Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_10-cv-01067/USCOURTS-cand-3_10-cv-01067-0/pdf.json

Parties Involved:
Pepsico Employee Health Care Program
Defendant
Pepsico Long Term Disability Plan
Defendant
Anastacio Rodriguez
Plaintiff

Document Text:

United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

ANASTACIO RODRIGUEZ,

Plaintiff,

v.

PEPSICO LONG TERM

DISABILITY PLAN, et al.,

Defendants.

NO. C10-01067 TEH

ORDER GRANTING

DEFENDANTS’ MOTION TO

TRANSFER VENUE

This matter came before the Court on June 7, 2010, on the motion to dismiss or, in the

alternative, to transfer venue filed by Defendants PepsiCo Long Term Disability Plan (“LTD

Plan”) and PepsiCo Employee Health Care Program (“Health Care Program”) (collectively,

“Defendants”). Defendants argue that Plaintiff Anastacio Rodriguez (“Rodriguez” or

“Plaintiff”) filed his claim to recover long-term disability benefits in an improper venue,

contrary to a forum selection clause requiring that such lawsuits be brought in the United

States District Court for the Southern District of New York. Rodriguez contends that the

forum selection clause should not be enforced because he did not receive notice of the

provision, the clause runs contrary to federal law, and moving the venue to New York would

deny him his day in court due to his physical and financial constraints.

For the reasons set forth below, Defendants’ motion is GRANTED. This action will

be transferred to the Southern District of New York.

BACKGROUND

Rodriguez began working for Frito-Lay, Inc. – a division of PepsiCo, Inc. – in June

2000 as a route sales representative, a position that required him to drive a company truck to

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 The LTD Plan defines “Petitioner” as “an Employee, former Employee, Participant,

[or] former Participant,” among others. Sloat Aff., Ex. A at 73.

2

 A materially identical forum selection clause appears at Section 6.6 of the Health

Care Program effective January 1, 2008.

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locations where he would stock and merchandise Frito-Lay products. A degenerative lumbar

disc disease forced him to cease working in December 2006.

As a result of his condition, Rodriguez was granted 24 months of long-term disability

benefits through the LTD Plan, which is an “employee welfare benefit plan” within the

meaning of section 3(1) of the Employee Retirement Income Security Act of 1974

(“ERISA”), 29 U.S.C. § 1002(1). His claim for benefits was terminated as of December 31,

2008 based on the determination by the LTD Plan’s claims administrator, Sedgwick CMS

(“Sedgwick”), that he did not meet the definition of disability. He appealed that

determination on November 24, 2009, but Sedgwick affirmed its original decision by letter

dated January 5, 2010. Rodriguez filed this action on March 12, 2010, bringing one claim

under ERISA to recover benefits due to him under the LTD Plan and the Health Care

Program. See 29 U.S.C. § 1132(a)(1)(B).

Defendants moved to dismiss or to transfer venue on April 12, 2010, based on a forum

selection clause. As required by ERISA, 29 U.S.C. § 1102(a)(1), the terms of the LTD Plan

are set out in an official plan document, which included the following provision as of January

2007:

6.12 Restriction of Venue

Effective from and after January 1, 2007, any claim or action

filed in court or any other tribunal in connection with the

Program by or on behalf of a Petitioner (as defined in Section

6.11) shall only be brought or filed in the United States District

Court for the Southern District of New York.1, 2

Sloat Aff., Ex. A at 74. A description of the forum selection provision also appeared in a

“2007 Summary Plan Description,” which explained the terms of the LTD Plan in plain nonlegal language and was available on a benefits website for PepsiCo employees. This motion

requires the Court to determine whether the forum selection clause should be enforced.

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LEGAL STANDARD

A motion to dismiss based on a forum selection clause is governed by Federal Rule of

Civil Procedure 12(b)(3), which allows an action to be dismissed for “improper venue.” See

Argueta v. Banco Mexicano, S.A., 87 F.3d 320, 324 (9th Cir. 1996). On a Rule 12(b)(3)

motion, “the pleadings need not be accepted as true,” and “the court may consider facts

outside of the pleadings.” Murphy v. Schneider Nat’l, Inc., 362 F.3d 1133, 1137 (9th Cir.

2004). The Court “must draw all reasonable inferences in favor of the non-moving party and

resolve all factual conflicts in favor of the non-moving party.” Id. at 1138. A district court

shall, pursuant to 28 U.S.C. § 1406(a), “dismiss, or if it be in the interest of justice, transfer”

a case “laying venue in the wrong division or district.”

A forum selection clause is presumptively valid and “should control absent a strong

showing that it should be set aside.” M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15

(1972); see also Argueta, 87 F.3d at 325 (“Although Bremen is an admiralty case, its

standard has been widely applied to forum selection clauses in general.”). The party

opposing the enforcement of a forum selection clause has the burden of showing that it is

“‘unreasonable’ under the circumstances.” M/S Bremen, 407 U.S. at 10; see also

Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509, 514-15 (9th Cir. 1988). There

are three circumstances under which enforcement of a forum selection clause would be

unreasonable: “(1) if the inclusion of the clause in the agreement was the product of fraud or

overreaching; (2) if the party wishing to repudiate the clause would effectively be deprived

of his day in court were the clause enforced; and (3) if enforcement would contravene a

strong public policy of the forum in which suit is brought.” Murphy, 362 F.3d at 1140

(internal citations and quotation marks omitted). Forum selection clauses are also scrutinized

for “fundamental fairness,” and may be deemed unfair if inclusion of the clause was

motivated by bad faith, if “accession to the forum clause” was obtained “by fraud or

overreaching,” or if the party had no notice of the forum provision. Carnival Cruise Lines,

Inc. v. Shute, 499 U.S. 585, 595 (1991). “The party challenging the clause bears a ‘heavy

burden of proof.’” Murphy, 362 F.3d at 1140 (quoting M/S Bremen, 407 U.S. at 17).

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3 See, e.g., Klotz v. Xerox Corp., 519 F. Supp. 2d 430, 435-36 (S.D.N.Y. 2007)

(following the “vast majority of district courts” that “have enforced forum selection clauses

in ERISA plans”); Testa v. Becker, No. CV 10-638-GHK (FMOx), 2010 U.S. Dist. LEXIS

47130, at *22-23 (C.D. Cal. Apr. 22, 2010) (concluding forum selection clause “is valid and

enforceable,” and transferring action to appropriate venue); Laasko v. Xerox Corp., 566 F.

Supp. 2d 1018, 1024 (C.D. Cal. 2008) (enforcing forum selection clause because it is

“applicable to Plaintiff, does not contravene federal policy, and is fundamentally fair”);

Sneed v. Wellmark Blue Cross & Blue Shield, No. 1:07-CV-292, 2008 U.S. Dist. LEXIS

36382, at *9 (E.D. Tenn. Apr. 30, 2008) (deeming Plaintiff’s counsel having “to make one

trip to Iowa for a hearing” insufficient for “Plaintiffs to satisfy their ‘heavy burden of proof’

required to set aside a forum selection clause for inconvenience”); Schoemann v. Excellus

Health Plan, Inc., 447 F. Supp. 2d 1000, 1007 (2006) (finding “nothing in the language or

purposes of ERISA that renders invalid a forum-selection clause in a welfare-benefit plan”).

4 See Mezyk v. U.S. Bank Pension Plan, No. 3:09-cv-384-JPG, 2009 U.S. Dist. LEXIS

107574, at *11 (S.D. Ill. Nov. 18, 2009) (declining to enforce forum selection clause that

“was not negotiated with or reasonably communicated to the plaintiffs”); Nicolas v. MCI

Health & Welfare Plan No. 501, 453 F. Supp. 2d 972, 974 (E.D. Tex. 2006) (concluding that

“the policies of the ERISA statutory framework supercede the general policy of enforcing

forum selection clauses”).

4

DISCUSSION

The Ninth Circuit has not spoken to the enforceability of forum selection clauses in

ERISA plans. The vast majority of district courts to tackle the question have enforced such

clauses;3

 a couple have refused.4 Defendants, predictably, urge the Court to flow with the

tide of the majority; Rodriguez argues that only the outliers are applicable here. Although

Rodriguez acknowledges the presumption in favor of enforcing forum selection clauses, he

advances three rationales for overcoming that presumption. First, he contends that he

received no notice that the forum selection provision existed until this motion. Second, he

argues that the clause contravenes ERISA’s venue provision and defies its purpose of

guaranteeing access to the federal courts. Finally, Rodriguez alleges that enforcement of the

forum selection clause against him would be fundamentally unfair because his disability and

limited finances render him unable to travel to New York for the litigation. The Court

addresses each argument in turn.

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1. Notice of the Forum Selection Clause

Rodriguez claims that the first notice he received of the forum selection clause’s

existence was Defendants’ filing of this motion. Since notice of a forum selection clause is a

factor in assessing its fundamental fairness, Carnival Cruise Lines, 499 U.S. at 595,

Rodriguez contends that the lack of notice renders this clause unfair and unenforceable. 

Defendants respond that this argument is meritless because Rodriguez did have notice of the

venue requirement.

The forum selection clause at issue appears in the LTD Plan that became effective on

January 1, 2007. Rodriguez and his counsel submitted three requests for documents to

Sedgwick, but none of the materials that Sedgwick disclosed included any reference to the

forum selection clause. On January 13, 2009, before retaining counsel, Rodriguez faxed

Sedgwick a request for the contents of his claim file; the response included no plan

documents. His counsel, by letter dated May 19, 2009, requested from Sedgwick “[a]ll Plan

documents for the Long-Term Disability Plan, including but not limited to all governing

Plan documents and any amendments thereto, all Summary Plan Descriptions and statements

of material modification thereto, and any documents distributed to participants which detail

or comprise the terms of the Plan.” Springer-Sullivan Decl., Ex. 3 at ROD468. After

Sedgwick denied Rodriguez’s appeal, his counsel reiterated this request on January 12, 2010. 

Sedgwick responded to each of counsel’s communications, but furnished only the PepsiCo

LTD Plan effective January 1, 2000, and the PepsiCo 2006 Benefit Book, neither of which

included the forum selection clause. As a result, Rodriguez claims he only became aware of

the forum selection clause when the instant motion was filed.

However, Defendants offer two examples of notice that was given or available to

Rodriguez before he brought this action. Sedgwick’s January 10, 2010 letter denying

Plaintiff’s appeal explained that, “[u]nder the terms of the Plan, any claim or action filed in

court or any other tribunal in connection with the Plan by you or by another individual,

person, entity or representative on your behalf shall only be brought or filed in the United

States District Court for the Southern District of New York.” Supp. Laser Aff., Ex. A at 4. 

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In addition, notice of the forum selection clause was included in the 2007 Summary Plan

Description (“SPD”), which was posted on a PepsiCo employee website and available to

LTD Plan participants. The SPD provided, under the heading “Limitations on Actions,” that

“[a]ny claim or action relating to disability benefits (including eligibility claims or actions)

under the PepsiCo Disability Plan can only be brought in the United States District Court for

the Southern District of New York.” Sloat Aff., Ex. B at 286.

Rodriguez analogizes the circumstances here to Mezyk v. U.S. Bank Pension Plan, in

which a federal district court in Illinois refused to enforce a forum selection clause because it

“was not reasonably communicated to the party against whom enforcement [was] sought.” 

No. 3:09-cv-384-JPG, 2009 U.S. Dist. LEXIS 107574, at *10 (S.D. Ill. Nov. 18, 2009). The

plaintiffs in Mezyk did not receive notice of the forum selection clause until after they

commenced litigation on May 21, 2009, even though it had been added to the ERISA plan by

amendment effective January 1, 2009. “To bind the plaintiffs to a Plan provision of which

they were not reasonably notified would be manifestly unjust and would be a reason for

declining to dismiss or transfer a case under either § 1404(a) or § 1406(a),” the court found. 

Id. at *11. This Court does not find Mezyk persuasive here, however, because Defendants

have demonstrated that Rodriguez did receive notice of the forum selection clause before

filing suit.

Rodriguez contends that notice to him was even more deficient than in Mezyk,

because he had explicitly requested copies of plan documents but received only prior

versions lacking any forum selection clause. Defendants counter that Rodriguez sent his

request to the wrong entity: Sedgwick is the LTD Plan claims administrator, whereas only

the plan administrator – the PepsiCo Administration Committee – is obligated to respond to

requests for plan documents. This distinction is key, according to Defendants, because

claims are administered according to the plan in place when a participant first becomes

disabled – which explains why Sedgwick sent Rodriguez only earlier plan documents that

predated the appearance of the forum selection clause. Procedural issues before this Court,

by contrast, are governed by the version of the plan in effect when the claim is denied – i.e.

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the LTD Plan effective January 1, 2007. Rodriguez rebutted this argument at hearing by

asserting that Sedgwick – as claims administrator – is a fiduciary of the LTD Plan and did

have an obligation to provide the documents requested.

The Court need not rule on the propriety of Sedgwick’s responses to Rodriguez’s

requests, however. Rodriguez does not dispute that the forum selection provision was

explained on the PepsiCo benefits website – to which LTD Plan participants are directed for

benefits information – nor does he deny that Sedgwick advised him of the clause in its letter

denying his appeal. He argues simply that such notice is insufficient. The Court disagrees. 

Since the Court is satisfied that Rodriguez received adequate notice of the forum selection

clause, deficiency of notice cannot be a basis for denying this motion.

2. ERISA’s Venue Provisions

Enforcement of the forum selection clause would also conflict with ERISA itself,

Rodriguez argues. ERISA allows actions to be brought “in the district where the plan is

administered, where the breach took place, or where a defendant resides or may be found.” 

29 U.S.C. § 1132(e)(2). Enforcing a forum selection clause would constrain those options to

a single venue and therefore, according to Rodriguez, violate ERISA’s broad venue

provision. Rodriguez further contends that forum selection clauses run counter to the

purpose of ERISA, as articulated in the congressional findings and legislative history. 

ERISA was meant to advance a policy of protecting “the interests of participants in employee

benefit plans and their beneficiaries, . . . by providing for . . . ready access to the Federal

courts.” 29 U.S.C. § 1001(b). The legislative history similarly characterizes the statute’s

goal as “to provide the full range of legal and equitable remedies available in both state and

federal courts and to remove jurisdictional and procedural obstacles which in the past appear

to have hampered effective enforcement of fiduciary responsibilities under state law for

recovery of benefits due to participants.” H.R. Rep. No. 93-533, at 17 (1973), reprinted in

1974 U.S.C.C.A.N. 4639, 4655.

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Enforcement of a forum selection clause is not inconsistent with the terms or policy

rationales of ERISA. The statute’s venue provision provides that an action “may be brought

in the district where the plan is administered, where the breach took place, or where a

defendant resides or may be found.” 29 U.S.C. § 1132(e)(2) (emphasis added). Nothing in

the statutory language bars those negotiating ERISA plans from narrowing that menu of

options to one venue in particular. As many other district courts have already observed,

Congress could have – but has not – expressly barred parties from agreeing to restrict

ERISA’s venue provisions. See Klotz v. Xerox Corp., 519 F. Supp. 2d 430, 436 (S.D.N.Y.

2007) (“If Congress had wished to prevent parties from waiving ERISA’s venue provision by

private agreement, it could have done so through an express provision in the statute.”); see

also Testa v. Becker, No. CV 10-638-GHK (FMOx), 2010 U.S. Dist. LEXIS 47130, at *14

(C.D. Cal. Apr. 22, 2010). In light of the strong presumption favoring enforcement of forum

selection clauses, Congress would have had to speak far more clearly if it meant to prohibit

them entirely in the ERISA context.

The Court does not share the concern articulated in Nicolas v. MCI Health and

Welfare Plan No. 501 that enforcement would “encourage a flood of new, non-negotiated

‘plans’ containing forum selection clauses[,] . . . severely limit[ing] many potential plaintiffs

from having ready access to the federal courts and thereby vitiat[ing] the congressional intent

of enacting ERISA.” 453 F. Supp. 2d 972, 974 (E.D. Tex. 2006). The Supreme Court, while

declaring the presumptive validity of forum selection clauses in M/S Bremen, also established

a framework for disregarding them where enforcement would be unreasonable. M/S Bremen

and its progeny provide sufficient protection against the Nicolas court’s concern about the

application of forum selection clauses to effect a wholesale denial of court access for ERISA

plaintiffs. Furthermore, limiting claims to one federal district encourages uniformity in the

decisions interpreting that plan, which furthers ERISA’s goal of enabling “employers ‘to

establish a uniform administrative scheme’” so that plans are not “subject to different legal

obligations in different States.” Egelhoff v. Egelhoff, 532 U.S. 141, 148 (2001) (quoting Fort

Halifax Packing Co. v. Coyne, 482 U.S. 1, 9 (1987)); see also Klotz, 519 F. Supp. 2d at 436. 

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The inclusion and enforcement of forum selection clauses in ERISA plans is therefore not

inconsistent with the language and purpose of the statute, and enforcement should not be

denied on that basis.

3. Physical and Financial Constraints

Rodriguez’s final argument is based on the constraints imposed by the very disability

that underlies this lawsuit. Rodriguez’s degenerative lumbar disc disease causes severe,

continuous back pain that renders him incapable of sitting in the same position for more than

20 minutes. His condition makes flying cross-country impossible; indeed, he has not flown

once in the past dozen years. In addition, he could not afford airfare to New York given that

he and his wife have a limited monthly income of $2,600 to support a family of six.

A forum selection clause should not be enforced where doing so would “deprive[ a

party] of his day in court.” Murphy v. Schneider Nat’l, Inc., 362 F.3d 1133, 1140 (9th Cir.

2004). In Murphy, the Ninth Circuit found that a party’s “physical and financial limitations”

could together preclude him from having “his day in court,” and therefore provide a basis for

declining to enforce a forum selection clause. Id. at 1143. Murphy, however, was a driver’s

personal injury suit, an action with a reasonable probability of going to trial.

The nature of ERISA actions is very different. The LTD Plan explicitly provides in

section 6.09(g) that court review shall be based solely on “the record before the

Administrator at the time the Administrator made its determination,” and that the claim “shall

be reviewed under the arbitrary and capricious standard (i.e., the abuse of discretion

standard).” Sloat Aff., Ex. A at 72. Benefits “will be paid only if the . . . Claims

Administrator decides in its discretion that the Participant (or other claimant) is entitled to

them.” Id. at 66 (LTD Plan section 6.3(c)) (emphasis added). An “abuse of discretion”

standard is used to review the denial of benefits under an ERISA plan that gives an

administrator discretionary authority to make eligibility determinations. See Firestone Tire

& Rubber Co. v. Bruch, 489 U.S. 101, 114-15 (1989). In that context, the prospect of a trial

is highly improbable; rather, this action is likely to be decided by the court on motions for

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 Rodriguez argued at hearing that the Ninth Circuit’s ruling in Nolan v. Heald

College, 551 F.3d 1148 (9th Cir. 2009), makes ERISA actions far more likely to be decided

at a bench trial. The Ninth Circuit held that, when an ERISA plaintiff presents material

evidence of the plan administrator’s bias at summary judgment, the district court “will have

to conduct a limited bench trial to definitively determine bias and, in turn, the precise

contours of the abuse of discretion standard.” Id. at 1156. Defendants respond that the

structural conflict of interest at issue in Nolan – where the same entity “both determines

eligibility for benefits and pays benefits awards,” id. at 1153 – is not present here, because

Sedgwick determines eligibility and PepsiCo pays the awards. Furthermore, Rodriguez has

identified no comparable decision in the Second Circuit that would increase the probability

of a bench trial. Nolan therefore does not alter this Court’s conclusion that a trial in the

Southern District of New York is highly unlikely.

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summary judgment.5

 If a trial were to occur, Rodriguez could move to transfer venue back to

the Northern District of California, based on his inability to appear in New York. 28 U.S.C.

§ 1404(a) (allowing the court to “transfer any civil action to any other district or division

where it might have been brought” “[f]or the convenience of parties and witnesses” and “in

the interest of justice”); see also Klotz, 519 F. Supp. 2d at 437 (rejecting argument that

change in venue would deny plaintiff’s day in court based on physical infirmity). 

Enforcement of the forum selection clause therefore will not deprive Rodriguez of his day in

court.

* * * 

As Rodriguez has failed to overcome the presumption in favor of enforcing the forum

selection clause, the Court rules that the clause should be enforced. The Court must now

determine how to enforce it: whether to dismiss the action outright, or, “in the interest of

justice,” to transfer it directly to the Southern District of New York. 28 U.S.C. § 1406(a). 

Although Defendants proposed either option, they suggested at hearing that transfer would be

the more appropriate alternative. Dismissal would force Plaintiff to incur additional fees and

delay by refiling in the Southern District of New York. The Court therefore concludes that

justice is best served by transfer, rather than dismissal. See Minnette v. Time Warner, 997

F.2d 1023, 1027 (2d Cir. 1993); Whiteman v. Grand Wailea Resort, No. C98-04442 MMC,

1999 U.S. Dist. LEXIS 3594, at *6-7 (N.D. Cal. Mar. 17, 1999).

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CONCLUSION

For the reasons set forth above, Defendants’ motion to transfer is GRANTED. The

Clerk is directed to transfer this case to the United States District Court for the Southern

District of New York.

IT IS SO ORDERED.

Dated: 6/9/10 

THELTON E. HENDERSON, JUDGE

UNITED STATES DISTRICT COURT

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