Tom Nagrone v. Michael A. Davis

FILED
NOT FOR PUBLICATION FEB 25 2010
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS
FOR THE NINTH CIRCUIT
TOM NAGRONE; DAN NAGRONE; No. 09-35165
DARRELL NACCURATO; PATRICK
DAHMEN; JANELLE SELLS; TERRI D.C. No. 9:07-cv-00004-DWM-
ORTON; WILLIAM EVANSON; RKS
TAMMY EVANSON; LARRY
THOMPSON; JAMIE GUICE; LAURA
SQUIBB; JEFFREY TUCKER; AMY MEMORANDUM *
TUCKER; BILL EVANSON; RICK
BAILLIE; LAURA STOCKTON;
LENORA DAVIS BATEMAN;
MARYBETH WETSCH; VICKI
EARHART; CAROL HEALD; JERRY
STREETER; CLARA KUHN; IVAN
KAYS; THERESA YOUNGQUIST;
BARBARA GAUSTAD; SHARON
YOUNG; DIANE MOLES; KYLE
BAILEY; MIKE BRIGGS; WILLIS
BALL; MARK RADEMAN; DREW
OLSEN; CHADNEY SAWYER; NANCY
MCDONALD; TED NUXOLL; CINDY
NUXOLL; DEAN CARLSON; BRAD
BLATTLER,
Plaintiffs - Appellants,
and
TIDYMAN’S MANAGEMENT
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
SERVICES, INC.,
Plaintiff,
v.
MICHAEL A. DAVIS,
Defendant - Appellee,
JOHN MAXWELL,
Defendant - Appellee,
and
RIC ODEGARD,
Defendant,
TIDYMAN’S MANAGEMENT
SERVICES, INC.,
Defendant,
TIDYMAN’S LLC; JOE CUSTER;
GEORGE REITEMEIER; CHRIS
SCHNUG,
Defendants.
TOM NAGRONE; DAN NAGRONE; No. 09-35182
DARRELL NACCURATO; JANELLE
SELLS; PATRICK DAHMEN; TERRI D.C. No. 9:07-cv-00004-DWM-
ORTON; WILLIAM EVANSON; RKS
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TAMMY EVANSON; LARRY
THOMPSON; JAMIE GUICE; LAURA
SQUIBB; JEFFREY TUCKER; AMY
TUCKER; BILL EVANSON; RICK
BAILLIE; LAURA STOCKTON;
LENORA DAVIS BATEMAN;
MARYBETH WETSCH; VICKI
EARHART; CAROL HEALD; JERRY
STREETER; CLARA KUHN; IVAN
KAYS; THERESA YOUNGQUIST;
BARBARA GAUSTAD; SHARON
YOUNG; DIANE MOLES; KYLE
BAILEY; MIKE BRIGGS; WILLIS
BALL; MARK RADEMAN; DREW
OLSEN; CHADNEY SAWYER; NANCY
MCDONALD; TED NUXOLL; CINDY
NUXOLL; DEAN CARLSON; BRAD
BLATTLER; TIDYMAN’S
MANAGEMENT SERVICES INC.,
Plaintiffs,
v.
MICHAEL A. DAVIS; JOHN
MAXWELL,
Defendants - Appellees,
v.
TIDYMAN’S MANAGEMENT
SERVICES, INC.; TIDYMAN’S LLC,
Defendants - Appellants,
and
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RIC ODEGARD; JOE CUSTER;
GEORGE REITEMEIER; CHRIS
SCHNUG,
Defendants.
Appeal from the United States District Court
for the District of Montana
Donald W. Molloy, District Judge, Presiding
Argued and Submitted January 13, 2010
Seattle, Washington
Before: KLEINFELD and TALLMAN, Circuit Judges, and SETTLE, ** District
Judge.
This is a combined appeal. First, Plaintiffs Thomas Nagrone and other
participants in the Tidyman’s Management Services, Inc. Employee Stock
Ownership Plan and Trust (“Plaintiffs”) appeal the district court’s grant of
summary judgment in favor of Defendants Michael Davis and John Maxwell
(“Defendants”) on the issues of futility of demand and ERISA preemption.
Second, Tidyman’s Management Services, Inc. (“TMSI”) appeals the district
court’s denial of its motion for leave to amend so that it could be joined as a
Plaintiff. For the reasons discussed below, we reverse the district court’s summary
**
The Honorable Benjamin Hale Settle, United States District Judge for
the Western District of Washington, sitting by designation.
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judgment rulings and remand for further findings. We do not reach the appeal of
the district court’s denial of the motion for leave to amend.
A. Futility of Demand
In this case, it is undisputed that before filing their complaint, Plaintiffs
failed to make a demand for action on either the Employee Stock Ownership Plan
and Trust (“ESOP”) or the corporate officers. Under Washington law, a
“complaint in a proceeding brought in the right of a corporation must . . . allege
with particularity the demand made, if any, to obtain action by the board of
directors and either that the demand was refused or ignored or why a demand was
not made.” Wash. Rev. Code § 23B.07.400(2). After the district court entered its
order granting summary judgment, the Washington Supreme Court decided In Re
F5 Networks, 207 P.3d 433 (Wash. 2009), and clarified the substantive demand
requirements under Wash. Rev. Code § 23B.07.400(2). The court held that a
plaintiff’s failure to make a proper demand may be excused if the plaintiff shows
that demand would have been futile. Id. at 438–39.
Although Plaintiffs failed to make a demand, the district court did not
consider the issue of whether such a demand would have been futile. Moreover,
the record is not sufficiently developed so that we can determine whether a demand
would have been futile. Therefore, the district court’s grant of summary judgment
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on this issue is vacated and the case is remanded for further discovery and
consideration of the substantive demand requirements as set forth in In Re F5
Networks, 207 P.3d 433 (Wash. 2009).
B. ERISA Preemption
Whether ERISA preempts state law is a question of subject matter
jurisdiction which we review de novo. Blue Cross of Cal. v. Anesthesia Care
Assocs. Med. Group, Inc., 187 F.3d 1045, 1049–50 (9th Cir. 1999).
ERISA preempts “any and all State laws insofar as they may now or
hereafter relate to any employee benefit plan” that is subject to ERISA. 29 U.S.C.
§ 1144(a). We have formulated a “relationship test” to determine whether ERISA
preempts state law. Geweke Ford v. St. Joseph’s Omni Preferred Care Inc., 130
F.3d 1355, 1358 (9th Cir. 1997). Under the relationship test, ERISA preempts a
state law claim if the claim encroaches on the relationships ERISA regulates, “such
as between plan and plan member, plan and employer, and plan and trustee.” Blue
Cross of Cal., 187 F.3d at 1053; see also Rutledge v. Seyfarth, Shaw, Fairweather
& Geraldson, 201 F.3d 1212, 1219 (9th Cir. 2000).
In this case, Plaintiffs asserted a state law claim that Defendants violated
corporate duties owed to TMSI as officers and directors of TMSI. This
relationship between TMSI and Defendants does not encroach on an ERISA
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regulated relationship because the corporate relationship involves neither the ESOP
nor the ESOP-participant Plaintiffs. In other words, the state law claim for breach
of corporate duties owed to the corporation does not encroach upon an ERISA
regulated relationship such as one between (1) a plan and a plan member, (2) a plan
and an employer, or (3) a plan and a trustee. See Abraham v. Norcal Waste Sys.,
Inc., 265 F.3d 811, 820–23 (9th Cir. 2001); see also Sommers Drug Stores Co.
Employee Profit Sharing Trust v. Corrigan Enter., Inc., 793 F.2d 1456, 1468–69
(5th Cir. 1986) (the fiduciary duties of a corporate director may be parallel to the
duties entrusted to an ERISA plan fiduciary but exist independently from the plan
itself).
We vacate the district court’s grant of summary judgment to Defendants on
the issue of preemption because ERISA does not preempt Plaintiffs’ state law
claim.
C. Leave to Amend
In this case, we need not reach the issue of whether the district court
properly exercised its discretion in denying leave to amend because on remand the
question will arise anew in a different procedural posture.
Each party shall bear its own costs on appeal.
REVERSED and REMANDED.
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