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MBA Engineering, Inc. v. Vantage Benefits Administrators, Inc.

United States District Court, N.D. Texas, Dallas Division

August 9, 2019

MBA ENGINEERING, INC., as Sponsor and Administrator of the MBA Engineering, Inc. Employees 401(k) Plan and the MBA Engineering, Inc. Cash Balance Plan; and CRAIG MEIDINGER, as Trustee of the MBA Engineering, Inc. Employees 401(k) Plan and the MBA Engineering, Inc. Cash Balance Plan, Plaintiffs,
v.
VANTAGE BENEFITS ADMINISTRATORS, INC.; JEFFREY A. RICHIE; WENDY K. RICHIE; and MATRIX TRUST COMPANY, Defendants.

          MEMORANDUM OPINION AND ORDER

          Sam A. Lindsay, United States District Judge.

         Before the court is “Defendant Matrix Trust Company's (1) Motion to Dismiss for Improper Venue, or Alternatively, to Transfer and (2) Motion to Dismiss for Failure to State a Claim” (Doc. 25), filed May 2, 2018. For the reasons herein explained, the court denies “Defendant Matrix Trust Company's (1) Motion to Dismiss for Improper Venue, or Alternatively, to Transfer and (2) Motion to Dismiss for Failure to State a Claim” (Doc. 25).

         I. Procedural Background

         On March 5, 2019, the Findings, Conclusions and Recommendation of the United States Magistrate Judge (“Report”) (Doc. 42) was entered, recommending that the court grant Defendant Matrix Trust Company's Motion to Dismiss for Failure to State a Claim; dismiss with prejudice all claims asserted by Plaintiffs against Matrix Trust Company (“Matrix”); and deny Matrix's Motion to Dismiss for Improper Venue or, Alternatively, to Transfer. Specifically, the magistrate judge determined that: (1) dismissal for improper venue or severance and transfer of the claims against Matrix under Federal Rule of Civil Procedure 12(b)(3) and 28 U.S.C. § 1404(a) is not appropriate; (2) Plaintiffs' claims in Counts 2 and 4 under section 502(a)(2) of the Employee Retirement Income Security Act of 1974 (“ERISA”) should be dismissed because Plaintiffs lack statutory standing under ERISA to assert these claims, as their pleadings show they brought suit in their individual capacities to obtain a judgment in their favor to recover money Plaintiffs loaned to the employee benefit plans at issue (“Plans”), and not on behalf of or in favor of the Plans; (3) Plaintiffs' ERISA claims in Counts 6 and 11 under sections 406(b)(1), 406(a)(1)(D), and 405(a) should be dismissed for failure to state a claim upon which relief can be granted because Plaintiffs' pleadings fail to establish that Matrix was a fiduciary to the Plans; (4) Plaintiffs abandoned their ERISA claim under section 502(a)(3) in Count 8 and, even if not abandoned, the claim should be dismissed for failure to state a claim upon which relief can be granted because Plaintiffs do not allege that Matrix is in possession of the funds sought; and (5) Plaintiffs' state law negligence claims in Counts 15 and 18 should be dismissed because Plaintiffs fail to adequately allege facts regarding the source of Matrix's duty, and these state law claims are preempted by ERISA because they relate to the benefit plan at issue. The magistrate judge further recommended that the court deny Plaintiffs' request to amend their pleadings because, in response to Matrix's motion to dismiss, they failed to explain how they would cure the deficiencies noted. The magistrate judge, therefore, determined that granting them leave to amend would likely be futile and cause unnecessary delay. Plaintiffs filed objections to the Report, to which Matrix filed a response in opposition.

         II. Motion to Dismiss for Improper Venue, or Alternatively, to Transfer

         No objections were made to the magistrate judge's recommendation that Matrix's Motion to Dismiss for Improper Venue, or Alternatively Transfer should be denied. Having reviewed the motion, the parties' briefs, evidence, and the Report, the court determines that the findings and conclusions of the magistrate judge with respect to Matrix's Motion to Dismiss for Improper Venue, or Alternatively Transfer are correct, and accepts them as those of the court. Accordingly, the court denies Matrix's Motion to Dismiss for Improper Venue or, Alternatively, to Transfer.

         III. Motion to Dismiss for Failure to State a Claim

         Only Plaintiffs filed objections to the Report. In their objections (Doc. 43), filed March 20, 2019, Plaintiffs MBA Engineering, Inc., as Sponsor and Administrator of the MBA Engineering, Inc. Employees 401(k) Plan and the MBA Engineering, Inc. Cash Balance Plan; and Craig Meidinger, as Trustee of the foregoing Plans (collectively, “Plaintiffs”) contend in pertinent part as follows: (1) that they have standing to assert their ERISA claims; that Matrix qualifies as a “functional fiduciary” because it exercised authority and control over the Plans' assets when it unilaterally transferred assets out of the Plans to Defendants Vantage Benefits Administrators, Inc. (“Vantage”) and Jeffrey and Wendy Richie;[1] that they did not abandon their ERISA claims under section 503(a)(3);[2] that their state law claims should not be dismissed as preempted[3] or for failure to state a claim because they allege in the alternative that, even if it is determined that Matrix is a non-fiduciary to the Plans under ERISA, it owed a common law duty to the Plans under Texas law as a service provider to the Plans and the custodian of the Plans' assets; and that they should be allowed to amend their pleadings to cure the deficiency noted by the magistrate judge by replacing language in their pleadings to reflect that this action is being brought on behalf of the Plans, and that Plaintiffs are seeking entry of a judgment in favor of the Plans. Matrix filed a response in opposition to Plaintiffs' objections (Doc. 46) on April 3. 2019.

         In briefing Matrix's motions, both parties submitted evidence in support of their respective positions regarding venue, as well as the appropriateness of dismissal under Federal Rule of Civil Procedure 12(b)(6). In addition, Plaintiffs submitted evidence in response to the magistrate judge's findings and recommendation. Specifically, in support of its motion to dismiss and contention that it does not qualify as a fiduciary under ERISA, an issue that goes to the heart of all of Plaintiffs' ERISA claims, Matrix relies on the declaration of Will Beutelschies (“Beutelschies”) to show, among other things, that the letter referenced in Plaintiffs' First Amended Complaint (“Complaint”) for purposes of establishing an alternate basis of fiduciary status or liability against Matrix, is a “forgery.” Matrix Mot. 19 n.8 (Doc. 26) (quoting Matrix App. 4-5 (Doc. 27)). Matrix also appears to rely in part on a Custodian Agreement but contends that dismissal under Rule 12(b)(6) is appropriate even if the court does not consider this agreement.[4] See Matrix Mot. 22.

         In response to Matrix's motion to dismiss, Plaintiffs rely on declarations and loan documents to support their contention that they have statutory standing[5] to sue on behalf of the Plans under ERISA. In conjunction with their objections to the Report, Plaintiffs also submitted the declaration of Meidinger to show that he would have had standing to sue under ERISA, even if he had sued in his individual capacity. In submitting these materials, both parties request the court to consider matters outside of the pleadings in ruling on Matrix's motion for dismissal under Rule 12(b)(6).[6]

         Regarding Matrix's Motion to Dismiss for Failure to State a Claim, the court determines that the arguments raised by the parties involve factual issues that are better left for resolution at the summary judgment stage or trial. The facts regarding Matrix's fiduciary status under ERISA need development, as the court cannot make a determination regarding Matrix's fiduciary status in a vacuum. Accordingly, evidence regarding Matrix's disputed role is needed to determine whether it actions amount to exercising “any authority or control respecting management or disposition of [the Plans'] assets, ” 29 U.S.C. § 1002(21)(A)(i), or make Matrix liable to the Plans on the other theories referenced in the parties' briefs such as “directed trustee” liability. Likewise, the facts as to whether Matrix can be held liable as a non-fiduciary under Texas common law for the torts alleged need development. In addition, if Matrix intends to seek dismissal again of Plaintiffs' ERISA claims for lack of statutory standing on the ground that this action is in effect a contribution action that does not entitle Plaintiffs to relief under ERISA, this legal issue will need further development and analysis as it applies to the facts of this case.

         While the court has discretion to convert Matrix's motion to dismiss to a summary judgment and consider the parties' evidence that is outside the pleadings, it declines to do so here, as it would only further delay the resolution of the motion to dismiss and the proceedings in this case unnecessarily because the court would need to give the parties an opportunity to submit additional briefing and evidence, and it is not clear whether proceeding in this manner would facilitate disposition of Plaintiffs' claims against Matrix. See Isquith v. Middle South Util., Inc., 847 F.2d 186, 193 n.3 (5th Cir. 1988) (explaining that the decision whether to convert a motion to dismiss to a motion for summary judgment is within the court's discretion, which is exercised on the basis of a determination of “whether or not the proffered material, and the resulting conversion from the Rule 12(b)(6) to the Rule 56 procedure, is likely to facilitate the disposition of the action.”) (citation and quotation omitted); see also Scanlan v. Texas A & M Univ., 343 F.3d 533, 539 (5th Cir. 2003) (explaining that, when a district considers matters outside the pleadings in ruling on a Rule 12(b)(6) motion to dismiss, it must first convert the motion to dismiss to a summary judgment motion, give the parties notice and an opportunity to present evidence pertinent to the motion).

         Accordingly, having reviewed the motion to dismiss, the parties' briefs, the pleadings, and the Report, and having conducted a de novo review of that portion of the Report to which objection was made, the court determines that the motion to dismiss should be denied. The court, therefore, rejects as moot the findings and conclusions of the magistrate judge with respect to Matrix's Motion to Dismiss for Failure to State a Claim and overrules as moot Plaintiffs' objections to the Report.

         IV. ...


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