Thompson v. Oracle Corporation ( 2021 )

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 ELISA THOMPSON, Case No. 4:21-cv-00026-YGR 8 Plaintiff, ORDER GRANTING IN PART AND DENYING 9 v. IN PART DEFENDANT’S MOTION TO DISMISS SECOND AMENDED COMPLAINT 10 ORACLE CORPORATION, ET AL., Re: Dkt. No. 43 Defendants. 11 12 Plaintiff Elisa Thompson brings this action against defendants Oracle Corporation, Oracle 13 America, Inc., Oracle Corporation Long Term Disability Plan (collectively, “Oracle defendants”), 14 and Hartford Life & Accident Insurance Company. Plaintiff asserts seven causes of action: (1) 15 breach of employment contract, (2) promissory estoppel, (3) fraudulent misrepresentation, (4) 16 negligent misrepresentation, (5) elder abuse, (6) benefits and enforcement and clarification of 17 rights under the Employee Retirement Income Security Act (“ERISA”), and (7) breach of 18 fiduciary duty. (See Dkt. No. 39) (“Complaint” or “Compl.”). 19 Now before the Court is Oracle defendants’ motion to dismiss all causes of action. (See 20 Dkt. No. 43-1.) Having carefully reviewed the record, the papers submitted on the motion, and for 21 the reasons set forth more fully below, the Court GRANTS IN PART AND DENIES IN PART the 22 motion to dismiss. 23 I. BACKGROUND 24 Plaintiff was hired in 2000 by Sun Microsystems, Inc. During that time, plaintiff 25 negotiated her job offer and received a letter from Sun Microsystems that reflected that Sun 26 Microsystems was offering “a long term disability benefit with a lifetime benefit period.” (Compl., 27 Ex. 1.) This concern for lifetime long term disability benefit came from a concern over a 1 specifically in part because of this offer letter and the guarantee of a lifetime benefit period for 2 long term disability insurance. Effective 2001, however, the long term disability plan (“LTD 3 plan” or “the plan”) that Sun Microsystems enrolled into changed its policies to one where an 4 individual who is disabled before age 60 will have long term disability insurance terminate at age 5 65. In summer 2001, plaintiff was involved in an accident where she became permanently 6 disabled. Later, Oracle Corporation acquired Sun Microsystems (as well as its obligations). 7 Plaintiff received benefits until she turned 65 in 2020, at which point she was denied claims under 8 the plan. 9 II. LEGAL STANDARD 10 A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the claims alleged in 11 the complaint. Ileto v. Glock Inc., 349 F.3d 1191, 1199–1200 (9th Cir. 2003). “Dismissal can be 12 based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a 13 cognizable legal theory.” Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988). 14 All allegations of material fact are taken as true and construed in the light most favorable to the 15 plaintiffs. Johnson v. Lucent Techs., Inc., 653 F.3d 1000, 1010 (9th Cir. 2011). To survive a 16 motion to dismiss, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a 17 claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting 18 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007)). This “facial plausibility” standard requires 19 the plaintiffs to allege facts that add up to “more than a sheer possibility that a defendant has acted 20 unlawfully.” Iqbal, 556 U.S. at 678. While courts do not require “heightened fact pleading of 21 specifics,” plaintiffs must allege facts sufficient to “raise a right to relief above the speculative 22 level.” Twombly, 550 U.S. at 555. “[A] plaintiff’s obligation to provide the ‘grounds’ of this 23 ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic recitation of the 24 elements of a cause of action will not do.” Id. 25 In deciding whether the plaintiff has stated a claim upon which relief can be granted, the 26 court must assume that the plaintiff’s allegations are true and must draw all reasonable inferences 27 in the plaintiff’s favor. See Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987). 1 unwarranted deductions of fact, or unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 2 F.3d 1049, 1055 (9th Cir. 2008). 3 III. ANALYSIS 4 A. First and Second Claims: Breach of Contract and Promissory Estoppel 5 The Oracle defendants argue that the Court should dismiss plaintiff’s breach of contract 6 and promissory estoppel claims because: (1) the claims are preempted under ERISA; (2) they are 7 time-barred under the statute of limitations; (3) the alleged promise to pay lifetime disability 8 benefits was too indefinite to be the basis of a binding contract; and (4) the promise was too 9 unclear and ambiguous to be the basis of a promissory estoppel claim. The Court discusses each. 10 1. Preemption 11 The Court first considers whether plaintiff’s breach of contract and promissory estoppel 12 claims are preempted under ERISA. ERISA Section 514(a) expressly preempts “any and all State 13 laws insofar as they may now or hereafter relate to any employee benefit plan[.]” 29 U.S.C. § 14 1144(a). “While this section suggests that the phrase ‘relate to’ should be read broadly, the 15 Supreme Court has recently admonished that the term is to be read practically, with an eye toward 16 the action’s actual relationship to the subject plan.” Providence Health Plan v. McDowell, 385 17 F.3d 1168, 1172 (9th Cir. 2004) (citing New York State Conference of Blue Cross & Blue Shield 18 Plans v. Travelers Ins. Co., 514 U.S. 645, 655-56 (1995)). However, although ERISA preemption 19 is broad, the Supreme Court has cautioned that courts “must go beyond the unhelpful text and the 20 frustrating difficulty of defining its key term, and look instead to the objectives of the ERISA 21 statute as a guide to the scope of [preemption].” New York State Conference of Blue Cross & Blue 22 Shield Plans, 514 U.S. at 645. “Generally speaking, a common law claim ‘relates to’ an employee 23 benefit plan governed by ERISA ‘if it has a connection with or reference to such a 24 plan.’” Id. (citation omitted). “In evaluating whether a common law claim has ‘reference to’ a plan 25 governed by ERISA, the focus is whether the claim is premised on the existence of 26 an ERISA plan, and whether the existence of the plan is essential to the claim’s survival. If so, a 27 sufficient ‘reference’ exists to support preemption.” Id. (citations omitted). 1 1994) to argue that ERISA’s preemptive sweep includes state law claims based on an employer’s 2 breach of an alleged promise to provide certain benefits. However, Devoll was decided a year 3 before the Supreme Court’s decision in New York State Conference of Blue Cross & Blue Shield 4 Plans v. Travelers Ins. Co., 514 U.S. 645, 655 (1995), which the Ninth Circuit later described as a 5 move “away from a literal reading of ‘relate to,’ towards a more narrow interpretation of the 6 phrase and its preemptive scope.” Graham v. Balor Co., 146 F.3d 1052, 1054 (9th Cir. 1998). The 7 Ninth Circuit’s decision in Graham is instructive. 8 In Graham, an employee received an unfavorable performance review and faced 9 termination. Id. at 1054–55. After contesting the review and threatening litigation, the employee 10 entered into an agreement with her employer whereby the employee promised not to pursue 11 litigation in exchange for continued health care benefits through the employer’s plan. Id. Five 12 years after the parties entered in the agreement, the employer terminated the plaintiff’s benefits. 13 Id. at 1055. Plaintiff sued for breach of contract, breach of the covenant of good faith and fair 14 dealing, and intentional infliction of emotional distress. Id. The Ninth Circuit held that the 15 plaintiff’s state law claims were not preempted because the agreement “was a settlement of legal 16 claims which does not relate to an employee benefit plan.” Id. The court further found that the 17 agreement “did not arise in the course of [defendant’s] administration of its employee benefit 18 plan” and “concern[ed] only one employee, not the entire plan. Therefore, it [fell] outside plan 19 administration, and [did] not trigger preemption.” Id. 20 As in Graham, plaintiff’s breach of contract and promissory estoppel claims are based on 21 plaintiff’s separate employment contract and does not depend on the existence or terms of an 22 ERISA plan. The complaint alleges that plaintiff entered into an employment agreement that 23 promised plaintiff lifetime disability benefits. (Compl. ¶¶ 26-30, Ex. 1.) Thus, the representations 24 made in plaintiff’s offer letter regarding lifetime benefits are independent and distinct from the 25 ERISA policy and administration of the plan. Thus, the Court finds that plaintiff’s claims for 26 breach of contract and promissory estoppel are not preempted under ERISA. 27 Accordingly, the Court DENIES the motion on this ground. 1 2. Statute of Limitations 2 Having concluded that plaintiff’s breach of contract and promissory estoppel claims are not 3 preempted under ERISA, the Court now considers whether the claims are timely. 4 Under California law, the statute of limitations for breach of a written contract is four 5 years. Cal. Civ. Proc. Code § 337(1). A breach of contract claim generally accrues at the time of 6 the breach. Power Quality & Elec. Sys., Inc. v. BP W. Coast Prod. LLC, No. 16-CV-04791 YGR, 7 2016 WL 6524408, at *4 (N.D. Cal. Nov. 3, 2016). A claim for promissory estoppel must be 8 brought within 2 years from the date of accrual. Newport Harbor Ventures, LLC v. Morris 9 Cerullo World Evangelism, 6 Cal. App. 5th 1207 (2016). 10 Here, the parties dispute when plaintiff’s breach of contract and promissory estoppel 11 claims accrued. The Oracle defendants argue that plaintiff’s claims accrued in 2001 when 12 plaintiff’s claim for disability benefits under the LTD was first approved. Plaintiff argues that the 13 claims accrued in April 2020 when she stopped receiving the lifetime disability benefits she was 14 promised. 15 The complaint alleges that the breach occurred when plaintiff stopped receiving benefits in 16 April 2020 after previously being promised lifetime disability benefits, Compl. ¶ 30, and that 17 plaintiff first learned that defendants intended to breach the terms of her employment agreement 18 in April 2020, id. ¶ 18. Plaintiff’s claims are premised on the termination of benefits, not on the 19 defendants “offering only a plan that did not include a lifetime benefit period” as defendants 20 suggest. (See Mot. at 11.) Thus, construing the allegations in the complaint in plaintiff’s favor, as 21 the Court must at this stage, the Court finds that the breach did not occur until April 2, 2020 when 22 plaintiff stopped receiving disability benefits. Plaintiff filed suit nine months later. Thus, the 23 Court finds that plaintiff’s claims are not time-barred. 24 Accordingly, the motion is DENIED on this ground.1 25 26 27 1 3. Indefiniteness. 2 The Court next considers whether defendants’ promise of lifetime benefits was too 3 indefinite to constitute a binding contract. Under California law, “where a contract is so uncertain 4 and indefinite that the intention of the parties in material particulars cannot be ascertained, the 5 contract is void and unenforceable.” Moncada v. West Coast Quartz Corp., 221 Cal. App. 4th 768, 6 777 (2013) (citation omitted). All contracts have some degree of indefiniteness and uncertainty, 7 but “[t]he law leans against the destruction of contracts because of uncertainty and favors an 8 interpretation which will carry into effect the reasonable intention of the parties if it can be 9 ascertained.” Id. 10 In arguing that the promise of lifetime disability benefits is too indefinite to enforce, 11 defendants rely on Ladas v. Cal. State Auto. Ass’n, 19 Cal. App. 4th 761 (1993). There the court 12 found unenforceable a promise to consider what employees at other companies were earning when 13 setting commission rates. Id. at 771. The court noted that numerous uncertainties defeated 14 enforcement, such as what standard would be used to determine whether a breach had occurred 15 and the fact that the nature of the obligation provided no rational method for determining breach or 16 computing damages. Id. 17 Ladas is inapposite. Unlike Ladas, the Court finds that defendants’ language promising 18 lifetime benefits sufficiently certain to state a claim for breach of contract. Nothing in plaintiff’s 19 offer letter renders the term “lifetime benefits” unclear. Indeed, the language in the offer letter is 20 certain enough to allow the Court to evaluate whether there was a breach and the circumstances 21 that would constitute a breach. Thus, the Court finds the promise of lifetime benefits in plaintiff’s 22 offer letter certain enough to form the basis of a valid and enforceable contract, especially in light 23 of the years of compliance. 24 Accordingly, the Court DENIES defendants’ motion to dismiss on this ground. 25 4. Vague and Ambiguous 26 In the same manner that the Oracle defendants challenge plaintiff’s breach of contract 27 claim for the promise of lifetime benefits being too indefinite, defendants argue that the promise of 1 Having already found the promise of lifetime benefits certain and clear enough to be binding, the 2 Court DENIES the motion for the same reasons discussed above. See supra III.A.3. 3 B. Fourth Claim: Negligent Misrepresentation Claim 4 Having already found that plaintiff’s negligent misrepresentation claim was not time 5 barred, the Court now considers whether the claim is sufficiently pled. The Oracle defendants 6 argue that the claim fails because plaintiff does not allege any misrepresentation. 7 Plaintiff must allege the following to state a claim for negligent misrepresentation: (1) the 8 misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it 9 to be true, (3) with intent to induce another’s reliance on the fact misrepresented, (4) justifiable 10 reliance on the misrepresentation, and (5) resulting damage. Borman v. Brown, 59 Cal. App. 5th 11 1048, 1060 (2021) (citations omitted). 12 Here, plaintiff alleges that the Oracle defendants misrepresented plaintiff’s benefits to 13 plaintiff and that defendants either failed in their obligations to ensure that the promise was carried 14 out, or that defendants had no reasonable grounds for believing its promise to provide lifetime 15 benefits. (Compl. ¶¶ 53-54.) The Court finds these allegations sufficient to allege a 16 misrepresentation. Accordingly, the Court DENIES the motion on this ground. 17 C. Fifth Claim: Elder Abuse 18 Defendants next argue that plaintiff’s claim for elder abuse fails for two reasons. First, it is 19 preempted by ERISA and second, plaintiff has not sufficiently alleged a claim for elder abuse in 20 that plaintiff did not identify any personal property that the Oracle defendants obtained or retained 21 from her. 22 With respect to the defendant’s preemption argument, the Court finds that plaintiff’s claim 23 for elder abuse is not preempted. As plaintiff’s other state law claims, this claim is premised on 24 plaintiff’s employment agreement and not the LTD plan. Accordingly, the claim is not preempted. 25 With respect to the Elder Abuse Act, the Act defines various acts as “abuse of an elder,” 26 including “[p]hysical abuse, neglect, financial abuse, abandonment, isolation, abduction, or other 27 treatment with resulting physical harm or pain or mental suffering.” Cal. Welf. & Instit. Code § 1 that a person or entity: (1) “takes, secretes, appropriates, obtains, or retains real or personal 2 property” (2) of an elder or dependent adult; (3) for wrongful use or with intent to defraud or both 3 or (4) assist in such taking. Id. § 15610.30(a)(1) -(a)(2). 4 Defendants only dispute whether plaintiff has sufficiently identified personal property that 5 was obtained or retained. The Court finds that plaintiff has sufficiently stated a property interest in 6 the promise for lifetime benefits due under her employment contract. The complaint alleges that 7 plaintiff’s benefits were vested and due under the contract. She also alleges that those benefits 8 were subsequently withheld. Thus, the Court finds that plaintiff has adequately alleged that 9 defendants obtained her vested benefits due under the employment contract. 10 Accordingly, the Court DENIES the motion to dismiss plaintiff’s elder abuse claim to the 11 extent it is premised on benefits due under the employment contract. However, to the extent 12 plaintiff’s elder abuse claim is premised on plaintiff’s vested benefits in the LTD plan, the claim 13 fails for the reasons identified in section III.D. 14 D. Sixth Claim: Benefits Under the Plan and Enforcement/Clarification of Rights 15 Plaintiff argues that her employment agreement amended the LTD plan. The Oracle 16 defendants dispute this, arguing that dismissal is warranted because plaintiff did not sufficiently 17 allege that the offer letter operated as an amendment to the plan. 18 ERISA requires that each plan provide amendment procedures and identify the persons who 19 have authority to amend the plan. 29 U.S.C.A. § 1102(b)(3). To satisfy this obligation, Article 13.2 20 of the plan includes formal amendment procedures, which provides Oracle with the right to adopt 21 any amendments to the plan. (See Dkt. No. 43-2) (Decl. of E. Lockwood, Ex. A, Section 13.2). The 22 plan requires any amendment that increases plan benefits to be approved by the Board of Directors. 23 (Id.). Plaintiff has not sufficiently alleged that the employment agreement comports with these 24 procedures. Without these allegations, the Court cannot find that plaintiff sufficiently alleged that 25 the employment agreement operated as an amendment to the LTD plan. 26 In light of the foregoing, the Court finds that the plain language of the plan, which provides 27 that plaintiff’s long term disability benefits were to terminate upon her reaching the age of 65 1 complaint and amendment appears futile, the motion is granted WITHOUT LEAVE TO AMEND. 2 E. Seventh Claim: Breach of Fiduciary Duty and Equitable Relief under ERISA 3 The Oracle defendants argue that plaintiff’s breach of fiduciary duty claim fails because 4 plaintiff has not identified any fiduciary actions. 5 ERISA’s enforcement scheme provides a cause of action against plan fiduciaries 6 for breach of their fiduciary duties, 29 U.S.C. § 1132(a)(2), and a cause of action to remedy plan 7 or ERISA violations with “appropriate equitable relief,” id. § 1132(a)(3). Plaintiff seeks relief 8 under both provisions. 9 There are two types of fiduciaries under ERISA. Depot, Inc. v. Caring for Montanans, 10 Inc., 915 F.3d 643, 653 (9th Cir. 2019). First, a party that is designated “in the plan instrument” 11 as a fiduciary is a “named fiduciary.” 29 U.S.C. § 1102(a)(2). Second, ERISA provides the 12 following definition of what is sometimes referred to as a “functional” fiduciary: [A] person is a 13 fiduciary with respect to a plan to the extent that person (i) exercises any discretionary authority or 14 discretionary control respecting management of such plan or exercises any authority or control 15 respecting management or disposition of its assets, (ii) renders investment advice for a fee or other 16 compensation, direct or indirect, with respect to any moneys or other property of such plan, or has 17 any authority or responsibility to do so, or (iii) has any discretionary authority or discretionary 18 responsibility in the administration of such plan. Id. § 1002(21)(A); Santomenno v. Transamerica 19 Life Ins. Co., 883 F.3d 833, 837 (9th Cir. 2018). 20 A person is a fiduciary only to the extent the person is engaged in some form of the 21 conduct listed above. Pegram v. Herdrich, 530 U.S. 211, 225-26 (2000); Acosta v. Brain, 910 22 F.3d 502, 519 (9th Cir. 2018) (“[W]e must distinguish between a fiduciary ‘acting in connection 23 with its fiduciary responsibilities’ with regard to the plan, as opposed to the same individual or 24 entity ‘acting in its corporate capacity.’ Only the former triggers fiduciary status; the latter does 25 not.” (internal citation omitted)). The central question then becomes whether the complained of 26 conduct was fiduciary in nature. Pegram, 530 U.S. at 226. Determination of whether a fidicuary 27 duty attaches to alleged conduct is appropriate at the motion to dismiss stage. See Depot, Inc., 915 1 ERISA). 2 Here, the complaint alleges that the Oracle defendants owes a fiduciary duty to participants 3 and beneficiaries of the plan. (Compl. ¶¶ 88-89.) The complaint also alleges that the Oracle 4 defendants breached their fiduciary duties by: (a) failing to create a class under the plan for 5 members who received a lifetime benefit; (b) refusing to pay the vested benefits in accordance 6 with the employment agreement; (c) failing to secure a long-term disability plan with a lifetime 7 benefit as it was obligated to do; (d) failing to disclose that there was no separate class under the 8 plan for members with lifetime benefits; (e) denying in bad faith that plaintiff is owed lifetime 9 benefits; (f) promising benefits that defendants did not intend to provide; (g) denying the existence 10 of the benefits due to plaintiff; (h) failing to amend its plan to ensure that plaintiff would have 11 lifetime benefits; (i) and failing to discharge its duties with care, skill, prudence, and diligence; 12 and (j) violating the standard of care mandated by ERISA. (Id. ¶ 99.) 13 Plaintiff’s claim for breach of fiduciary duty fails as a matter of law. With respect to 14 plaintiff’s claim that the Oracle defendants failed to create a subclass of members receiving 15 lifetime benefits and failed to amend its plan to include such, those claims fail because “an 16 employer’s decisions about the content of a plan are not themselves [an] fiduciary act.” Pegram, 17 530 U.S. at 226. Given that, defendants’ alleged failure to include such content in the plan, and 18 failure to disclose as much, cannot be the basis of plaintiff’s breach of fiduciary claim. Similarly, 19 the bulk of plaintiff’s allegations, which mostly relate to defendants’ refusal to pay lifetime 20 benefits and failure to secure a plan with such benefits, also fail as a matter of law because the 21 plain language of the LTD plan permits disability benefits only up to the age of 65. Furthermore, 22 with respect to plaintiff’s allegations that defendants promised her lifetime benefits, even if true, 23 those allegations cannot form the basis of plaintiff’s breach of fiduciary duty claim since plaintiff 24 has alleged that those statements were made before plaintiff became a plan participant. The Court 25 finds that plaintiff’s remaining allegations of defendants failing to discharge its duty with care and 26 violating the standard of care mandated by ERISA insufficient to state a claim for breach of 27 fiduciary duty, as those allegations are devoid of any factual allegations to support the conclusory 1 WITHOUT LEAVE TO AMEND. 2 || IV. CONCLUSION 3 In light of the foregoing, the Court GRANTS AND IN PART AND DENIES IN PART the Oracle 4 || defendants’ motion to dismiss. The motion is DENIED with respect to plaintiff's state law claims 5 (claims one through five) and GRANTED with respect to plaintiff's ERISA claims (claims six and 6 seven). 7 The Oracle defendants shall respond to claims one through five amended complaint by 8 December 30, 2021. The Court sets a case management conference for January 24, 2022 at 2:00 9 || p.m. which shall proceed over the Zoom platform. Specifics will be noted on the docket. 10 This Order terminates Docket Number 43. 11 IT Is SO ORDERED. q 12 Dated: December 10, 2021 14 UnrreD STATES DISTRICT □□□□□ 2 16 18 19 20 21 22 23 24 25 26 27 28