Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_11-cv-03102/USCOURTS-caed-2_11-cv-03102-5/pdf.json

Parties Involved:
Mark A. Habib
Defendant
James P. McKenna
Defendant
Virginia C. Moon
Counter Defendant
David H. Rush
Counter Claimant

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

VIRGINIA C. MOON, on her own

behalf and on behalf of the

Peters Rush Habib & McKenna

401(k) Profit Sharing Plan,

 Plaintiff,

 v.

DAVID H. RUSH, MARK A. HABIB,

and JAMES P. MCKENNA, 

 Defendants.

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2:11-cv-03102-GEB-CKD

ORDER

Defendants David H. Rush (“Rush”), Mark A. Habib (“Habib”),

and James P. McKenna (“McKenna”; collectively, “Defendants”) move under

Federal Rule of Civil Procedure (“Rule”) 12(h)(3) for dismissal of

Plaintiff’s Employment Retirement Income Security Act (“ERISA”) and

declaratory relief claims, arguing subject matter jurisdiction does not

exist for these claims. Defendants also seek dismissal of Plaintiff’s

state law claims, arguing the Court should decline to exercise

supplemental jurisdiction over the state claims if Plaintiff’s ERISA

claims are dismissed. In the alternative, Defendants move under Rule 56

for summary judgment on Plaintiff’s ERISA claims. The gravamen of

Defendants’ dismissal motion is their argument that “[Moon] is not a

‘beneficiary’ of the [Peters Rush Habib & McKenna 401(k) Profit Sharing

Plan (‘the Plan’)] within the meaning of ERISA and, therefore, . . . has

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no standing to bring her claims under ERISA[, 29 U.S.C. § 1132(a) (‘§

1132’)].” (Defs.’ Mot. (“Mot.”) 1:24-27.) Plaintiff Virginia C. Moon

(“Moon”) opposes the motion.

After considering the uncontroverted facts and each party’s

argument, it became evident in light of Moon’s current status under

ERISA, and concurrent state court proceedings pertinent to her status,

that Moon’s ERISA claims should be dismissed under the prudential

ripeness doctrine, and that the Court should discontinue exercising

supplemental jurisdiction over Moon’s state claims under 28 U.S.C. §

1367(c)(3). Because of the considerations involved with the prudential

ripeness doctrine and the Court’s discretionary decision whether to

continue exercising supplemental jurisdiction over Moon’s state claims,

issues involved in Defendants’ pending motion will not be reached unless

an issue has a bearing on the following sua sponte decision. 

I. FACTUAL BACKGROUND

The following facts are relevant to decision on the ripeness

issue. These facts are from the parties’ statements of undisputed facts

required by a local rule, and additional facts and evidence submitted by

a party. 

On September 26, 1995, an uncontested Judgment of Dissolution

concerning Moon and Rush’s former marriage was filed in the Superior

Court of California, County of Butte (“Butte County Superior Court

divorce case”). (Habib Decl. Filed in In re Rush, No. FL 004059 (Cal.

Super. Ct. Dec. 23, 2011) (hereinafter “Habib Decl.”) ¶¶ 2-3 (attached

as Ex. 7 to Wasow Decl.).) A document entitled “Stipulation & Order

Dividing Community Interest in Employee Benefit Plan—Qualified Domestic

Relations Order” (hereinafter “the DRO”) was filed on the same date.

(Stip. & Order (hereinafter “DRO”), In re Rush, No. FL 004059 (Cal.

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Super. Ct. Sept. 26, 1995) (attached as Ex. 1 to Wasow Decl.). The DRO

lists Rush as a Plan participant and Trustee of the Plan and Moon as an

alternate payee. Id. ¶ 4.

The DRO states: 

[Moon] is acknowledged to own and shall be accorded

an account with the plan which shall consist of the

segregation of . . . [o]ne-half of the community

interest in the approximately $6,500 cash; . . .

[a]ll of the community’s interest in 1525 Dayton

Rd. . . . ; [a]ll of the community interest in

Winder Baker receivable of $50,000 . . . ; [and

o]ne-half of the community interest in the real

property on Carr Drive in Ventura, California.

Id. ¶ 9. The address for serving notice to the Plan is listed in the DRO

as “PETERS et al PROFIT SHARING PLAN [for benefit of (‘f/b/o’)] DAVID H.

RUSH[,] c/o Trustee: David H. Rush.” Id. ¶ 4. Habib has been the Plan

Administrator since 1996. (Habib Decl. ¶ 1.)

“Rush, in his capacity as Trustee of the Plan, opened a

separate Plan account for the benefit of [Moon], and deposited Plan

funds into this account in 1996 and 1999.” (Pl.’s Statement of Add’l

Facts (“Pl.’s SAF”) 2:10-12.) Further, the Plan has owned a 20.2881

percent interest in the Dayton Road property since 1995. (Habib, “Dayton

Asset Management History,” June 21, 2010 (attached as Ex. 5 to Wasow

Decl.).) 

In a letter to Habib dated February 25, 2010, Moon’s counsel,

Teresa Renaker (“Renaker”), requested a “pension benefit statement

indicating . . . the total benefits [Moon] ha[d] accrued under the

Plan.” (Letter from Renaker to Habib, Feb. 25, 2010 (attached as Ex. 8

to Wasow Decl.).) Renaker also requested “the initial accounting [and]

periodic accountings” of Moon’s interest in the Plan since 1995. Id. 

In another letter to Habib dated June 16, 2010, Renaker

stated: 

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You have asserted that the Plan records do not

include the [DRO]. . . . I do not understand you to

assert that the Plan is not bound by the [DRO]. If

that understanding is incorrect, please so inform

me right away.

(Letter from Renaker to Habib, June 16, 2010 (attached as Ex. 9 to Wasow

Decl.).) Habib sent Renaker a letter dated June 22, 2010, to which he

attached several documents concerning Moon’s interest in the Plan’s

assets. (Letter from Habib to Renaker, June 22, 2010 (attached as Ex. 10

to Wasow Decl.).) Habib stated in the letter: 

If [Moon] has a mechanism by which she can take

title to Dayton and to the existing FBO [Moon] bank

account into another pension plan, or if she wants

to take title to those assets directly (as a

reported distribution), let me know. Assuming she

leaves her assets in the Plan, she will receive a

separate account statement for 2010 and future

years.

Id. Habib did not mention the qualification of the DRO in his letter.

Id. 

In a letter to Habib dated October 14, 2011, Renaker requested

information concerning whether Habib had “taken any steps to determine

the qualification of the DRO.” (Letter from Renaker to Habib, Oct. 14,

2011 (attached as Ex. 12 to Wasow Decl.).) “By letter dated November 15,

2011, [Habib], as the Plan Administrator, determined that the [DRO]

. . . was not a ‘qualified [DRO]’ [(‘QDRO’)] because [it] did not

satisfy the requirements of ERISA § 206(d)(3)(c)(ii).” (Defs.’ Statement

of Undisputed Facts # 1.) Habib’s letter was Plaintiff’s first

notification that Habib had determined the DRO was not a qualified DRO.

(Pl.’s SAF 3:20.) 

Moon filed her complaint in this federal court on November 21,

2011. (ECF No. 1.) Moon alleges in her complaint that each Defendant

breached his fiduciary duties under ERISA, and that Habib failed to

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provide her with required account statements and information that she

requested under ERISA. Moon also alleges three state claims against Rush

concerning their co-ownership of real property in which the Plan holds

an interest. 

“On December 23, 2011, . . . Habib and Rush filed a motion in

the Butte County [Superior Court] divorce case requesting a judicial

determination that the [DRO] was not qualified.” (Wasow Decl. ¶ 16.)

Moon opposed the motion. Id. ¶ 17. On March 13, 2012, the Butte County

Superior Court ruled that the DRO is not QDRO under ERISA. (Perkins

Decl. ¶ 3; Hr’g Trans. 3:7-11, In re Rush, No. FL 004059 (Cal. Super.

Ct. Mar. 13, 2012) (attached as Ex. 1 to Perkins Decl.).) Moon appealed

the Butte County Superior Court’s determination that the DRO is not

qualified under ERISA. (Pl.’s SAF 4:2-3.) Defendants filed their

dismissal motion in this case on April 16, 2012. (ECF No. 24.) 

II. DISCUSSION

Defendants argue that after Moon filed her ERISA claims in

this federal court, “the Superior Court of California, County of Butte,

a court of competent jurisdiction under ERISA, . . . ruled that the 1995

[DRO] referenced in [Moon’s] Complaint[,] . . . is not a ‘qualified

[DRO]’ . . . under ERISA § 206(d)(3)(J).” (Mot. 1:20-24.) Defendants

argue that “[s]ince a court of competent jurisdiction has determined

that the DRO does not constitute a QDRO, [Moon] is not . . . a

‘beneficiary’ under ERISA . . . , and she has no standing to bring her

[ERISA] claims[.]” Id. at 15:2-5. “Section 1132, the civil enforcement

provision of ERISA, provides that a civil action may only be brought by

a participant, a beneficiary, a fiduciary, or the Secretary of Labor.”

McBride v. PLM Int’l, Inc., 179 F.3d 737, 742 (9th Cir. 1999) (citing 29

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U.S.C. § 1132). “The list of potential claimants in [§] 1132 is

exclusive.” Id. 

Moon’s ERISA claims are based on her allegation that she is “a

beneficiary of the Plan pursuant to ERISA . . . , 29 U.S.C. §

1056(d)(3)(J)[,]” by virtue of her status as an alternate payee under

the DRO. (Compl. ¶¶ 6 & 11.) Under ERISA, “[t]he term ‘beneficiary’

means a person designated by a participant, or by the terms of an

employee benefit plan, who is or may become entitled to a benefit

thereunder.” 29 U.S.C. § 1002(8). In addition, “ERISA confers

beneficiary status on a nonparticipant spouse . . . in only narrow

circumstances delineated by its [QDRO] provisions[.]” Boggs v. Boggs,

520 U.S. 833, 846 (1997). Under these provisions, “[a] person who is an

alternate payee under a qualified [DRO] shall be considered for purposes

of any provision of [ERISA] a beneficiary under the plan.” 29 U.S.C. §

1056(d)(3)(J) (emphasis added). “The term ‘alternate payee’ means any

. . . former spouse . . . of a participant who is recognized by a QDRO

as having a right to receive all, or a portion of, the benefits payable

under a plan with respect to such participant.” Id. § 1056(d)(3)(K). 

“A [DRO] must meet certain requirements [set forth in §

1056(d)(3)(C)-(E)] to qualify as a QDRO.” Boggs, 520 U.S. at 846.

“Primary responsibility for determining whether a DRO is a QDRO . . .

rests with the plan itself.” Tr. of Dirs. Guild of Am. v. Tise, 234 F.3d

415, 420 (9th Cir. 2000). “Upon obtaining a [DRO] in a state court

proceeding, an alternate payee who seeks to establish a right to payment

pursuant to that order from an ERISA-covered benefit plan must present

the order to the pension plan administrator for a determination of

whether it is a [QDRO].” Id. “If the plan administrator determines that

the DRO does not meet the requirements of a QDRO, the . . . alternate

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payee may appeal the plan administrator’s decision to a court of

competent jurisdiction.” Marriage of Nasca v. PeopleSoft, 87 F. Supp. 2d

967, 969 (N.D. Cal. 1999) (citing 29 U.S.C. § 1056(d)(3)(H)(I)).

“ERISA grants federal courts exclusive jurisdiction over most

ERISA cases, including those where the plaintiff requests equitable

relief to enforce provisions of ERISA or enjoin violations of the

statute, while providing state courts with concurrent jurisdiction over

cases brought ‘to recover benefits’ or ‘to enforce . . . or to clarify’

rights under the terms of the plan itself.” Mack v. Kuckenmeister, 619

F.3d 1010, 1018 (9th Cir. 2010) (quoting 29 U.S.C. §§ 1132(a)(1)(B),

1132(a)(3), 1132(e)(1)). However, “[b]ecause a state court has

concurrent jurisdiction over . . . proceedings [to enforce, clarify, or

collect] under 29 U.S.C. § 1132(a)(1)(B), . . . it follows that it has

jurisdiction to decide the intermediate question of whether or not the

DRO is a QDRO.” Id. 

In enacting ERISA, “Congress expressly contemplated that

further state court proceedings might ensue . . . through which the

alternate payee could attempt to cure any defects in the original DRO

and obtain an enforceable QDRO.” Tise, 234 F.3d at 422. “The QDRO

provisions of ERISA do not suggest that [the alternate payee] has no

interest in the plan[] until she obtains a QDRO, they merely prevent her

from enforcing her interest until the QDRO is obtained.” In re Gendreau,

122 F.3d 815, 819 (9th Cir. 1997); see Carmona v. Carmona, 603 F.3d

1041, 1056 (9th Cir. 2010) (“ERISA provides for further state court

proceedings after the initial DRO is issued to clarify and fix any

technical defects in the original DRO.”); cf. In re Gendreau, 122 F.3d

815, 818 (9th Cir. 1997) (“[T]he order by the Family Court, if not

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itself a proper QDRO, at least gave [the ex-spouse] a right to obtain a

proper QDRO[.]”).

Defendants argue “this Court lacks federal subject matter

jurisdiction over [Moon’s ERISA] claims[,]” since “the [Butte County

Superior Court] . . . ruled that the 1995 [DRO] referenced in [Moon’s]

Complaint[,] . . . and upon which [her] claim of statutory standing

rests, is not a ‘qualified [DRO]’ . . . under ERISA § 206(d)(3)(J).”

(Mot. 1:20-24.) Defendants argue that “[s]ince the DRO is not a QDRO,

[Moon] is not a ‘beneficiary’ of the [Plan] . . . and, therefore, [she]

has no standing[.]” Id. at 1:24-27. Defendants rely on a copy of an

order from the Butte County Superior Court in support of this argument,

in which that court determined that Moon’s DRO is not a QDRO. Moon

argues she “has a colorable claim to a benefit under the Plan” since

“there is no question that she will at some point in the future be

entitled to a benefit under the Plan pursuant to a [QDRO] (as a result

of reopening the divorce proceeding, if that becomes necessary).” (Opp’n

14:22-25 & 15:28.)

Although Defendants argue the Butte County Superior Court’s

determination concerning Moon’s beneficiary status deprives this Court

of subject matter jurisdiction (Mot. 1:20-27), the Ninth Circuit has

held that a plaintiff’s statutory standing under § 1132 “is a

substantive element of [an ERISA] claim, not a prerequisite for subject

matter jurisdiction.” Leeson v. Transamerica Disability Income Plan, 671

F.3d 969, 971 (9th Cir. 2012) (holding that “participant” status is an

element of the plaintiff’s ERISA claim); see Bilyeu v. Morgan Stanley

Long Term Disability Plan, --- F.3d ----, No. 10-16070, 2012 WL 2333629,

at *5 (9th Cir. June 20, 2012) (treating “fiduciary” status under ERISA

as an element of an ERISA claim); Harris v. Amgen, Inc., 573 F.3d 728,

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732 n.3 (9th Cir. 2009) (“Although the district court dismissed

[plaintiff’s ERISA] claims for lack of subject matter jurisdiction, a

dismissal for lack of statutory standing is properly viewed as a

dismissal for failure to state a claim.”); Vaughn v. Bay Envtl. Mgmt.,

Inc., 567 F.3d 1021, 1024 (9th Cir. 2009) (same). However, Moon’s

current status under ERISA and concurrent state court proceedings

implicate prudential ripeness principles.

“Ripeness has two components: constitutional ripeness and

prudential ripeness.” In re Coleman, 560 F.3d 1000, 1004 (9th Cir. 2009)

(citation omitted). “While [constitutional] ripeness is jurisdictional,

[p]rudential considerations of ripeness are discretionary.” McClung v.

City of Sumner, 548 F.3d 1219, 1224 (9th Cir. 2008) (internal quotation

marks and citation omitted). Here, “the facts presented raise only

prudential concerns.” Id. “The Supreme Court has developed a two-part

test for determining the prudential component of ripeness . . . : the

fitness of the issues for judicial decision and the hardship to the

parties of withholding court consideration.” Id. (internal quotation

marks and citation omitted).

Moon’s ERISA claims are not “fit[] . . . for [federal]

judicial decision,” since the Butte County Superior Court has already

determined her DRO is not a QDRO. Id. The Butte County Superior Court’s

determination precludes Moon from pursuing her ERISA claims until she

obtains a QDRO. The record evinces that the proceedings in state court

concerning the DRO have not concluded. Moon has appealed the Butte

County Superior Court’s determination that the DRO is not a QDRO, and

each party in this federal case argues that the Butte County Superior

Court can revise the DRO to cure the deficiencies. In light of the

ongoing proceedings in state court, dismissal of Moon’s ERISA claims

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does not appear to cause Moon to endure hardship, since she needs to

obtain a QDRO before she can prosecute her ERISA claims. 

Since Moon’s federal claims are not ripe, they are dismissed

without prejudice. Therefore, the Court may sua sponte decide whether to

continue exercising supplemental jurisdiction over the state claims.

Under 28 U.S.C. § 1367(c)(3), a district court “may decline to exercise

supplemental jurisdiction over a [state] claim” if “all claims over

which it has original jurisdiction” have been dismissed. The “discretion

[whether] to decline to exercise supplemental jurisdiction over state

. . . claims is triggered by the presence of one of the conditions in §

1367(c), [and] is informed by the . . . values of economy, convenience,

fairness and comity” as delineated by the Supreme Court in United Mine

Workers of America v. Gibbs, 383 U.S. 715, 726 (1966). “In a case in

which all federal law claims are eliminated before trial, the balance of

these factors will generally point toward declining to exercise

jurisdiction over the remaining state law claims.” Nishimoto v.

Federman–Bachrach & Assoc., 903 F.2d 709, 715 (9th Cir. 1990).

Judicial economy does not favor continuing to exercise

supplemental jurisdiction since none of the state claims have been

addressed on the merits. See Otto v. Heckler, 802 F.2d 337, 338 (9th

Cir. 1986) (“[T]he district court, of course, has the discretion to

determine whether its investment of judicial energy justifies retention

of jurisdiction or if it should more properly dismiss the claims without

prejudice.”) (citation omitted). Nor do the comity and fairness factors

weigh in favor of exercising supplemental jurisdiction, since

“[n]eedless decisions of state law should be avoided both as a matter of

comity and to promote justice between the parties, by procuring for them

a surer-footed reading of applicable law.” Gibbs, 383 U.S. at 726. 

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III. CONCLUSION

For the stated reasons, Moon’s federal claims are dismissed

without prejudice, and the state claims are dismissed under 28 U.S.C. 

§ 1367(c). The Clerk is directed to close this action. 

Dated: September 7, 2012

 

GARLAND E. BURRELL, JR.

Senior United States District Judge

 

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