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Kosloff v. Smith

United States District Court, D. Kansas

September 17, 2014

JEFFREY LEE SMITH, et al., Defendants.


J. THOMAS MARTEN, Chief District Judge.

This case involves allegations by the current fiduciaries of the ERISA-governed Premier Hospice profit sharing 401(k) plan that the former fiduciaries violated ERISA in various ways and embezzled assets in violation of Kansas law. The case comes before the court on Defendants' Joint Motion to Dismiss (Dkt. 17). The parties have fully briefed the motion and the court is prepared to rule. The court relies on the allegations in the Complaint (Dkt. 1) for its background below.

I. Factual Background

The Premier Hospice profit sharing 401(k) plan ("the plan") is an ERISA-governed defined contribution pension plan established in October 2004 by Premier Hospice, LLC. Plaintiffs David Kosloff and Michael McMaude are the current fiduciaries of the plan and have served in that capacity since February 14, 2013. Defendant Jeffrey Lee Smith, the former founder and primary owner of Premier Hospice, was a named fiduciary of the plan from its inception through January 1, 2013. Defendant Lucke & Associates served as the plan administrator from September 20, 2004, through September 11, 2013, under a third party administrator ("TPA") contract between Premier Hospice and Lucke & Associates. Defendant Jeffrey Lucke, a CPA, is the principal owner of Lucke & Associates. The SP Management profit sharing 401(k) plan ("the SP plan") is an ERISA-governed plan into which assets of the plan were allegedly improperly transferred in 2006.

Plaintiffs allege that Defendants committed multiple violations of their fiduciary and/or co-fiduciary duties under ERISA while serving as the plan's fiduciaries from October 2004 to September 2013. Plaintiffs also allege that the transfer of assets from the plan to the SP plan constitutes embezzlement under Kansas law. Finally, Plaintiffs allege that Lucke & Associates breached the TPA contract and denied the plan its expected contractual benefits.

II. Legal Standard - Motion to Dismiss for Failure to State a Claim

Federal Rule of Civil Procedure 8(a)(2) provides that a complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." The complaint must give the defendant adequate notice of what the plaintiff's claim is and the grounds of that claim. Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512 (2002).

"In reviewing a motion to dismiss, this court must look for plausibility in the complaint... Under this standard, a complaint must include "enough facts to state a claim to relief that is plausible on its face.'" Corder v. Lewis Palmer Sch. Dist. No. 38, 566 F.3d 1219, 1223-24 (10th Cir. 2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "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." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (clarifying and affirming Twombly 's probability standard). Complaints containing no more than "labels and conclusions" or "a formulaic recitation of the elements of a cause of action" may not survive a motion to dismiss. Robbins v. Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008). The court must assume that all allegations in the complaint are true. Twombly, 550 U.S. at 589. "The issue in resolving a motion such as this is not whether [the] plaintiff will ultimately prevail, but whether the claimant is entitled to offer evidence to support the claims.'" Bean v. Norman, No. 008-2422, 2010 WL 420057, at *2, (D. Kan. Jan. 29, 2010) (quoting Swierkiewicz, 534 U.S. at 511).

III. Analysis

Defendants advance several arguments in favor of dismissal. First, they argue that Plaintiffs' ERISA claims arising prior to December 20, 2007, are time-barred. Second, they point out that Count IX of the Complaint alleges violations of ERISA section 101(f), arguing that this section only applies to defined benefit plans and not the defined contribution plan at issue here. Third, Defendants argue that Count XIII, an embezzlement claim based on Kansas state law, is preempted by ERISA. Finally, Defendants argue that the remaining claims should be dismissed because Plaintiffs failed to comply with Rule 8(a)(2)'s requirement of a "short and plain statement." The court addresses these arguments in order.

A. Plaintiffs' ERISA Claims Arising Prior to December 20, 2007 are Time-Barred

Plaintiffs' ERISA claims allege various breaches of fiduciary duty and the parties agree these claims are governed by the limitations periods set forth in ERISA section 413. That section provides as follows:

No action may be commenced under this subchapter with respect to a fiduciary's breach of any responsibility, duty, or obligation under this part, or with respect to a violation of this part, after the earlier of -
(1) six years after (A) the date of the last action which constituted a part of the breach or violation, or (B) in the case of an omission, the latest date on which the ...

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