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Duff v. Hilliard Martinez Gonzalez, LLP

United States District Court, S.D. Texas, Houston Division

May 2, 2018

CHARLES DUFF, Plaintiff,



         I. Background

         A. The Allegations In The Complaint.

         Charles Duff sued his former employer, Hilliard Martinez Gonzalez, LLP, a law firm in Corpus Christi, Texas, and two partners, Robert Hilliard and Catherine Tobin, who allegedly made the financial decisions for the firm. (Docket Entry No. 1). Duff was hired in August 2010 to serve as the chief financial officer for Hilliard Martinez Gonzales. Id. at ¶ 9. Duff alleges that in April 2015, Robert Hilliard agreed to pay him a bonus of “half a million” for his contributions and service, from money the law firm expected to get from cases it settled with General Motors. Id. Duff alleges that on June 10, 2015, he and Robert Hilliard signed a “deferred compensation agreement, ” under which the firm would put $800, 000 for Duff into an account associated with the agreement in four $200, 000 installments. Id. Duff also alleges that the firm agreed to pay him a bonus tied to the General Motors settlement funds, but separate from the contributions-and-service bonus. Id.

         In the fall of 2016, Duff was assigned the task of managing the General Motors settlement funds, increasing his workload. He alleges that he accepted the added work because of the bonus he believed he would receive. Id. at ¶ 10. When Duff sought assurance from Robert Hilliard that the deferred compensation agreement was still in force, Robert Hilliard allegedly told Duff, “I will take care of you brother.” Id.

         Robert Hilliard did not give Duff a bonus in December 2016 or January 2017. Id. That month, Duff brought the bonus issue to Catherine Hilliard's attention. Id. at ¶ 11. Catherine Hilliard told Duff that she and Robert Hilliard had considered paying Duff a bonus but did not do so because they wanted it to be “substantial, ” which required waiting until after the law firm collected the General Motors funds. Id. Duff alleges that Catherine Hilliard acknowledged that he would also receive $500, 000 for his contributions and service to the law firm. Id.

         In the spring of 2017, Duff told the Hilliards that the firm had collected most of the General Motors settlement funds. Id. at ¶ 12. Duff alleges that he asked Robert Hilliard to insulate the collected settlement funds from creditors or from bankruptcy, to protect his deferred compensation agreement from what he saw as Robert Hilliard's needless spending. Id. Robert Hilliard allegedly agreed to do so, but he did not. Id. Duff alleges that in July 2017, he asked Robert Hilliard to loan him 90% of his deferred compensation account balance, to protect the funds in the account. Id. at ¶ 13. The loan was not made. Id. Hilliard Martinez Gonzales did not pay Duff $500, 000 after the General Motors settlement funds were collected, instead awarding Duff $5, 000. Id. at ¶ 14. After Duff retained counsel to enforce the deferred compensation agreement, he was terminated on November 28, 2017. Id.

         B. The Motion To Dismiss.

         Duff asserts claims for violations of ERISA, 29 U.S.C. § 1132, and under Texas state law for breach of contract, fraud, breach of fiduciary duty, promissory estoppel, and unjust enrichment. He seeks damages and an injunction. The defendants have moved to dismiss under Rule 12(b)(6), asserting that the complaint fails to state a plausible claim under ERISA and arguing that the court should decline to exercise jurisdiction over the state-law claims if it dismisses the federal ERISA claim. (Docket Entry No. 7). Duff responded, the defendants replied, and Duff sur-replied. (Docket Entries No. 12, 13, 14).

         Based on the pleadings, the motion, response, reply, and sur-reply, the record, and the applicable law, the court dismisses the ERISA claim, with prejudice because amendment would be futile, declines to exercise jurisdiction over the state-law claims, and dismisses them, without prejudice, so that they might proceed in the state court. The reasons are explained below.

         II. The Applicable Legal Standards

         A. Rule 12(b)(6) Motions to Dismiss.

         Rule 12(b)(6) allows dismissal if a plaintiff fails “to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). Rule 12(b)(6) must be read in conjunction with Rule 8(a), which requires “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a) (2). A complaint must contain “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Rule 8 “does not require ‘detailed factual allegations, ' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 555). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). “The plausibility standard is not akin to a ‘probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (citing Twombly, 550 U.S. at 556).

         To withstand a Rule 12(b)(6) motion, a “complaint must allege ‘more than labels and conclusions, '” and “a formulaic recitation of the elements of a cause of action will not do.” Norris v. Hearst Tr., 500 F.3d 454, 464 (5th Cir. 2007) (quoting Twombly, 550 U.S. at 555). “Nor does a complaint suffice if it tenders ‘naked assertion[s]' devoid of ‘further factual enhancement.'” Iqbal, 556 U.S. at 678 (alteration in original) (quoting Twombly, 550 U.S. at 557). “[A] complaint does not need detailed factual allegations, but must provide the plaintiff's grounds for entitlement to relief-including factual allegations that when assumed to be true ‘raise a right to relief above the speculative level.'” Cuvillier v. Taylor, 503 F.3d 397, 401 (5th Cir. 2007) (quoting Twombly, 550 U.S. at 555). “Conversely, when the allegations in a complaint, however true, could not raise a claim of entitlement to relief, this basic deficiency should be exposed at the point of minimum expenditure of time and money by the parties and the court.” Id. (quoting Twombly, 550 U.S. at 558) (internal quotation marks and alteration omitted).

         When a plaintiff's complaint fails to state a claim, the court should generally give the plaintiff a chance to amend the complaint under Rule 15(a) before dismissing the action with prejudice, unless it is clear that to do so would be futile. See Carroll v. Fort James Corp., 470 F.3d 1171, 1175 (5th Cir. 2006) (Rule 15(a) “evinces a bias in favor of granting leave to amend”); Great Plains Tr. Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 329 (5th Cir. 2002) (“[D]istrict courts often afford plaintiffs at least one opportunity to cure pleading deficiencies before dismissing a case, unless it is clear that the defects are incurable or the plaintiffs advise the court that they are unwilling or unable to amend in a manner that will avoid dismissal.”). A court may deny a motion to amend for futility if the amended complaint would fail to state a claim upon which relief could be granted. Villarreal v. Wells Fargo Bank, N.A., 814 F.3d 763, 766 (5th Cir. 2016) (citing Stripling v. Jordan Prods. Co., LLC, 234 F.3d 863, 873 (5th Cir. 2000)). The decision to grant or deny leave to amend “is entrusted to the sound discretion of the district court.” Pervasive Software Inc. v. Lexware GMBH & Co., 688 F.3d 214, 232 (5th Cir. 2012).

         B. ERISA.

         The ERISA statute defines the retirement, health, severance, compensation, or other employee benefit plans it covers; with preemptive force. The statute provides that:

The terms “employee welfare benefit plan” and “welfare plan” mean any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or ...

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