that they are referencing the same motion,

the court will simply refer to it as the “January 2008” motion.

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certain materials may be considered without converting the motion

to one for summary judgment. The court may (1) consider

materials necessarily part of the complaint even if they are not

attached to it so long as their authenticity is not contested and

(2) take judicial notice of matters of public record. Lee v.

City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001). 

Here, defendants have requested that the court take

judicial notice of ten orders and one brief that are part of the

record of the proceedings in the Sacramento superior court. 

(Req. Judicial Notice Exs. A-K.) Both the HAC and Ellis’s Fourth

Amended Complaint refer to these materials (HAC ¶¶ 132-36;

Ellis’s Fourth Am. Compl. ¶¶ 69-71), and plaintiffs have not

contested their authenticity. Therefore, for the purposes of the

present motion to dismiss, the court may consider these materials

without converting the motion to one for summary judgment.

B. January 2008 Superior Court Motion

Plaintiff DeFazio has raised new allegations based upon

defendants’ January 2008 motion filed in Sacramento Superior

Court, including a claim that the filing of the motion violated

ERISA section 510 (29 U.S.C. § 1140) by “seeking to fine,

discipline, and discriminate against a participant (Ellis) and

beneficiary (DeFazio) who exercised their rights under ERISA and

the plan[.]” (HAC ¶ 179.) As alleged, Hollister and HolliShare

filed a motion in January 20082

 in Sacramento Superior Court to

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4

relieve themselves of any obligation under the most recent

domestic relations order (DRO), to have the court issue a new DRO

distributing DeFazio’s alternate payee account into an escrow

account, to have DeFazio and Ellis post a bond to indemnify

Hollister and HolliShare from liabilities they may face in the

present action regarding ERISA violations related to the DROs,

and to have Ellis and DeFazio pay sanctions for attorney’s fees

incurred in the process of determining the qualified status of

the DROs. (HAC ¶ 135.)

Defendants move to dismiss the claims based upon these

new allegations on two grounds: the Noerr-Pennington doctrine and

failure to state a cognizable claim under ERISA section 510. 

(Defs.’ Mem. Supp. Mot. Dismiss 4:11-15, 6:12-14.)

1. Noerr-Pennington Doctrine

The Noerr-Pennington doctrine, named for the Supreme

Court decisions in E. R.R. Presidents Conference v. Noerr Motor

Freight, Inc., 365 U.S. 127 (1961), and United Mine Workers of

Am. v. Pennington, 381 U.S. 657 (1965), “ensures that those who

petition the government for redress of grievances remain immune

from liability for statutory violations, notwithstanding the fact

that their activity might otherwise be proscribed by the statute

involved.” White v. Lee, 227 F.3d 1214, 1231 (9th Cir. 2000). 

The doctrine, however, does not protect petitioning in the form

of “sham” litigation. See BE & K Const. Co. v. N.L.R.B., 536

U.S. 516, 525-26 (2002). Whether a particular action constitutes

“sham” litigation requires an analysis of both whether the

lawsuit is “objectively baseless in the sense that no reasonable

litigant could realistically expect success on the merits” and

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3 The text of ERISA section 510 states in relevant part: 

It shall be unlawful for any person to discharge, fine,

suspend, expel, discipline, or discriminate against a

participant or beneficiary for exercising any right to

which he is entitled under the provisions of an employee

benefit plan . . . or for the purpose of interfering with

the attainment of any right to which such participant may

become entitled under the plan, this subchapter, or the

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the litigant’s subjective motivation. Prof’l Real Estate

Investors v. Columbia Pictures Indus., 508 U.S. 49, 60-61 (1993).

Defendants’ argument for protection under the NoerrPennington doctrine, as well as the applicability of the “sham”

litigation exception to that doctrine, rests in part on the

parties’ assertions regarding the conduct of DeFazio and Ellis in

Sacramento Superior Court. For example, defendants explain that

they filed the January 2008 motion in response to “Ellis’s and

DeFazio’s duplicitous use of [DROs] . . . as an artifice to

satisfy DeFazio’s obligations to Ellis while simultaneously

claiming in this [c]ourt that Hollister violated ERISA each time

it complied with one of [the DROs].” (Defs.’ Mem. Supp. Mot.

Dismiss 5:19-22.) Plaintiffs, however, specifically deny that

DeFazio took the inconsistent positions defendants allege. 

(Pls.’ Opp’n Mem. 2:22 (citing Docket No. 350 1:13-6:2).) 

Because resolution of these conflicting assertions concerning the

specific conduct of both DeFazio and Ellis before the Superior

Court demand consideration of matters outside the allegations of

the complaints and the materials currently before the court, the

court cannot decide the merits of defendants’ immunity under the

Noerr-Pennington doctrine at this stage of the proceedings.

2. Failure to State a Claim Under ERISA § 5103 

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Welfare and Pension Plans Disclosure Act. It shall be

unlawful for any person to discharge, fine, suspend,

expel, or discriminate against any person because he has

given information or has testified or is about to testify

in any inquiry or proceeding relating to this chapter .

. . .

29 U.S.C. § 1140. 

6

Plaintiffs allege that as a result of defendants’

January 2008 motion, which sought sanctions for attorney’s fees

and a bond of indemnification in addition to relief from any

future DROs from the Superior Court, DeFazio and Ellis will

likely incur “needless tax liability.” (HAC ¶¶ 135-36.) 

Further, the HAC alleges that defendants sought “to fine,

discipline, and discriminate against a participant (Ellis) and

beneficiary (DeFazio) who exercised their rights under ERISA and

the Plan; and for testifying (or intending to testify) in this

instant action.” (Id. ¶ 179.) These allegations state a

cognizable claim under ERISA section 510, and are therefore

sufficient to survive a motion to dismiss. 

Accordingly, the court will deny defendants’ motion to

dismiss plaintiffs’ claims related to the filing of the January

2008 motion.

C. Qualified Domestic Relations Order (QDRO) Claims

Defendants also move to dismiss DeFazio’s and Ellis’s

claims concerning HolliShare’s compliance with the domestic

relations orders issued by the Sacramento Superior Court. 

Plaintiffs allege that defendants violated ERISA by complying

with these orders that distributed to DeFazio a community

property share of Ellis’s vested benefits in HolliShare (Ellis’s

Fourth Am. Compl. ¶ 69), and distributed to Ellis a portion of

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that community property share. (HAC ¶ 132.) They allege that

these orders did not meet the statutory requirements of QDROs

under ERISA. (See HAC ¶ 134; Ellis’s Fourth Am. Compl. ¶¶ 105-

111.)

Though this court has previously denied defendants’

motions to dismiss the QDRO claims (see Feb. 23, 2008 Order; Nov.

1, 2007 Order), defendants now argue several grounds for

dismissal that were not discussed in the court’s earlier orders:

(1) res judicata, (2) judicial estoppel, (3) the Colorado River

doctrine, and (4) the Rooker-Feldman doctrine.

1. Res Judicata

Defendants argue that res judicata precludes

consideration of the QDRO claims because the issue of the

qualified status of the Superior Court’s orders was already

determined by the Superior Court, and DeFazio and Ellis failed to

appeal those determinations. (Defs.’ Mem. Supp. Mot. Dismiss

8:18-25.) In response, plaintiffs argue that the Sacramento

Superior Court lacked jurisdiction to determine whether its

orders are QDROs because federal courts have exclusive

jurisdiction over that determination under ERISA. (Pls.’ Opp’n

Mem. 6:5-7:21, 9:2-17; Ellis’s Opp’n Mem. 4:24-5:15.) 

Whether state courts have jurisdiction to determine the

qualified status of a DRO is not a question the court need decide

at this time, as the court finds that the doctrine of res

judicata would not preclude the QDRO claims regardless. The

preclusive effect of the Superior Court orders is governed by

California state law. See Pension Trust Fund for Operating

Eng’rs v. Triple A Mach. Shop, Inc., 942 F.2d 1457, 1460 (9th

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4 California continues to use the term “res judicata” to

refer to claim preclusion and “collateral estoppel” to refer to

issue preclusion. Johnson v. GlaxoSmithKline, Inc., 166 Cal.

App. 4th 1497, 1507 n.5 (2008).

8

Cir. 1991) (“The law is well-settled that ‘a federal court must

give to a state-court judgment the same preclusive effect as

would be given that judgment under the law of the State in which

the judgment was rendered.’” (quoting Migra v. Warren City School

Dist. Bd. of Ed., 465 U.S. 75, 81 (1984)). Under California law,

“[r]es judicata ‘precludes parties or their privies from

relitigating a cause of action that has been finally determined

by a court of competent jurisdiction.’” Intri-Plex Technologies,

Inc. v. Crest Group, Inc., 499 F.3d 1048, 1052 (9th Cir. 2007)

(quoting Rice v. Crow, 81 Cal. App. 4th 725, 734 (2000)).4 

Unlike collateral estoppel, the doctrine of res

judicata only applies when the subsequent litigation is based on

the same cause of action. See Border Bus. Park, Inc. v. City of

San Diego, 142 Cal. App. 4th 1538, 1563 (2006) (describing the

elements of both res judicata and collateral estoppel). 

California adheres to the primary rights theory, under which “‘a

“cause of action” is comprised of a “primary right” of the

plaintiff, a corresponding “primary duty” of the defendant, and a

wrongful act by the defendant constituting a breach of that

duty.’” Manufactured Home Communities Inc. v. City of San Jose,

420 F.3d 1022, 1031 (9th Cir. 2005) (quoting Mycogen Corp. v.

Monsanto Co., 28 Cal. 4th 888, 904 (2002)). The content of a

primary right, as distinguished from a particular legal theory or

remedy, “is simply the plaintiff’s right to be free from the

particular injury suffered.” Mycogen, 28 Cal. 4th at 904

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(internal quotations and citations omitted). 

Here, plaintiffs’ proceedings in the Sacramento

Superior Court and the instant action are based on different

primary rights. The relevant primary right in the Superior Court

proceedings was the right of ex-spouses to community property and

child support obligations following the entry of divorce. In

contrast, the primary right at stake in the instant litigation

related to the QDRO claims is the right to have pension benefits

properly administered in accordance with the terms of ERISA. The

determination of property rights to pension benefits under state

law is a distinct matter from the question of whether such rights

are enforceable against a plan because the holder has obtained a

QDRO. See Trs. of the Dirs. Guild of Am. v. Tise, 234 F.3d 415,

420-21 (9th Cir. 2000), amended by 255 F.3d 661 (9th Cir. 2001). 

Defendants’ alleged violations of ERISA in complying with the

Superior Court orders is therefore grounded in a different injury

suffered by plaintiffs than that asserted in the Superior Court

action under state domestic relations law. Plaintiffs’ instant

action is thus based on a different primary right and cause of

action.

Defendants urge the court to follow the First Circuit’s

recent decision in Geiger v. Foley Hoag LLP Ret. Plan, 521 F.3d

60, 67-68 (1st Cir. 2008), in which the First Circuit found that

a party’s failure to challenge the qualified status of a DRO in

the state court proceedings precluded his federal action under

Massachusetts’ law of res judicata. That decision, however, did

not discuss whether the state court action was based on the same

cause of action as the federal litigation. In this case,

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plaintiffs’ Superior Court litigation and the instant action

concern different primary rights and thus different causes of

action under California law. Notwithstanding the First Circuit’s

decision in Geiger, res judicata is therefore inapplicable.

2. Judicial Estoppel

Defendants argue that DeFazio and Ellis are judicially

estopped from attacking the qualified status of the Superior

Court orders because they stipulated to those orders. (Defs.’

Mem. Supp. Mot. Dismiss 18:3-4.) Generally, judicial estoppel

“‘prevents a party from prevailing in one phase of a case on an

argument and then relying on a contradictory argument to prevail

in another phase [or proceeding].’” Zedner v. United States, 547

U.S. 489, 504 (2006) (quoting Pegram v. Herdrich, 530 U.S. 211,

227 n.8 (2000)).

Similar to defendants’ argument concerning the

applicability of the Noerr-Pennington doctrine, their judicial

estoppel argument rests on assertions of DeFazio and Ellis’s

conduct and the supposed intentionally inconsistent positions

taken in the Superior Court proceedings. (See Defs.’ Mem. Supp.

Mot. Dismiss 18:21-20:3.) As discussed above, because resolution

of these issues requires examination of matters not appropriate

for consideration on a motion to dismiss pursuant to Rule

12(b)(6), the court cannot decide defendants’ argument for

judicial estoppel at this time.

3. Colorado River Doctrine

Defendants also urge the court to decline jurisdiction

over the QDRO claims under the Colorado River doctrine, named for

the Supreme Court decision in Colorado River Water Conservation

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District v. United States, 424 U.S. 800 (1976). (Defs.’ Mem.

Supp. Mot. Dismiss 22:22-23.) This doctrine allows a federal

court to stay or dismiss federal proceedings pending resolution

of concurrent state court proceedings based upon considerations

of “wise judicial administration.” Smith v. Cent. Ariz. Water

Conservation Dist., 418 F.3d 1028, 1032-33 (9th Cir. 2005). The

doctrine is only applicable “‘in situations involving the

contemporaneous exercise of concurrent jurisdictions . . . .’” 

F.D.I.C. v. Nichols, 885 F.2d 633, 638 (9th Cir. 1989) (quoting

Colo. River, 424 U.S. at 817). 

Based on the information presently before the court, it

is not clear that there exists a contemporaneous exercise of

jurisdiction by another court over the QDRO claims. The most

recent order from the Superior Court, dated April 23, 2008 (see

Req. Judicial Notice Ex. B), does not indicate that the qualified

status of all of the Superior Court’s orders related to

plaintiffs’ QDRO claims is currently pending or will be resolved

by that court. The court thus will not exercise its discretion

to stay or dismiss the present proceedings under the Colorado

River doctrine. See Smith, 418 F.3d at 1033 (“‘[T]he existence

of a substantial doubt as to whether the state proceedings will

resolve the federal action precludes the granting of a [Colorado

River] stay.’” (second alteration in original)(quoting Intel

Corp. v. Advanced Micro Devices, Inc., 12 F.3d 908, 913 (9th Cir.

1993)); Nichols, 885 F.2d at 638 (holding that the district court

abused its discretion by declining jurisdiction under Colorado

River when no pending or concurrent state court proceeding

existed).

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4. Rooker-Feldman Doctrine

Defendants argue that the court lacks jurisdiction over

the QDRO claims under the Rooker-Feldman doctrine, named for the

Supreme Court decisions in Rooker v. Fidelity Trust Co., 263 U.S.

413 (1923), and District of Columbia Court of Appeals v. Feldman,

460 U.S. 462 (1983). (Defs.’ Mem. Supp. Mot. Dismiss 24:10-11.) 

The Rooker-Feldman doctrine, “a fairly narrow preclusion

doctrine,” Carmona v. Carmona, 544 F.3d 988, 995 (9th Cir. 2008),

“provides that federal district courts lack jurisdiction to

exercise appellate review over final state court judgments.” 

Henrichs v. Valley View Dev., 474 F.3d 609, 613 (9th Cir. 2007). 

In response to inconsistent application of the doctrine in lower

courts, the Supreme Court has clarified that the doctrine “is

confined to . . . cases brought by state-court losers complaining

of injuries caused by state-court judgments rendered before the

district court proceedings commenced and inviting district court

review and rejection of those judgments.” Exxon Mobil Corp. v.

Saudi Basic Indus. Corp., 544 U.S. 280, 284 (2005).

Because it is not clear from the HAC or the other

materials considered for the purposes of this motion that any

plaintiff is a “state-court loser” with respect to the issue of

the qualified status of the Superior Court’s DROs, the court

cannot determine at this time whether the Rooker-Feldman doctrine

divests it of jurisdiction.

Accordingly, the court will deny defendants’ motion to

dismiss plaintiffs’ QDRO claims.

D. The 1999 Letter

The HAC adds new claims based upon a letter dated

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5 While defendants outlined their arguments in their

brief in support of the present motion, they did not address them

in full. Instead, they incorporated arguments made in portions

of earlier briefs regarding a different motion. (Defs.’ Mem.

Supp. Mot. Dismiss 25:22-26.) Plaintiffs, in turn, followed

suit. (Pls.’ Opp’n Mem. 12:21-23.) As the docket already has

over four-hundred filings, the court will not continue to search

through sections of past filings to resolve a pending motion. On

any future motion in this case, therefore, the court will not

consider an argument simply incorporated by reference. 

6 For the purposes of this motion to dismiss, the court

takes all allegations in the HAC regarding the 1999 Letter’s

contents as true and accurate. See Cruz v. Beto, 405 U.S. 319,

322 (1972). Even though a court may, under certain

circumstances, consider documents necessarily part of a

complaint, Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th

Cir. 2001), the court cannot do so here with respect to the 1999

Letter because the parties have not filed a copy with the court.

13

February 17, 1999 (“1999 Letter”), which was allegedly sent by

several defendants to Hollister employees and plan participants

and described the transfer of JDS preferred stock to the

Director’s Trust. (HAC ¶ 34.) Defendants present a variety of

arguments for why these new allegations do not give rise to any

cognizable claim under ERISA.5

 They argue that the preparation

and distribution of the 1999 Letter was not a fiduciary act under

ERISA, that the alleged misrepresentations and omissions

contained in the 1999 Letter were not material, and that

plaintiffs lack standing to challenge the 1999 Letter because

none of them personally received it. (Defs.’ Mem. Supp. Mot.

Dismiss 25:9-20.)

Several of defendants’ contentions in support of these

arguments rely on facts outside the HAC or statements contained

in the 1999 Letter that are not alleged in the HAC.6 Such

arguments are more appropriate for consideration on a motion for

summary judgment. At this stage of the proceedings, it is

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sufficient that plaintiffs have alleged that particular plan

fiduciaries sent, knew of, or were otherwise responsible for the

1999 Letter (HAC ¶¶ 34-35), the letter constituted a “pitch[]” to

ninety-one employees and plan participants for approval of the

1999 Transaction (id. ¶¶ 34, 58), the letter contained false

statements and omissions (id. ¶¶ 71-73, 75, 104), and the 1999

Transaction was an element of the transfer of control of JDS to

the Directors’ Trust for the purpose of preventing HolliShare

from eventually assuming control of JDS (id. ¶¶ 4, 33). The

allegations contained in the HAC are thus adequate to survive a

motion to dismiss for failure to state a claim.

Accordingly, the court will deny defendants’ motion to

dismiss plaintiffs’ claims regarding the 1999 Letter.

IT IS THEREFORE ORDERED that defendants’ motion to

dismiss be, and the same hereby is, DENIED.

DATED: November 19, 2008

 

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