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Cleo Van Doren, Formerly Cleo Dougherty v. Capital Research and Management Company D/B/A

December 30, 2010

CLEO VAN DOREN, FORMERLY CLEO DOUGHERTY
PLAINTIFF,
v.
CAPITAL RESEARCH AND MANAGEMENT COMPANY D/B/A AMERICAN FUNDS, TRADER JOE'S COMPANY, AND PLAN COMMITTEE
DEFENDANTS.



The opinion of the court was delivered by: Katharine S. Hayden, U.S.D.J.

NOT FOR PUBLICATION

OPINION

I. Introduction and Facts

In this ERISA case, the defendants-Trader Joe's Company (―Trader Joe's‖), the Plan Committee (―the Committee‖), which is the administrator of the Trader Joe's Company Retirement Plan (―the Plan‖), and Capital Research Management Company (―Capital Research‖), which provides administrative services for the Plan-have moved to dismiss the plaintiff's claims for benefits under the plan and for breach of fiduciary duty.

For the purposes of the motion to dismiss, all of the following facts, as stated in the complaint, are accepted as true. See Great W. Mining & Mineral Co. v. Fox Rothschild LLP, 615 F.3d 159, 161 (3d Cir. 2010). The plaintiff, Cleo Van Doren, (―Van Doren‖), was formerly married to Timothy Dougherty (―Dougherty‖), who had an account under the Plan. (Am. Compl. ¶¶ 2.) As Dougherty's spouse, Van Doren was a beneficiary of the Plan; as of May 29, 2008, there was $173,980 in the account. (Id.)

On May 29, 2008, Dougherty submitted a request for a distribution from the account, indicating-falsely-that he was unmarried. (Id. ¶ 7.) In response, Capital Research gave Dougherty withdrawal forms that provided information about the distribution, including the provision that a distribution to a married Plan participant must be by Qualified Joint Survivor Annuity unless the participant has obtained notarized spousal consent. (Id. ¶ 8.) The defendants then accepted and processed the distribution forms and distributed all of the account's assets to Dougherty based on the information he gave. (Id. ¶¶ 7, 9.) Van Doren was unaware of the distribution until late July 2009, when a Trader Joe's representative notified her. (Id. ¶ 10.)

Van Doren filed her original complaint in state court on January 10, 2010. [D.E. 1.] Trader Joe's and Capital Research separately removed to federal court, causing two cases to be opened. The cases were consolidated [D.E. 6], and on April 23, 2010, plaintiff filed an amended complaint [D.E. 20]. Trader Joe's and the Committee then filed a joint motion to dismiss [D.E. 25], and Capital Research moved separately [D.E. 23].

II. Discussion

The amended complaint explicitly invokes 29 U.S.C. § 1132(a)(1)(B), under which a participant or beneficiary of an ERISA plan can bring an action ―to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.‖ In pertinent part, Van Doren alleges that she was a beneficiary of the Plan and that half of Dougherty's account should have been distributed to her in the form of a joint survivor annuity. (Compl. ¶¶ 1, 14.) The complaint also impliedly invokes § 1132(a)(2), which allows actions for breach of fiduciary duty, and § 1132(a)(3), which allows actions for equitable relief to remedy statutory ERISA violations. Specifically, Van Doren alleges that the defendants were negligent and breached their fiduciary duties when they distributed the entirety of the account to Dougherty without ensuring that the distribution forms he submitted were accurate and without notifying Van Doren. (Compl. ¶¶ 12, 13.)

Capital Research argues that the claims against it should be dismissed because it is neither an administrator nor a fiduciary of the Plan and, therefore, cannot be held liable under ERISA. Trader Joe's and the Plan Committee argue that dismissal is proper because Van Doren failed to exhaust her administrative remedies, and because, insofar as Van Doren brings claims under §§ 1132(a)(2) and (a)(3), the damages she seeks are unavailable. For the reasons that follow, the Court finds that Capital Research is not a proper defendant. In addition, the Court finds that Van Doren has failed to exhaust her administrative remedies and cannot be excused from the exhaustion requirement.

A.Whether Capital Research Is a Proper Defendant

1.Is Capital Research a Plan Administrator for Purposes of § 1132(a)(1)(B)? Under § 1132(a)(1)(B), a participant or beneficiary of an ERISA plan can bring an action ―to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.‖ In such an action, ―the defendant is the plan itself (or plan administrators in their official capacities only).‖ Graden v. Conexant Sys. Inc., 496 F.3d 291, 301 (3d Cir. 2007). ―Exercising control over the administration of benefits is the defining feature of the proper defendant . . . .‖ Evans v. Employee Benefit Plan, 311 F. App'x 556, 558 (3d Cir. 2009). Where a plan administrator retains the discretion to decide disputes, a third-party service provider will not be deemed a fiduciary of the plan and will not be subject to a suit under § 1132(a)(1)(B). Terry v. Bayer Corp., 145 F.3d 28, 35 (1st Cir. 1998) (citing HealthSouth Rehab. Hosp. v. Am. Nat'l Red Cross, 101 F.3d 1005, 1008-09 (4th Cir.1996); Harris Trust & Sav. Bank v. Provident Life & Accident Ins. Co., 57 F.3d 608, 613-14 (7th Cir.1995); Kyle Rys., Inc. v. Pac. Admin. Servs., Inc., 990 F.2d 513, 516 (9th Cir.1993); Baker v. Big Star Div. of The Grand Union Co., 893 F.2d 288, 289-90 (11th Cir.1989)).

Two cases from other circuits provide guidance. In Me. Coast Mem'l Hosp. v. Sargent, 369 F. Supp. 2d 61, 64 (D. Me. 2005), a hospital sued a patient for unpaid bills, and the patient filed a third-party claim for benefits against her employer and the insurer that she claimed was her health plan's administrator. The court determined that the insurer was not a proper defendant because the health plan documents did not name it as the plan administrator, and even though the insurer approved coverage for certain claims, it nevertheless did not control administration of the plan. Id. In Seabrooke v Arch Commc'ns. Group, Inc., 2003 WL 21434915, at *1 (D.N.H. June 20, 2003), the plaintiff sued to obtain benefits from her employer and the insurance company that provided administrative services for the employer's health plan. The court found that the insurer was not a proper defendant because the employer, and not the insurer, was named as the plan administrator in the plan's documentation, and even though the insurer made initial determinations about whether to grant or deny claims, the ultimate responsibility for each claim rested with the employer. Id. at *3.

This case is similar to the two mentioned above. First, the Plan states that the administrator of the plan is ―a Committee, appointed by the Board,‖ and it vests all authority and discretion to administer the plan to the Plan Committee. (Trader Joe's Company Retirement Plan §§ 11.1-11.2, attached to Trotter Decl. as Ex. A.) In addition, the administrative services agreement between Trader Joe's and Capital Research*fn1 states that Capital Research has no ―power or discretion in the administration of the Plan or in the handling of any Plan assets,‖ and specifically bars it from, among other things, interpreting Plan provisions and determining eligibility. (Recordkeeping and Administrative Services Agreement §V, attached to Mot. to Dismiss as Ex. B.) The administrative services agreement also limits Capital Research to performing the following services, as stated in Van Doren's complaint: ―preparation of certified copy of the trust statement,‖ ―processing participant withdrawals at the employer's direction,‖ ―preparation of Form 1099R, and withholding tax remittance and reporting,‖ ―preparation and maintenance of participant loan documents and processing of loan ...


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