Vlahos v. Alight Solutions Benefit Payment Services, LLC

UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS

DANIELLE VLAHOS,

*

*

Plaintiff,

*

*

v.

*

* Civil ActionNo. 17-cv-12505-ADB

ALIGHT SOLUTIONS BENEFIT PAYMENT

*

SERVICES, LLC, JOHNSON CONTROLS,

*

INC., and FIDELITY INVESTMENTS

*

EMPLOYER BENEFITS SERVICES CORP.,

*

*

Defendants.

MEMORANDUM AND ORDER

GRANTING MOTION TO DISMISS

BURROUGHS, D.J.

On October 26, 2017,Plaintiff Danielle Vlahos filedthis actionallegingstatelaw claims

forbreach of contract, breach of implied warranty, negligence, and breach of fiduciary duty

against all Defendants for failingto protect her interest in401(k) retirement funds accrued by her

former husband, Mark Vlahos,during their marriage.[ECF No. 1-1]. Currently pendingbefore

the Court is Defendants’1 motion to dismiss. [ECF No. 10]. For the following reasons, the

motion to dismiss is GRANTED. Plaintiff, however, may file an amended complaint to state her

claims under ERISAwithin twenty-onedays of the entry of this order.

I. BACKGROUND

The following facts are drawn from the complaint [ECF No. 1-1at 4–14] (the

“Complaint”), the well-pleaded allegations of which are taken as true for purposes of evaluating

Defendants’ motion to dismiss. SeeRuivo v. Wells Fargo Bank, 766 F.3d 87, 90 (1st Cir. 2014).

1 Defendant Fidelity Investments Employer Benefits Services Corp. was apparently never served,

see[ECF No. 1 at 4], and has not entered an appearance in this action.

From 2002 until approximately 2015, Plaintiff was marriedto Mr.Vlahos. Compl. ¶ 5;

[ECF No. 14 at 9–10]. During their marriage,Mr. Vlahos was employed byDefendant Johnson

Controls. Compl. ¶ 5. In connection with his employment,Mr. Vlahos participated in a 401(k)

retirement savings plan (the “Plan”), which established a retirement savings account (the

“Account”). Id. ¶ 6. The funds in the Account were provided by Defendant Johnson Controls,

serviced by Defendant Alight, and maintained by Defendant Fidelity as custodian. Id. ¶¶ 6–8.

On approximately May 15, 2013, Plaintiff filed for divorce from Mr. Vlahos. Id. ¶9.On

June 12, 2014, theAccount had a balance of approximately $125,000.00. Id.¶10.OnNovember

5, 2014, the Account balance was approximately $25,000.00. Id. ¶ 11. Defendants did not

provide Plaintiff with prior notice of Mr. Vlahos’s $100,000.00 withdrawal from the Account. Id.

¶ 13.

Plaintiff filed this action in the Norfolk County Superior Court on October 11, 2017.

[ECF No. 1-1 at 15].On December 19, 2017,Defendants removed thecase to federal court,

without objection from Plaintiff, on the basis of federal question jurisdiction. [ECF No. 1].

Defendants assertedthat Plaintiff, as abeneficiary of anemployee benefits plan controlled by the

Employee Retirement Income Security Act of 1974, 29 U.S.C. §1001 et seq.(“ERISA”),alleged

state law claims that were preempted by ERISA and thus subject to federal jurisdiction.Id.; see

28 U.S.C. §1331.

II. STANDARDOF REVIEW

On a motion to dismiss under Federal Rule ofCivil Procedure 12(b)(6), the Court must

accept as true all well-pleaded facts, analyze those facts in the light most hospitable to the

plaintiff’s theory, and draw all reasonable inferences from those facts in favor of the plaintiff.

U.S. ex rel. Hutcheson v. Blackstone Med., Inc., 647 F.3d 377, 383 (1st Cir. 2011). The facts

alleged must be sufficient to “state a claim to relief that is plausible on its face.” A.G. ex rel.

Maddox v. Elsevier, Inc., 732 F.3d 77, 80 (1st Cir. 2013) (quoting Bell Atlantic Corp. v.

Twombly, 550 U.S. 544, 570 (2007)). The plausibility standard invites a two-step analysis. Id.

“At the first step, the court ‘must separate the complaint’s factual allegations (which must be

accepted as true) from its conclusory legal allegations (which need not be credited).’” Id.

(quoting Morales-Cruz v. Univ. of P.R., 676 F.3d 220, 224 (1st Cir. 2012)). “At the second step,

the court must determine whether the remaining factual content allows a reasonable inference

that the defendant is liable for the misconduct alleged.” Id.(internal quotations and citation

omitted). “[T]he combined allegations, taken as true, must state a plausible, not a merely

conceivable, case for relief.” Sepúlveda-Villarini v. Dep’t of Educ. of P.R.,628 F.3d 25, 29 (1st

Cir. 2010).

III. DISCUSSION

Plaintiff brings state law claims against all Defendants, all premised onthe allegationthat

Defendants failed to protect her interests as a plan beneficiaryin the Account during the couple’s

pending divorce.Defendants argue that Plaintiff’s claims for breach of contract, breach of

implied warranty, negligence, and breach of fiduciary dutyshould be dismissed because they are

preempted by ERISA.

A. ERISAPreemption

ERISA expressly preempts all state laws that “relate to any employee benefit plan,”

including common law claims. 29 U.S.C. § 1144(a); seePilot Life Ins. Co. v. Dedeaux, 481 U.S.

41, 41–42, 48 (1987) (holdingthat state common law claims relating to ERISA plans are

preempted unless they qualify for an exception). The parties do not dispute that the Planat issue

here is an employee benefit plan covered by ERISA. Therefore, the survival of the Complaint

hinges on whether Plaintiff’s claims “relate to” the Planand,ifso, whether they qualify for an

exemption.

Astatelaw relates to an employee benefit plan if it (1) has “a connection with” or (2)

makes “reference to such a plan.” Cal. Div. of Labor Standards Enforcement v. Dillingham

Const., N.A., 519 U.S. 316, 324(1997)(internal quotation marks and citation omitted). Because

Plaintiff alleges common law claims, only the “connection with” test is relevant here. Id.Under

this test,the court must look to “the objectives of the ERISA statute as a guide to the scope of the

state law that Congress understood would survive.”Zipperer v. Raytheon Co., 493 F.3d 50, 53

(1st Cir. 2007)(quoting Hampers v. W.R. Grace & Co., 202 F.3d 44, 51 (1st Cir.2000)).

ERISA’s objectives include uniformity of administration of ERISA plans and “avoiding

inconsistent state regulation of such plans.” Id.; seealsoEgelhoff v. Egelhoff ex rel. Breiner, 532

U.S. 141, 151 (2001) (holding that state law that removed named beneficiaryspouse from former

spouse’s life insurance policy upon divorcewas preemptedbecause “[t]his ‘tailoring of plans and

employer conduct to the peculiarities of the law of each jurisdiction’ is exactly the burden

ERISA seeks to eliminate” (quoting Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142

(1990))). “[A]ny state-law cause of action that duplicates, supplements, or supplants the ERISA

civil enforcement remedy conflicts with the clear congressional intent to make the ERISA

remedy exclusive and is therefore pre-empted.”2 Aetna Health Inc. v. Davila, 542 U.S. 200, 209–

10(2004)(holding that if entitlement to benefits exists “only because of the terms of an ERISA-

regulated employee benefit plan, and where no legal duty (state or federal) independent of

2 Section 502(a) of ERISA sets out the civil enforcement mechanism, and “provide[s] in relevant

part that ‘[a] civil action may be brought—(1) by a participant or beneficiary—. . . (B) to

recover benefits due to him [or her] under the terms of his [or her] plan, to enforce his [or her]

rights under the terms of the plan, or to clarify his [or her] rights to future benefits under the

terms of the plan.’” Rogers v. Rogers & Partners, Architects, Inc., No. 08-cv-11730-NG, 2009

WL 5124652, at *5 (D. Mass. July 27, 2009) (quoting 29 U.S.C. § 1132(a)(1)(B)).

ERISA or the plan terms is violated, then the suit [is preempted]”). “There is a strong

presumption that common-law claims that intrude on ERISA’s civil enforcement regime are

preempted.” Anthony v. JetDirect Aviation, Inc., 725 F. Supp. 2d 249, 256 (D. Mass. 2010).

In Hampers, 202 F.3d at 53, the First Circuit held that state common law claims were

preempted by ERISAbecause the defendant was “an ERISA employer and fiduciary with

responsibility overthe administration of the plan”and it was only because of this relationship to

the ERISA-governed plan that the defendant could have breached the agreement in the way the

plaintiff alleged. Similarly, a judge ofthis court held that common law claims are preempted “if

the relationship between the plaintiff and defendant is based on a plan governed by ERISA.”

Cuoco v. NYNEX Inc., 722 F.Supp. 884, 886–87 (D. Mass. 1989) (determining there was no

preemption because parties’ relationship was “not based directly on the .. . plan but on verbal

misrepresentations which were not part of the plan”).

Here, Plaintiff’s claims are premised on herrelationship withDefendants, which is

established exclusively through the Plan,given Defendants’ administration of the plan and her

claim that sheis “a beneficiary to”the Account.Compl. ¶¶ 54, 58, 62. Because Plaintiff alleges

that Defendants acted improperlyby distributingfunds to Mr. Vlahos in contravention of their

obligations to protect her interests “as a beneficiary of the contract”and “as beneficiary to”the

Account,id.¶¶ 16, 54, her claims relatedirectly to the administration of benefits under the Plan.

Therefore, here, as in Hampers,“it is onlyby virtue of [defendant’s] status as an ERISA [related

entity] with direct control over the administration and operation of the [benefits account] that

[defendant] could have breached the. . . agreement in the way [plaintiff] insists that it did.” 202

F.3d at 53.Thus, Plaintiff is seeking to enforce her rights under the Planas a beneficiary, which

puts her claims directlywithin the scope ofERISA preemption.See29 U.S.C. § 1144(a).

B. Qualified Domestic Relations Order Exemption

Plaintiff argues in her opposition that her claims should survive because she is “ask[ing]

the Court to enforce her legal rights under Massachusetts domestic relations laws”and not under

the Plan.[ECF No. 14 at 4]. Plaintiff does not cite to a specific provision of the Massachusetts

domestic relations laws as the source of her claim to the Account, but she appears to be referring

to Mass.Supp.R.Dom.Rel.P. 411, which provides that the filing of a complaint in adivorce

action triggers the issuance of an automatic restraining order prohibiting either party from

“sell[ing], transfer[ring], encumber[ing], conceal[ing], assign[ing], remov[ing] or in any way

dispos[ing] of any property, real or personal, belonging to or acquired by, either party” during

the pendency of the action, and Mass. Gen. Laws ch. 208, § 34, which grants the probate court

the authority to assign to either spouse “all or any part of the estate of the other, including... all

vested and nonvested benefits, rights and funds accrued during the marriage and which shall

include. . .retirement benefits.”3

ERISA provides an exception to preemptionfor orders that are deemed by the ERISA-

governed plan administrator to be qualified domestic relations orders (“QDRO”).4 29 U.S.C. §

1144(b)(7); seeBoggs v. Boggs, 520 U.S. 833, 846 (1997)(“QDRO’s, unlike domestic relations

orders in general, are exempt from . . . ERISA’s general pre-emption clause.”).A domestic

relations order is “qualified”when it meets certain statutory requirements and has been provided

to the plan administrators for their evaluation and adetermination as to whether it is a QDRO.

SeeTrs.of Dirs.Guild of Am.-Producer Pension Benefits Plans v. Tise, 234 F.3d 415, 420 (9th

Cir.),opinion amended on denial of reh’g,255 F.3d 661 (9th Cir. 2000) (“Upon obtaining a

3 Plaintiff did not explain, either in the Complaint or in her opposition brief, what percentage of

the Account, if any, was awarded to Plaintiff in the divorce proceedings.

4 Plaintiff didnot explicitly raise the QDRO exception as an argument against preemption.

domestic relations order in a state court proceeding, [the party seeking] to establish a right to

payment pursuant to that order from an ERISA-covered benefit plan must present the order to the

pension plan administrator for a determination of whether it is a QDRO.”); seealso29 U.S.C. §

1056(d)(3)(G)(i).

A domestic relations order meets the statutory requirements for a QDROif the orderis

issued by a court pursuant to a state domestic relations law,29 U.S.C. § 1056(d)(3)(B)(ii),and

clearly specifies the following:

(i) the name and the last known mailing address (if any) of the participant and the

name and mailing address of each alternate payee covered by the order, (ii) the

amount or percentage of the participant’s benefits to be paid by the plan to each

such alternate payee, or the manner in which such amount or percentage is to be

determined, (iii) the number of payments or period to which such order applies,

and,(iv) each plan to which such order applies.

Id.§ 1056(d)(3)(C).These requirements are intended to “amount to a statutory checklist working

to ‘spare [an administrator] from litigation-fomenting ambiguities.’” Kennedy v. Plan Adm’r for

DuPont Sav. & Inv. Plan, 555 U.S. 285, 301–02(2009)(quoting Metro. Life Ins. Co. v.

Wheaton,42 F.3d 1080, 1084 (7th Cir.1994)).

Some courts have adopted a broad interpretation of the QDRO statutory requirements and

found domestic relations orders to be qualified as long as they contain no ambiguity as to the

beneficiary and scope of the entitled benefits.See Unicare Life & Health Ins. Co. v. Phanor, 472

F. Supp. 2d 8, 12,14 (D. Mass. 2007); see alsoMetro. Life Ins. Co. v. Marsh,119 F.3d 415, 422

(6th Cir.1997). In Unicare,the court held that an automatic restraining order,similar to the order

at issue here, was a QDRO.472 F. Supp. 2d at 14. Despitedetermining that “the state court’s

[standard automatic restraining order in divorce cases] fails to meet every one of [the statutory]

requirements”under a strict interpretation,the court broadly interpretedthe QDRO provision of

ERISAas requiring only “that a party reading the order be able to understand which specific

people, percentages, periods, and policies it affects.” Id.at 12–13. The First Circuit has not

spoken directly tothe question of whetherprobate court restraining orders are QDROs, and other

Circuits disagree with this broad interpretation of the statutory requirements.SeeCent. States,

Se. & Sw. Areas Pension Fund v. Howell,227 F.3d 672, 678 (6th Cir.2000) (holding that

probate court injunction was not a QDRO because, despite naming the parties, the order did not

contain thestatutorily-required information,including the amount and percentage of payments or

the name of the plan); Irwin v. Principal Life Ins. Co.,No. 04-cv-4052-JAR,2005 WL 3470359,

at *11 (D.Kan. Dec. 16, 2005) (holdingthat probate court-issued temporary restraining order did

not constitutea QDRO because it failed to meet all statutorily-required elements and was not

provided to the plan administrator).

Even when an order is deemed a QDRO, theQDRO exception“does not extend to claims

against a plan administrator for improper administration of the plan, which do not ‘arise under a

QDRO,’but are merely tangential to it.”Hogan v. Fid. Invs. Inst.Operations Co., No. 12-cv-

11229-DPW, 2013 WL 1330480, at *2 (D. Mass. Mar. 29, 2013)(quoting MacKay v. Estate of

Harris,No. 03-cv-150, 2004 WL 356701,at *2–3 (D.Me. Feb. 25, 2004)(holding plaintiffdid

not ground his claims regarding improper administration of the plan“in any right conferred by

the QDRO, but in state statutory and common law,” and “ERISA preempts such state law insofar

as it conflicts with ERISA provisions governing administration of benefits plans”).Therefore,

the operative questions in this caseare (1) whether the order qualifies as a QDRO under the

statutory definitionand (2)whether Plaintiff’s claims arise under the QDRO.

Here, Plaintiff does not allege that the automatic restraining order entered in the divorce

proceedingwas a QDRO, nor do the alleged facts indicatethat it meets the statutory

requirements. Plaintiff did not provide a complete or official copy of theorder. The excerpt

provided as part of an exhibit to Plaintiff’s opposition brief does not include the parties’ names,

and does not identify whetherit applies to theAccount or any benefits accounts.[ECF No. 14 at

9]; see29 U.S.C. § 1056(d)(3)(C).Therefore, without additional information regarding how the

order impacts the administration of the benefits, it is too ambiguous to meet the statutory

definition ofa QDRO,even under thebroadstandard established in Unicare.SeeUnicare,472 F.

Supp. 2d at 12 (explaining that, at a minimum,a reader must be able to“unambiguously deduce

which policies were implicated”for an order to qualify as a QDRO). Additionally, Plaintiff does

not allege that Defendants were provided a copy of the order prior to Mr. Vlahos’s withdrawal of

his retirement funds. Therefore, the allegations do not demonstratethat the order satisfies the

QDROrequirements or that the QDROpreemption exception should apply to Plaintiff’s claims.

Where a domestic relations order does not satisfy the QDRO requirements, courts will

then conduct a typical ERISA preemption analysis. In disputes arising out of inconsistencies

between non-qualified domestic relations orders and plan documents, generally plan “documents

control”in light ofCongress’ intent to provide for simplicity and uniformity in ERISA plan

administration.Kennedy, 555 U.S. at 304; Iowa Health Sys., Inc. v. Graham, No. 07-cv-4030,

2009 WL 2222780, at *6 (C.D. Ill. July 23, 2009) (“ERISA carries the power to preempt not

only state laws, but also the judgments and orders of state courts—even those orders touching on

domestic relations, which is an area of law traditionally reserved for the state courts.”); see also

29 U.S.C.§ 1056(d)(3)(H)(iii). While in Kennedythe court noted that there is no “general rule

that a non-QDRO is a nullity in any proceeding that would affect the determination of a

beneficiary,” it suggested that once a domestic relations order is deemed not qualified, plan

administrators should distribute benefits in accordance with plan documents. Kennedy, 555 U.S.

at 298.

The Planhere clearly states that the plan participant, Mr. Vlahos, “may withdraw all or

part of his . . . account balance at any time.” [ECF No. 11-1 § 7.2]. The Plan does not make

reference to a spousal notice requirement for fund withdrawals. Id.Thus, Defendants were

apparentlyactingin compliance with the terms of the Plan when they permitted Mr. Vlahos to

withdraw $100,000.00.Seeid.To hold otherwise would require Defendants to look outside the

plan documents—and act inconsistent withthem—in conflict with the intent of Congress to

create uniformity in plan administration. SeeKennedy, 555 U.S. at 301–04(holding plan

administrator properly complied with ERISA plan procedure and distributed benefits to named

beneficiary ex-wife despite conflict with non-QDRO divorce decree in whichshe waived her

rights to such benefits); Egelhoff, 532 U.S. at 150(holding the state statute “directly conflicts

with ERISA’s requirements that plans be administered, and benefits be paid, inaccordance with

plan documents” because the statute requires administrators to look outside the plan to divorce

orders to determine who is entitled to benefits); Berlet v. Berlet, No. 98 CIV. 3263 DLC, 1999

WL 47107, at *2 (S.D.N.Y. Feb. 3, 1999) (“A failure to find preemption in the current case

would subject the . . . [p]lan to two sets of obligations, one under the state law cause of action

outside the plan to pay out plan benefits and a second set of obligations inside the plan under

ERISA. As such, the present claim is preempted by ERISA.”). Thus,to the extent that Plaintiff

asserts that a non-QDRO order issued by a state probate court created a requirement in conflict

with Defendants’ obligations under ERISA,her state law claims are preempted.5

5 Defendants have also argued that Plaintiff failed to exhaust her administrative remedies under

the Plan. As Plaintiff’s claims are based in state law, failure to exhaust theseparticularclaims

under ERISA is not a proper basis for dismissing the present complaint. When Plaintiff files an

amended complaint stating claims under ERISA, however, she must demonstrate either that she

satisfied the exhaustion requirement or that an exceptionapplies.

IV. CONCLUSION

Accordingly, Defendants’ motion to dismiss [ECF No. 10] is GRANTED.Plaintiff

requested leave to amend her complaint if the motion is granted, and accordingly, shemay file an

amended complaint to state her claims under ERISA within twenty-one days of the entry of this

order.

SO ORDERED.

August 8, 2018 /s/ Allison D. Burroughs

ALLISON D. BURROUGHS

U.S. DISTRICT JUDGE