Medical Benefits Administrators, Inc. vs. Sierra Railroad Company, No. 2:2006cv02408 - Document 131 (E.D. Cal. 2009)
Court Description: ORDER denying 120 Motion for Summary Judgment signed by Judge Frank C. Damrell, Jr on 9/1/09. (Kaminski, H)
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Medical Benefits Administrators, Inc. vs. Sierra Railroad Company Doc. 131 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 12 13 ----oo0oo---MEDICAL BENEFITS ADMINISTRATORS OF MD, INC., a Maryland corporation; and CUSTOM RAIL EMPLOYER WELFARE TRUST FUND, NO. CIV. S-06-2408 FCD DAD 14 15 16 17 Plaintiffs, v. MEMORANDUM AND ORDER SIERRA RAILROAD COMPANY, n/k/a SIERRA NORTHERN RAILWAY; VANNA M. WALKER; AMBER A. GILLES and DAVID N. MAGAW, 18 Defendants. 19 ----oo0oo---20 21 This matter is before the court on plaintiffs Medical 22 Benefits Administrators of MD, Inc. (“MBA”) and Custom Rail 23 Employer Welfare Trust Fund’s (“CREW”) (collectively, 24 “plaintiffs”) motion for summary judgment against defendants 25 Sierra Railroad Company (“Sierra”) and Vanna M. Walker (“Walker”) 26 (collectively, “defendants”) as to Count I of the First Amended 27 Complaint (“FAC”), seeking equitable restitution pursuant to the 28 Employee Retirement Income Security Act of 1974 (“ERISA”) Section Dockets.Justia.com 1 502(a)(3) (codified at 29 U.S.C. § 1132(a)(3)).1 2 proceeds against Sierra and Walker solely on Count I of the FAC 3 under ERISA; previously, the court dismissed plaintiffs’ state 4 law claims as preempted by ERISA, and it dismissed named 5 defendants Amber Gilles (“Gilles”) and David Magaw (“Magaw”) 6 since plaintiffs asserted only state law claims against these 7 individuals. 8 Order”].) 9 the monies they paid for Walker’s medical expenses because said This action (Mem. & Order, filed Oct. 5, 2007 [“Oct. 5 Plaintiffs contend they are entitled to restitution of 10 payments were made as a result of the fraudulent and wrongful 11 acts of Sierra and Walker. 12 that triable issues of fact remain as to whether they made any 13 misrepresentation of fact or intended to wrongfully obtain 14 benefits for an employee they knew was ineligible under the 15 subject policy. 16 17 For the reasons set forth below, the court DENIES plaintiffs’ motion for summary judgment. BACKGROUND2 18 19 Defendants oppose the motion, arguing CREW is a multiple employer welfare arrangement for certain 20 railroad employers which has established an Employee Welfare 21 Benefit Plan (the “Plan”) within the meaning of ERISA, 29 U.S.C. 22 § 1001 et. seq. CREW provides health benefits to qualified and 23 24 25 26 27 28 1 Because oral argument will not be of material assistance, the court orders this matter submitted on the briefs. E.D. Cal. L.R. 78-230(h). 2 Unless otherwise noted, the following facts are undisputed. Said facts are derived from defendants’ opposition to plaintiffs’ statement of uncontested facts in support of the motion for summary judgment. (Docket #127-3, filed Aug. 7, 2009 [hereinafter referred to as “RUF”].) 2 1 properly enrolled active employees of participants and is a 2 fiduciary as defined by ERISA. 3 administered by MBA, which is also a fiduciary under ERISA. 4 ¶s 6, 13.) 5 (RUF ¶ 5.) The Plan is (RUF Sierra is a short line railroad company in California that 6 qualifies to participate in CREW through membership in the Small 7 Railroad Business Owners Association of America. 8 July 17, 2003, Sierra submitted a Group Benefit Plan Questionaire 9 (the “Questionaire”) to MBA for participation in CREW. (RUF ¶ 7.) On (RUF 10 ¶ 18.) 11 and attached a list of Sierra’s fifty employees, thirty-five of 12 which were to be enrolled in CREW. 13 not disclosed as an employee and coverage was not requested on 14 her behalf by Sierra. 15 represented that during the previous 12 months, none of its 16 employees, seeking coverage, had been hospitalized, had incurred 17 medical claims in excess of $5,000.00 or had any “major 18 conditions,” such as cancer, or expected to be hospitalized 19 within the next 12 months. 20 Magaw, Sierra’s Vice President, signed the Questionaire (RUF ¶ 29.) (RUF ¶ 11, 18.) Walker was In the Questionaire, Sierra (RUF ¶ 46.) Under the subject Plan, only “Active Employees” are eligible 21 to participate in the CREW Plan. 22 Description provides that an eligible employee is one who works 23 normally at least 24 hours per week and is on the regular payroll 24 of the employer for that work or is under a contract or a full- 25 time written appointment with a member employer. 26 The CREW Summary Plan (RUF ¶ 15.) In response to the Questionnaire, CREW began discussions 27 with Sierra, and Sierra was required to submit supplemental lists 28 of employees who were eligible for the Plan. 3 (RUF ¶s 21-22.) 1 From July through December 2003, Gilles, Sierra’s Human Resources 2 Director, submitted lists of employees to CREW for consideration 3 and rating of the Plan. 4 information to CREW regarding which employees were covered under 5 Sierra’s existing employee benefit plan with Kaiser Permanente, 6 which did not include Walker as of January 1, 2004. (RUF ¶s 10, 28.) Gilles also submitted (RUF ¶ 29.) 7 On December 10, 2003, Magaw signed the Participation 8 Application and Agreement (the “Agreement”) between Sierra and 9 CREW, and Gilles faxed it to CREW. (RUF ¶ 31.) The Agreement 10 certified that Sierra read and understood that CREW would rely on 11 the information set forth by Sierra as a basis for approval. 12 (RUF ¶s 32-37.) 13 Sierra became effective. 14 On January 1, 2004, the Plan between CREW and (RUF ¶ 38.) On January 7, 2004, Gilles submitted an Employee Enrollment 15 Form (“Enrollment Form”), signed by Walker, seeking to add Walker 16 as an enrollee in CREW and verifying that all the information 17 contained therein was correct. 18 stated that Walker resided at 333 Crescent Drive, Grand Prairie, 19 Texas, and that she was currently “Employed Full Time” as a 20 “Safety Manager” by “Sierra Railroad Company,” and that she was 21 hired by Sierra on “12/19/02.” 22 resided in Grand Prairie, Texas, plaintiffs contend none of these 23 statements were true. 24 not then, and never had been, employed by Sierra: 25 part time, independent contractor for Yolo Shortline from 2002 26 through May 2003; she was on active duty in the Army reserves in 27 May 2003; she was not employed by any entity from June through 28 December 2003; and she was not a “full time employee” of any (RUF ¶ 77.) The Enrollment Form With the exception that she (RUF ¶ 78.) 4 Plaintiffs assert Walker was she had been a 1 Sierra-related entity in 2004, having only worked a total of 45 2 hours for entities affiliated with Midland Railroad Enterprises 3 from January 19, 2004 through July 2004. (RUF ¶ 67, 79.) 4 Defendants dispute plaintiffs’ contentions, asserting that 5 Sierra recruited Walker in late-2003 to work for Sierra and its 6 related companies as their safety manager, and that Walker moved 7 to California for this express purpose. 8 Defendants maintain that at the time they sought to enroll Walker 9 in the CREW Plan, both Sierra and Walker anticipated that Walker (RUF ¶s 16, 78-79.) 10 would be a “full-time” employee as defined by the Summary Plan 11 Description; namely, she would “normally” work 24 hours or more 12 per week. 13 above referenced companies was either merged with or a wholly 14 owned subsidiary of Sierra. 15 services for each company, including Sierra. 16 The services to the various companies were pursuant to a contract 17 with Sierra, and thus, defendants assert Walker was eligible 18 under the terms of the Plan. 19 (RUF ¶ 61.) Defendants also state that each of the Over the years, Walker performed (RUF ¶s 55-60, 65.) (RUF ¶s 16, 50.) On January 7, 2004, Walker told Gilles she had been 20 diagnosed and treated for cancer.3 21 pre-existing conditions were covered, but Walker does not recall 22 Gilles telling CREW that Walker had been diagnosed and treated 23 for cancer. 24 applied for enrollment in the CREW Plan, he did not know she had 25 cancer. (RUF ¶ 71.) (RUF ¶ 70.) Gilles called CREW to ask if Magaw asserts at the time Walker Neither Walker nor Gilles disclosed 26 3 27 28 Walker was diagnosed with multiple myeloma, a form of blood cancer, on July 14, 2003, and thereafter actively underwent chemotherapy from July through December 2003, during which time she did not work for any entity. (RUF ¶s 12, 42.) 5 1 2 Walker’s illness prior to her enrollment in CREW. (RUF ¶ 94.) After Walker enrolled in CREW, she, along with healthcare 3 providers, began submitting claims for medical benefits stemming 4 from her treatment of multiple myeloma, with which she had been 5 diagnosed prior to January 7, 2004. 6 (FAC ¶s 35-36.)4 Defendants concede that after January 7, 2004, Walker’s work 7 for Sierra was limited due to her illness; however, defendants 8 assert that they intended and anticipated when they re-hired 9 Walker and sought enrollment for her in the CREW Plan, in January 10 2004, that her normal job duties would qualify her for benefits 11 under the Plan. 12 (RUF ¶s 64-68.) On September 8, 2004, Ronald J. Wilson (“Wilson”), the CEO 13 of MBA, asked Gilles and Magaw during a telephone call whether 14 Walker was an employee of Sierra. 15 responded that Walker was a “contract employee” of Sierra and 16 that Sierra had an agreement to cover her because she was 17 Sierra’s Safety Director. 18 these statements to Wilson. 19 Wilson asserts that Magaw (RUF ¶ 82.) Magaw denies that he made (Id.) Plaintiffs assert that in reliance on the representations by 20 Sierra and Walker, MBA made payments from CREW to healthcare 21 providers on behalf of Walker in the amount of $177,740.35. 22 (FAC, ¶ 42.)5 23 Walker’s medical expenses, Sierra would have been obligated to Plaintiffs maintain that had they not paid 24 25 26 27 28 4 Plaintiffs did not describe these facts in their statement of uncontested facts; thus, the court cites the FAC since defendants do not appear to dispute these facts. 5 Plaintiffs did not describe these facts in their statement of uncontested facts; thus, the court cites the FAC since defendants do not appear to dispute these facts. 6 1 pay the expenses pursuant to its agreement to provide such 2 benefits as a term of Walker’s employment or pursuant to its 3 employee health benefit program. 4 plaintiffs contend Walker was personally obligated to pay her 5 medical expenses. 6 (RUF ¶s 88-89, 90.) 7 (RUF ¶ 90.) (RUF ¶s 84-89.) Alternatively, Defendants deny these facts. On November 5, 2004, CREW issued an Adverse Benefit 8 Determination terminating Walker’s participation in the CREW Plan 9 based on Sierra’s failure to disclose Walker’s prior diagnosis 10 and treatment for cancer and Walker’s failure to meet the 11 eligibility requirements under the Plan. 12 advised Walker of her right to appeal the decision. 13 Walker never appealed the denial of benefits. 14 15 (RUF ¶ 98.) CREW However, (RUF ¶ 104.) STANDARD The Federal Rules of Civil Procedure provide for summary 16 judgment where “the pleadings, the discovery and disclosure 17 materials on file, and any affidavits show that there is no 18 genuine issue as to any material fact and that the movant is 19 entitled to judgment as a matter of law.” 20 see California v. Campbell, 138 F.3d 772, 780 (9th Cir. 1998). 21 The evidence must be viewed in the light most favorable to the 22 nonmoving party. 23 Cir. 2000) (en banc). 24 Fed. R. Civ. P. 56(c); See Lopez v. Smith, 203 F.3d 1122, 1131 (9th The moving party bears the initial burden of demonstrating 25 the absence of a genuine issue of fact. 26 Catrett, 477 U.S. 317, 325 (1986). 27 meet this burden, “the nonmoving party has no obligation to 28 produce anything, even if the nonmoving party would have the 7 See Celotex Corp. v. If the moving party fails to 1 ultimate burden of persuasion at trial.” Nissan Fire & Marine 2 Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102-03 (9th Cir. 2000). 3 However, if the nonmoving party has the burden of proof at trial, 4 the moving party only needs to show “that there is an absence of 5 evidence to support the nonmoving party's case.” 6 477 U.S. at 325. Celotex Corp., 7 Once the moving party has met its burden of proof, the 8 nonmoving party must produce evidence on which a reasonable trier 9 of fact could find in its favor viewing the record as a whole in 10 light of the evidentiary burden the law places on that party. 11 See Triton Energy Corp. v. Square D Co., 68 F.3d 1216, 1221 (9th 12 Cir. 1995). 13 allegations without any significant probative evidence tending to 14 support the complaint. 15 1107. 16 “must set forth specific facts showing that there is a genuine 17 issue for trial.” The nonmoving party cannot simply rest on its Instead, through admissible evidence the nonmoving party Fed. R. Civ. P. 56(e). 18 19 See Nissan Fire & Marine, 210 F.3d at ANALYSIS Plaintiffs assert they are entitled to recover $177,740.35 20 in health benefits paid by MBA on behalf of CREW for medical 21 treatment to Walker that either Walker, individually, or Sierra, 22 as Walker’s employer, would otherwise have been obligated to pay 23 but for Sierra and Walker’s misrepresentations and other wrongful 24 misconduct. 25 against Sierra and Walker of said monies pursuant to Section 26 502(a)(3) of ERISA. Plaintiffs claim they are entitled to restitution 29 U.S.C. § 1132(a)(3). 27 To sustain a claim under Section 502(a)(3), a plaintiff must 28 establish that (1) it is an ERISA fiduciary and (2) it is seeking 8 1 equitable relief to redress violations or enforce provisions of 2 the plan. 3 Cir. 2000). 4 are plan fiduciaries as defined by ERISA. 5 Also, this court has previously held that the restitution of 6 monies from defendants that plaintiffs seek is “equitable” relief 7 permitted by Section 502(a)(3). 8 20 [rejecting defendants’ argument that plaintiffs’ ERISA claim 9 was a disguised claim for money damages, as opposed to equitable Reynolds Metals Co. v. Ellis, 202 F.3d 1246, 1247 (9th Here, defendants do not dispute that CREW and MBA (RUF ¶s 5-6, 13.) (Oct. 5 Order at 12:6-7, 13:17- 10 relief, and holding that “[b]ecause plaintiffs allege facts 11 supporting fraud or wrongdoing and [defendants’] receipt of ‘ill- 12 gotten gains,’ . . . [their Section 502(a)(3)] is allowable under 13 Ninth Circuit authority”].) 14 The Ninth Circuit has held that claims for restitution 15 relating to “ill-gotten gains” of a defendant are permissible 16 when a plaintiff alleges fraud. 17 1258, 1261 (9th Cir. 1997) (citing Mertens v. Hewitt Assocs., 508 18 U.S. 248, 256 (1993)) (recognizing that the Supreme Court in 19 Mertens defined “[r]estitution [for purposes of Section 20 502(a)(3)) as the return of ‘ill-gotten’ assets or profits taken 21 from a plan”). 22 Southern California v. Vonderharr, 384 F.3d 667, 672 (9th Cir. 23 2004), the court emphasized that “Owens was based on Mertens and 24 did not preclude all claims for [monetary] relief, but 25 appropriately limited restitution and constructive trust remedies 26 to those situations in which fraud or wrongdoing is shown.” 27 Further, in Reynolds where the appellant argued that Owens 28 precludes all forms of monetary relief under Section 502(a)(3), FMC Med. Plan v. Owens, 122 F.3d In Carpenters Health and Welfare Trust for 9 1 the court held: “This badly mischaracterizes the Owens opinion-- 2 the opinion accepts, as does Mertens, that restitution and 3 constructive trust remedies may be appropriate under § 1132 4 (a)(3) [ERISA § 502(a)(3)], provided some fraud or wrongdoing is 5 shown.” 202 F.3d at 1249. 6 Thus, the only issue, here, is whether plaintiffs have 7 shown, as a matter of law, that defendants engaged in fraudulent 8 conduct. 9 plaintiffs must demonstrate each of the elements of a common law Defendants contend that to make this showing, 10 fraud claim, namely: (1) a material misrepresentation of fact (or 11 concealment of the same); (3) knowledge of the falsity of the 12 statement; (3) intent to defraud; (4) plaintiffs’ justifiable 13 reliance on the misrepresentation; and (5) resulting damage. 14 Anderson v. Deloite & Touche, 56 Cal. App. 4th 1468, 1474 (1997). 15 Plaintiffs argue, to the contrary, that they must show only some 16 “wrongdoing” by defendants. 17 Plaintiffs are incorrect. First, contrary to plaintiffs’ assertions, this court did 18 not so hold in its October 5 Order. 19 whether Count I of plaintiffs’ FAC stated an equitable, as 20 opposed to, legal claim for relief; more specifically, whether 21 plaintiffs’ claim was truly an equitable claim for restitution or 22 whether plaintiffs actually sought monetary damages. 23 Order at 12-13.) 24 Section 502(a)(3), since it sought equitable restitution of “ill- 25 gotten gains” derived from defendants’ alleged fraudulent 26 conduct, the court did not decide what showing plaintiffs would 27 be required to make to establish a fraud. 28 court decides that issue, for the first time, on the instant There, the court considered (Oct. 5 In finding plaintiffs’ claim viable under ERISA 10 (Id. at 13-14.) The 1 2 motion. In holding that Section 502(a)(3) does not preclude all 3 forms of monetary relief, the Ninth Circuit has emphasized that 4 such recovery, however, is limited to only those circumstances 5 involving fraudulent conduct by the defendant. 6 at 1261; Reynolds, 202 F.3d at 1249; Vonderharr, 384 F.3d at 672. 7 In Mertens, the Supreme Court defined “restitution,” permitted by 8 Section 502(a)(2), as the “return of ‘ill-gotten’ assets or 9 profits taken from a plan.” Owens, 122 F.3d Mertens, 508 U.S. at 260. Applying 10 that definition, the Ninth Circuit determined in Owens and 11 Vonderharr that claims for monetary restitution relating to “ill- 12 gotten gains” of a defendant are permissible when a plaintiff 13 alleges fraudulent conduct. 14 384 F.3d at 672. 15 times referenced fraudulent and/or “wrongful” conduct, it is 16 clear from the rationale of the cases, that the exception 17 permitting monetary recovery is narrow--it is confined to those 18 circumstances wherein a fraud has been perpetrated on the Plan 19 fiduciaries. 20 Owens, 122 F.3d at 1261; Vonderharr, While the Ninth Circuit, in these cases, at Id. Indeed, in an analogous case, the Northern District denied 21 the defendant’s motion to dismiss, finding that the plaintiffs, a 22 benefit fund and administrator, stated a viable claim under 23 Section 502(a)(3) against an employer to recover amounts paid to 24 an ineligible employee, based on the employer’s alleged willful 25 and false reporting of hours worked by the employee. 26 California Food Employers & Retail Clerks Unions Benefit Fund v. 27 Dianda’s Italian-American Pastry Co., Inc., 645 F. Supp. 160, 161 28 (N.D. Cal. 1986). Northern The court held that Section 502(a)(3) allows 11 1 for the redress of plan violations of this sort and that such 2 redress includes compensating the plan for lost monies due to the 3 violation. 4 plaintiffs would be required to prove each of the elements of a 5 common law fraud claim to ultimately prevail in the action, the 6 court’s emphasis on the alleged willfulness and falsity of the 7 employer’s conduct supports this court’s reading of the 8 requirements of Owens and Vonderharr. Id. While the court did not expressly state that the 9 Thus, because the exception permitting monetary recovery 10 under Section 502(a)(3) must be narrowly construed, the court 11 finds, consistent with defendants’ argument, that to establish 12 entitlement to the restitution of the alleged “ill-gotten gains” 13 in this case, plaintiffs must establish each of the elements of a 14 common law fraud claim.6 15 However, for several reasons, the court cannot find that 16 plaintiffs have made this showing as a matter of law. 17 proffer sufficient evidence to raise a triable issue of fact that 18 they did not make any materially false statements of fact and did 19 not intend to defraud plaintiffs in seeking to enroll Walker in 20 the CREW Plan. 21 Defendants As to the alleged misrepresentations of fact, it is 22 undisputed that at the time Sierra filled out the Questionaire, 23 on July 17, 2003, seeking coverage from CREW, Walker was on 24 6 25 26 27 28 The court’s prior ruling preempting plaintiffs’ state law claims under ERISA, including a claim for fraud, does not preclude this holding. (Oct. 5 Order at 7-11.) While plaintiffs may not have a separately viable claim for fraud under state law, fraudulent conduct is required to sustain the instant ERISA claim, and the court properly turns to state law to ascertain the elements of a fraud claim since such a claim is derived from the common law. 12 1 active duty in the Army, stationed in Texas, and was not an 2 employee of Sierra. 3 it is undisputed that at no time, during Sierra’s negotiations 4 with CREW from July to December 2003, was Walker an employee of 5 Sierra. 6 Walker as an employee or provide health information pertaining to 7 Walker.7 8 actionable misrepresentation based on Sierra’s statements in the 9 Questionaire and during the negotiation period. 10 (Id.) (RUF ¶s 11, 12, 18, 29, 42, 94.) Moreover, Accordingly, Sierra had no obligation to disclose Therefore, plaintiffs have not demonstrated any As such, plaintiffs’ claim of a misrepresentation of fact 11 hinges on Sierra’s and Walker’s statements in the January 7, 2004 12 Enrollment Form. 13 at 333 Crescent Drive, Grand Prairie, Texas; she was currently 14 “Employed Full Time” as a “Safety Manager” by “Sierra Railroad 15 Company;” and she was hired by Sierra on “12/19/02.” 16 exception that she resided in Grand Prairie, Texas, plaintiffs 17 contend none of these statements were true. 18 Plaintiffs assert Walker was not then, and never had been, 19 employed by Sierra: 20 contractor for Yolo Shortline from 2002 through May 2003; she was 21 on active duty in the Army reserves in May 2003; she was not The Enrollment Form stated that Walker resided With the (RUF ¶ 78.) she had been a part time, independent 22 7 23 24 25 26 27 28 Indeed, defendants maintain that during this time, Sierra did not know Walker had been diagnosed with cancer. (RUF ¶s 12, 42, 70, 71.) Both Magaw and Gilles testified that they did not know of Walker’s diagnosis until January 7, 2004 or thereafter, and Walker testified she did not tell anyone at Sierra about her condition until after she returned to work at Sierra in January 2004. (RUF ¶s 70, 71.) Plaintiffs dispute these facts, arguing that based on Walker’s obvious, health condition in late 2003 and early 2004, defendants “had to have known” Walker had cancer. (See Reply, filed Aug. 13, 2009, at 10-11.) However, plaintiffs do not proffer any evidence in support of their argument. 13 1 employed by any entity from June through December 2003; and she 2 was not a “full time employee” of any Sierra-related entity in 3 2004, having only worked a total of 45 hours for entities 4 affiliated with Midland Railroad Enterprises from January 19, 5 2004 through July 2004. (RUF ¶ 67, 79.)8 6 Defendants, however, dispute plaintiffs’ contentions and 7 proffer evidence that Sierra recruited Walker in late-2003 to 8 work for Sierra and its related companies as their safety 9 manager, and that Walker moved to California for this express 10 purpose. 11 time they sought to enroll Walker in the CREW Plan, both Sierra 12 and Walker anticipated that Walker would be a “full-time” 13 employee as defined by the Summary Plan Description; namely, she 14 would “normally” work 24 hours or more per week. 15 Defendants also submit evidence that each of the above referenced 16 companies was either merged with or a wholly owned subsidiary of 17 Sierra. 18 company, including Sierra. 19 describe that the services to the various companies were pursuant 20 to a contract with Sierra, and thus, defendants assert Walker was 21 eligible under the terms of the Plan. 22 (RUF ¶s 16, 78-79.) Defendants maintain that at the (RUF ¶ 61.) Over the years, Walker performed services for each (RUF ¶s 55-60, 65.) Defendants (RUF ¶s 16, 50.) Defendants concede that after January 7, 2004, Walker’s work 23 for Sierra was limited due to her illness; however, defendants 24 assert that they intended and anticipated when they re-hired 25 8 26 27 28 At times, plaintiffs make passing reference to alleged misrepresentations in the Enrollment Form regarding Walker’s health status. However, with respect to the Enrollment Form, as opposed to the Questionaire, no such claim is viable as the form did not require or ask questions regarding the applicant’s health condition. (RUF ¶ 78.) 14 1 Walker and sought enrollment for her in the CREW Plan, in January 2 2004, that her regular job duties would qualify her for benefits 3 under the Plan. 4 (RUF ¶s 64-68.) Defendants’ evidence sufficiently raises a triable issue of 5 fact as to whether defendants made any false statements of fact 6 in the Enrollment Form. 7 subject statements were materially false. 8 822 F.2d 902, 904 (9th Cir. 1987) (recognizing that “[w]hether 9 the misrepresentations were material under the circumstances, A jury must determine whether the See In re Lansford, 10 whether there was reasonable reliance, and whether there was an 11 intent to deceive are [ordinarily] issues of fact” for the jury 12 to resolve). 13 stated in the Enrollment Form that Sierra hired Walker on 14 12/19/02, suggesting she had been employed by Sierra since that 15 date, when in fact, defendants concede, Walker had periods of 16 time after that date when she was not employed by Sierra; 17 however, a jury must assess whether that statement was materially 18 false since defendants only sought coverage for Walker beginning 19 in January 2004. 20 falsely represented that Walker was a “full-time employee” of 21 Sierra, defendants proffer evidence that at the time Sierra 22 sought benefits for Walker, Sierra had hired Walker to perform 23 work for Sierra under terms which qualified her for the CREW 24 Plan; namely, regular work, as a Safety Manager, of at least 24 25 hours per week for Sierra and its related companies. 26 the jury to determine the credibility of defendants’ statements 27 regarding Sierra’s offer of employment to Walker, Walker’s 28 acceptance of the same and defendants’ intentions regarding the For example, plaintiffs emphasize that defendants Moreover, while plaintiffs contend defendants 15 It is for 1 terms of Walker’s employment. 2 Estates, Nos. B182090, B183975, 2007 WL 926567, *25 (Cal. Ct. 3 App. April 25, 2007). 4 Norwest Mortg. v. Canyon View For similar reasons, defendants have also raised a triable 5 issue of fact as to whether they intended to defraud plaintiffs, 6 by knowingly seeking coverage for an ineligible employee. 7 forth above, it is undisputed that Walker was not performing any 8 work for Sierra or its related companies at the time Sierra 9 sought coverage from CREW in July to December 2003. As set It is also 10 undisputed that Sierra did not know of Walker’s health status 11 until January 7, 2004, at the earliest. 12 have not demonstrated defendants’ knowledge of any false 13 statements or intent to defraud based on the Questionaire. 14 Therefore, plaintiffs With respect to the Enrollment Form, as described above, 15 defendants proffer evidence that it was anticipated both by 16 Sierra and Walker that Walker would work for Sierra and its 17 related companies under terms which qualified her for benefits 18 under the CREW Plan. 19 whether defendants made any knowingly false statements intending 20 to enroll Walker in a Plan for which she was not qualified. 21 Defendants maintain they believed in January 2004 that Walker met 22 the qualifications for enrollment in the Plan since they hired 23 her to work at least 24 hours per week as the Safety Manager for 24 Sierra and its related companies. 25 assertions, that Walker ultimately was not able to work those 26 hours does not establish the falsity of defendants’ statements, 27 as a matter of law. 28 of defendants’ statements and intentions and ascertain whether Thus, it is a disputed issue of fact Contrary to plaintiffs’ It is for the jury to weigh the credibility 16 1 defendants fraudulently misrepresented Walker’s employment 2 status.9 3 1407, 1417 (1988) (recognizing that “[g]enerally, issue of 4 whether insured’s false statement to insurer during processing of 5 claim was knowingly and intelligently made with knowledge of its 6 falsity, and with intent to defraud insurer, is a question of 7 fact” for the jury). 8 9 See Cummings v. Fire Ins. Exchange, 202 Cal. App. 3d Thus, plaintiffs have not established, as a matter of law, these additional, requisite elements of a fraud claim. Triable 10 issues of fact remain as to defendants’ alleged knowledge of the 11 claimed falsity of their statements in the Enrollment Form and 12 their purported intent to defraud plaintiffs by obtaining 13 coverage for an ineligible employee.10 14 CONCLUSION 15 16 For the foregoing reasons, plaintiffs’ motion for summary judgment as to Count I of the FAC, alleging defendants violated 17 18 9 19 20 21 22 23 24 Again, as to the alleged failure to disclose Walker’s health status, plaintiffs have not shown that the Enrollment Form required the disclosure of such information. Instead, plaintiffs cite to the Questionaire, and the provisions thereunder, which required defendants to disclose the health status of eligible employees. However, at the time Sierra sought coverage from CREW in July 2003, Walker was not an employee of Sierra or its related companies, and thus, plaintiffs have not demonstrated Sierra had an obligation to disclose Walker’s health status. Moreover, it is undisputed that defendants did not know of Walker’s health status at that point. 10 25 26 27 28 Defendants also argue that plaintiffs’ claim fails because they cannot demonstrate Sierra was otherwise obligated to pay Walker’s medical bills. Sierra contends that there is nothing in its employment handbook or contract with Walker that obligates it to pay Walker’s medical bills. This is not an issue the court can resolve on plaintiffs’ instant motion; Sierra has not cross-moved for summary judgment, and thus, the court does not resolve this apparent legal issue herein. 17 1 2 3 Section 502(a)(3) of ERISA, is DENIED. IT IS SO ORDERED. DATED: September 1, 2009. 4 5 FRANK C. DAMRELL, JR. UNITED STATES DISTRICT JUDGE 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 18
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