THOMAS A. PAULSEN; ROBERT M. BOWDEN; EDWARD L. FRAZEE; ROBERT J. NEWELL; LLOYD MICHAEL O‘CONNELL, III, individually and on behalf of a class of all other persons similarly situated; CHESTER MADISON v. CNF INC.; CNF SERVICE COMPANY INC.; ADMINISTRATIVE COMMITTEE OF THE CONSOLIDATED FREIGHTWAYS CORPORATION PENSION PLAN; STEPHEN D. RICHARDS; JAMES R. TENER; ROBERT E. WRIGHTSON; TOWERS, PERRIN, FORSTER & CROSBY, INC.; PENSION BENEFIT GUARANTY CORPORATION
No. 07-15142, No. 07-15389
United States Court of Appeals, Ninth Circuit
March 20, 2009
559 F.3d 1061
D.C. No. CV-03-03960-JW
James Ware, District Judge, Presiding
Argued and Submitted August 11, 2008—San Francisco, California
Filed March 20, 2009
Before: Eugene E. Siler, Jr.*, M. Margaret McKeown, and Consuelo M. Callahan, Circuit Judges.
*The Honorable Eugene E. Siler, Jr., Senior United States Circuit Judge for the Sixth Circuit, sitting by designation.
Teresa S. Renaker, Lewis, Feinberg, Lee, Renaker & Jackson, P.C., on behalf of plaintiffs-appellants Thomas A. Paulsen, Robert M. Bowden, Edward L. Frazee, Chester Madison, Robert Newell, and Lloyd Michael O‘Connell III.
David L. Bacon, Thelen Reid Brown Raysman & Steiner LLP, on behalf of defendants-appellees CNF Inc. and CNF Service Co., Inc.
Gary S. Tell, O‘Melveny & Meyers LLP, on behalf of defendants-appellees Stephen D. Richards, James R. Tener, Robert E. Wrightson, and the Administrative Committee of the Consolidated Freightways Corporation Pension Plan.
Robert E. Mangels and Susan Allison, Jeffer, Mangels, Butler & Marmaro, LLP, on behalf of defendant-appellee Towers, Perrin, Forster & Crosby, Inc.
Charles L. Finke, on behalf of defendant-appellee Pension Benefit Guaranty Corporation.
CALLAHAN, Circuit Judge:
Plaintiffs-Appellants are former employees (“the Employees“) of CNF Inc. (“CNF“), a supply chain management company that underwent a substantial reorganization starting in 1996.1 The Employees allege that as a result of CNF‘s reorganization, which included a “spinoff” of an underperforming division of CNF in which the Employees worked, their retirement benefits were substantially reduced. The spinoff created a new company, Consolidated Freightways Corporation (“CFC“). Concurrent with the division spinoff, CNF also spun off part of the defined benefit pension plan in which the Employees were participants, and the Employees became members in a new plan sponsored by CFC. These plans are governed by the Employee Retirement Income Security Act of 1974 (“ERISA“). In connection with the plan spinoff, CNF engaged the actuarial services of Towers, Perrin, Forster & Crosby, Inc. (“Towers Perrin“) to value the benefit liabilities to be transferred to the CFC-sponsored plan and associated assets to be transferred to cover those liabilities. This was done to certify compliance with the requirement of
After the spinoff, CFC declared bankruptcy and “distress terminated” its pension plan, which was then determined to be under-funded by roughly $216 million. The termination
The Employees sued CNF, CNF Service Co., the Administrative Committee of the CFC Pension Plan and its individual members (“Committee Defendants“) for breaches of their ERISA-based fiduciary duties in connection with the spinoff.2 The Employees also sued Towers Perrin for professional negligence under state law in valuing the plan liabilities to be transferred at spinoff and in repeatedly certifying post-spinoff that the new plan was adequately funded. Finally, the Employees sued PBGC, as trustee, for not pursuing claims against the other defendants in connection with the spinoff. The district court dismissed all of the Employees’ claims on various grounds, and this appeal followed.
We affirm the district court in part, reverse it in part, and remand. We affirm the district court‘s dismissal of the Employees’ ERISA-based claims because the Employees lack Article III standing to pursue several of those claims, and lack standing under ERISA to pursue others. We also affirm the dismissal of the claim against PBGC because PBGC‘s non-enforcement decisions are presumptively immune from judicial review, and the Employees cannot rebut that presumption. Finally, however, we hold that the Employees might be able to state a claim for professional negligence against Towers Perrin under California law and remand for further proceedings on a more developed factual record.
A.
CNF is a supply chain management company that provides services including trucking and air freight transportation. CNF operated two trucking units that, over time, began directly competing with one another: the unionized CF MotorFreight and non-unionized Con-Way Transportation Services, Inc. (“Con-Way“). In 1994 and 1995, CF MotorFreight posted operating income losses in the range of $34.4 to $46.6 million dollars, while Con-Way posted operating income gains in the range of $96.5 to $111.2 million dollars. In December 1996, CNF spun off CF MotorFreight, and created a stand-alone, unionized trucking company called Consolidated Freightways Corporation, or CFC.
Before the spinoff, the Employees were in essence participants in a defined benefit plan sponsored by CNF called the CNF Inc. Retirement Plan (“CNF Plan“). In connection with the spinoff, CNF created the Consolidated Freightways Corporation Pension Plan (“CFC Plan“). CNF and CFC entered into an Employee Benefit Matters Agreement (“EBMA“), which “provided that CNF employees who became CFC employees as a result of the corporate spinoff also would become participants in the CFC Plan and that the CNF Plan would transfer to the CFC Plan all its obligations owing to those participants.” Five of the six Employees who were active CNF employees at the time of the spinoff were transferred to CFC. The EBMA also transferred the benefits obligations of certain named retirees receiving pension benefits under the CNF Plan, including plaintiff Frazee, to the CFC Plan.
The EBMA provided that the CNF would transfer a portion of the CNF Plan‘s liabilities to the CFC Plan; these transferred portions would be the initial liabilities of the CFC Plan. It also required CNF to transfer assets to the CFC Plan “equal
Post-spinoff, the Committee Defendants administered the CFC Plan. The Committee Defendants consist of the Administrative Committee of the CFC Plan and CFC‘s officers who served on the committee. The committee‘s duties included retention of an enrolled actuary for the CFC Plan and establishment of a funding policy for the CFC Plan in consultation with the actuary.
B.
The Employees allege that Towers Perrin, a consulting firm, provided actuarial services to the CNF Plan and the CFC Plan for the benefit of plan participants starting in at least November 1996.4 On November 1, 1996, CNF filed an IRS Form 5310-A (Notice of Plan Merger or Consolidation, Spinoff, or Transfer of Plan Assets or Liabilities), which it was required to file 30 days before the spinoff. As part of the filing, “Towers Perrin certified that participants in and beneficiaries of the new CFC Plan would be as well off on a termination basis in the CFC Plan as in the CNF Plan.”5 In
Towers Perrin also provided actuarial services to the CFC Plan post-spinoff, “including valuing the Plan on an annual basis.” The Employees allege “that in each year from 1997 through 2001, Towers Perrin determined that the CFC Plan was fully funded and that CFC had no obligation to contribute to the Plan.”6 This resulted in CFC making no contributions to the CFC Plan in these years.
C.
In September 2002, CFC filed petitions for Chapter 11 bankruptcy. In January 2003, CFC informed the CFC Plan participants that the plan administrator would terminate the CFC plan in a “distress termination,” effective March 2003, due to under-funding, and that the plan “would not have sufficient funds to pay all vested accrued benefits to all participants and beneficiaries” upon termination.7 Specifically, CFC
PBGC assumed trustee responsibility for the CFC Plan in June 2003, and “estimated that the [CFC] Plan had approximately $228 million in assets to cover approximately $504 million in vested accrued benefits.”9 This represents an approximate 55% shortfall in funding. Under the benefit payment limits set by PBGC, the Employees suffered dramatic reductions in their pension benefits. PBGC, however, declined to file a civil action against CNF, CNF Service Co., the Committee Defendants, or Towers Perrin.
D.
This case has a complicated and tortured procedural history, with several amended complaints and motions to dismiss. We recount the procedural history here to provide adequate background for this appeal.
1.
In 2003, the Employees filed a Complaint alleging seven
The district court granted CNF and CNF Service Co.‘s motion to dismiss the entire Complaint without prejudice as to “all Defendants” on the ground that the Employees lacked standing to pursue its claims because PBGC “has the sole power to bring a lawsuit against the Defendants to recover trust assets.”
It also analyzed claims one through five (the ERISA-based claims) separately. The Employees’ first claim alleged that the Fiduciary Defendants breached their fiduciary duties by (a) failing to provide adequate information to enable Towers Perrin to formulate reasonable assumptions for its actuarial valuation; (b) failing to supervise, monitor, and investigate the basis for Towers Perrin‘s actuarial valuation; and (c) failing to make certain that sufficient assets were transferred to satisfy the accumulated benefit obligation purportedly transferred to the CFC Plan. The district court dismissed the Employees’ first claim “with prejudice as to all Defendants” based on its factual findings that there was no breach of fiduciary duty because, consistent with
The Employees’ second claim alleged that CNF breached its fiduciary duty to all CNF Plan participants “by purporting to transfer to the CFC Plan the CNF Plan‘s obligations to Plaintiffs and Class members when CNF knew that the CFC Plan was unlikely to be able to fulfill those obligations due to . . . inadequate funding at its inception and inability of its
The Employees’ third claim for relief alleged that the Fiduciary Defendants breached their fiduciary duties to the CFC Plan and its participants for the same reasons as alleged in the Employees’ first claim for relief, except that the third claim related to post-spinoff annual valuations. The district court dismissed the third claim as to CNF and CNF Service Co. with prejudice, concluding that neither was a fiduciary of the CFC plan.10
The Employees’ fourth claim for relief alleged that the Fiduciary Defendants breached their fiduciary duties by “(a) failing to establish a funding policy as required by the terms of the CFC Plan, (b) failing to establish a funding policy that was reasonable, including requiring that reasonable actuarial assumptions be used to value the CFC Plan, [and] (c) failing to follow a reasonable funding policy . . . .” The district court dismissed this claim with prejudice as to CNF and CNF Service Co. on the grounds that: (1) neither had a fiduciary duty to the CFC Plan to follow a funding policy, and (2) even if such a duty existed, the court‘s factual finding regarding compliance with
The Employees’ fifth claim alleged that the Fiduciary Defendants breached their fiduciary duties at the time of the spinoff by failing to properly notify CNF Plan participants that their rights under the CNF Plan had been terminated and assumed by a new plan. The district court dismissed this
The Employees’ sixth and seventh claims for relief alleged that Towers Perrin, acting as an actuary to the CNF Plan, committed professional negligence in (1) valuing the CFC Plan at the time of spinoff (sixth claim); and (2) in valuing the CFC Plan in subsequent annual valuations after the spinoff (seventh claim). The district court dismissed these claims with prejudice, finding that the Employees were not Towers Perrin‘s clients and holding that Towers Perrin, as an actuary to the plan, owed no duty to the Employees under California law, relying on Bily v. Arthur Young & Co., 834 P.2d 745 (Cal. 1992).
2.
The Employees filed a First Amended Complaint that re-alleged the third and fourth claims for relief under ERISA against the Committee Defendants, and added the eighth and ninth claims for professional negligence against Towers Perrin under “Oregon, Washington, and Any Other Applicable State Law (Other Than California)[.]” The district court granted the motions to dismiss filed by the Committee Defendants and Towers Perrin. The district court dismissed the third and fourth claims against the Committee Defendants without prejudice, concluding that the Employees had not stated a claim for relief under
3.
The Employees filed a Second Amended Complaint, which amended the third and fourth claims to clarify the relief sought under
The district court dismissed nearly the entire Second Amended Complaint. It dismissed the ERISA-based claims—the amended third and fourth claims—with prejudice on the grounds that: (1) the Employees’ claims under
4.
The district court ordered the Employees to file a Third Amended Complaint for the sole purpose of incorporating its prior holdings. The Employees complied with that order, and
5.
The Employees’ Fourth Amended Complaint added a sixteenth claim for relief against PBGC, as trustee of the terminated CFC Plan, for breach of fiduciary duty for failing to bring claims against the other named defendants on behalf of the CFC Plan. In response, the district court issued an “Order to Show Cause Why PBGC Should Not Be Dismissed from the Fourth Amended Complaint and Realigned as a Plaintiff.” After a hearing, the district court dismissed the Fourth Amended Complaint with prejudice as to PBGC, holding that the breach of fiduciary duty claim was not actionable because “PBGC‘s determinations that (1) ERISA did not impose a requirement that PBGC file suit following the failure of the CFC Plan and (2) PBGC had no meritorious claims to assert against Towers on behalf of the plan are entitled to judicial deference.”
The district court also addressed, sua sponte, the question of subject matter jurisdiction over the Employees’ state law claims against Towers Perrin. The court dismissed the Employees’ remaining state law claims against Towers Perrin, concluding that (1) the Employees lacked constitutional standing to sue because any recovery would inure to the benefit of PBGC, thus negating the Employees’ redressable injury;
The district court entered a Final Judgment dismissing the entire action. The Employees filed this timely appeal.
II.
We review ”de novo the district court‘s decision to grant a motion to dismiss for failure to state a claim, as well as its interpretation of ERISA.” Bassiri v. Xerox Corp., 463 F.3d 927, 929 (9th Cir. 2006). “Under the notice pleading standard of the Federal Rules, plaintiffs are only required to give a ‘short and plain statement’ of their claims in the complaint.” Diaz v. Int‘l Longshore & Warehouse Union, Local 13, 474 F.3d 1202, 1205 (9th Cir. 2007) (citing
We review de novo whether a party has standing. Doran v. 7-Eleven, Inc., 524 F.3d 1034, 1039 n.3 (9th Cir. 2008).
The question of whether a duty of due care exists under California negligence law is a question of law that we review de novo. See Glenn K. Jackson Inc. v. Roe, 273 F.3d 1192, 1196-97 (9th Cir. 2001); Wiener v. Southcoast Childcare Ctrs., Inc., 88 P.3d 517, 522 (Cal. 2004). Further, we review de novo questions of choice of law, Huynh v. Chase Manhat-tan Bank, 465 F.3d 992, 996 (9th Cir. 2006), and whether ERISA preempts state law claims. See Cedars-Sinai Med. Ctr., 497 F.3d at 975.
III.
The Employees’ claims for relief relevant to this appeal fall into three general categories: (1) claims brought pursuant to ERISA against the Fiduciary Defendants alleging breaches of ERISA-imposed fiduciary duties (claims one through five); (2) state law professional negligence claims against Towers Perrin (claims six through nine); and (3) a claim for breach of fiduciary duty under ERISA against PBGC (claim sixteen). We address these claims in turn.
A.
Whether the Employees may pursue their ERISA-based claims against the Fiduciary Defendants turns on issues of standing. There are two aspects of standing that are relevant here. First, the Employees must satisfy the minimum requirements of constitutional standing:
First, the plaintiff must have suffered an “injury in fact“—an invasion of a legally protected interest which is (a) concrete and particularized, and (b) “actual or imminent, not ‘conjectural’ or ‘hypothetical.’ ” Second, there must be a causal connection between the injury and the conduct complained of—the injury has to be “fairly . . . trace[able] to the challenged action of the defendant, and not . . . th[e] result [of] the independent action of some third party not before the court.” Third, it must be “likely,” as opposed to merely “speculative,” that the injury will be “redressed by a favorable decision.”
Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992) (internal citations and footnotes omitted).
1.
[2] The Employees allege that their claims for breach of ERISA fiduciary duties numbered one through five seek, in part, relief pursuant to
Although the parties argue over whether the Employees have sought a proper form of relief under section 1132(a)(2), which goes to statutory standing under ERISA, we do not
[3] We reason as follows. The Supreme Court has held that recovery for a violation of
Our reasoning is consistent with our decision in Glanton ex. rel. ALCOA Prescription Drug Plan v. AdvancePCS Inc., 465 F.3d 1123 (9th Cir. 2006), cert. denied, 128 U.S. 126 (2007). The plaintiffs in Glanton were prescription drug plan participants who sued a benefits management company pursuant to
[4] Our approach recognizes PBGC‘s role as an insurer of guaranteed and non-guaranteed benefits. Upon distress termi-
We pause to consider the Fourth Circuit’s decision in Wilmington Shipping Co. v. New England Life Insurance Co., 496 F.3d 326 (4th Cir. 2007). There, a plan participant in a terminated plan sued the plan sponsor under
PBGC, acting as trustee, must hold plan assets in trust for the benefit of plan participants and pay all plan benefits, if possible, in accordance with the stat
utory order of priorities. See 29 U.S.C.A. §§ 1342(d)(1)(A)(ii) ,1344 . Only after the PBGC as trustee has allocated plan assets and determined that the plan has insufficient funds to meet its obligations does the PBGC as guarantor “chip in” from ERISA funds to cover the unpaid guaranteed benefits.
[5] Under this rationale, PBGC, as trustee, would be obligated to pay non-guaranteed CFC Plan benefits, if possible, out of the plan assets and any potential recovery in this lawsuit. Not until those assets ran out would PBGC assume its role as guarantor. However, the authorities cited by the Fourth Circuit—
Notwithstanding any other provision of this subchapter, the corporation is authorized to pool assets of terminated plans for purposes of administration, investment, payment of liabilities of all such terminated plans, and such other purposes as it determines to be appropriate in the administration of this subchapter.
We decline to adopt the rule from Wilmington Shipping and hold that PBGC’s role as an independent actor negates redressability, and thus the Employees’ Article III standing to bring claims pursuant to
We next address those portions of the Employees’ claims two through five that allege ERISA-based claims for breach of fiduciary duties for which the Employees seek relief under
[6] Relevant to this appeal, section 502(a)(3)(B) of ERISA permits a participant or beneficiary to bring a civil action “to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan.”
The Employees’ complaint requests several forms of relief in connection with claims two through five. The Employees’ opening brief on appeal, however, asserts that only the fol
[7] The Employees’ second claim for relief, which seeks, in part, reinstatement into the CNF Plan, does not seek relief provided in
[8] We also conclude that the Employees’ third and fourth claims, which seek “make-whole monetary relief” under
[9] We conclude that the district court correctly dismissed the Employees’ ERISA-based claims. The Employees have not satisfied the requirements for Article III standing with respect to their claims brought pursuant to
B.
We next evaluate whether the Employees have stated a cognizable claim for professional negligence against Towers Perrin based on Towers Perrin’s valuation work at the time of the spinoff and in subsequent years. The Employees’ sixth and seventh claims allege that Towers Perrin owed them a duty of ordinary care under California law, and that Towers Perrin breached that duty.
1.
Under California law, “[t]he threshold element of a cause of action for negligence is the existence of a duty to use due care toward the interest of another that enjoys legal protection against unintentional invasion.” Bily, 834 P.2d at 760-61. Whether a duty of ordinary care exists is a question of law. Glenn K. Jackson Inc., 273 F.3d at 1196-97.
[10] California law sharply limits the duty of ordinary care imposed on a supplier of information to non-clients. In Bily, the California Supreme Court considered “whether and to what extent an accountant‘s duty of care in the preparation of an independent audit of a client‘s financial statements extends to persons other than the client.” 834 P.2d at 746. The court held that “an auditor owes no general duty of care regarding the conduct of an audit to persons other than the client.”17 Id.
- Given the secondary “watchdog” role of the auditor, the complexity of the professional opinions rendered in audit reports, and the difficult and potentially tenuous causal relationships between audit reports and economic losses from investment and credit decisions, the auditor exposed to negligence claims from all foreseeable third parties faces potential liability far out of proportion to its fault;
- the generally more sophisticated class of plaintiffs in auditor liability cases . . . permits the effective use of contract rather than tort liability to control and adjust the relevant risks through “private ordering“; and
- the asserted advantages of more accurate auditing and more efficient loss spreading relied upon by those who advocate a pure foreseeability approach are unlikely to occur; indeed, dislocations of resources, including increased expense and decreased availability of auditing services in some sectors of the economy, are more probable consequences of expanded liability.
We hold that Towers Perrin does not owe a general duty to the non-client Employees in the context of this case because two of the policy concerns at issue in Bily weigh against imposing a duty of ordinary care. First, imposing such a duty could lead to potential liability for an actuary that is far out of proportion with its fault. The actuarial work performed at the time of a spinoff and afterward involves the derivation of funding conclusions based on assumptions about the expected retirement age of plan participants and projected rates of return for plan funding. As was the case with the auditors in Bily, the work of an actuary at issue here involves a “professional opinion based on numerous and complex factors” and cannot be “checked against uniform standards of indisputable accuracy.” 843 P.2d at 763 (stating that “an audit report is not
Second, the probability of increased expense and decreased availability of actuarial services outweighs the possible advantages of imposing a negligence duty on an actuary in connection with a spinoff, such as more accurate valuations and more efficient loss spreading. See id. at 765-66. The imposition of a duty of ordinary care—with resulting potential liability exposure in the hundreds of millions of dollars—would have the probable effect of decreasing the availability of actuarial services; increasing the cost of actuarial services generally; increasing clients’ indemnification obligations to retained actuaries; and increasing insurance costs for both actuaries and clients. These factors weigh against the probability that increased liability exposure would increase the accuracy of actuarial services, especially when such services do not involve precise, verifiable science.
[12] For these reasons, we decline to impose a duty of ordinary care on actuaries in connection with spinoff-related valuation work absent a California statute or supporting case law. Finding such a duty as a general matter would be inconsistent with the decisions of the California Supreme Court interpreting California law.
[13] However, our inquiry into whether Towers Perrin owed a duty of ordinary care to the Employees does not end here. Despite the Bily court’s holding that an auditor‘s liability for general negligence is confined to the client, it recognized the possibility that intended third party beneficiaries could recover for an auditor‘s professional negligence:
In theory, there is an additional class of persons who may be the practical and legal equivalent of “clients.” It is possible the audit engagement contract might expressly identify a particular third party or parties so as to make them express third party bene
ficiaries of the contract. Third party beneficiaries may under appropriate circumstances possess the rights of parties to the contract.
Id. at 767 & n.16 (citations omitted); see also Glenn K. Jackson Inc., 273 F.3d at 1199-1200 (recognizing the third party beneficiary “exception” to the Bily rule); Mariani v. Price Waterhouse, 82 Cal. Rptr. 2d 671, 677 (Ct. App. 1999) (same). The Bily court stated that it was not presented with a third party beneficiary issue because “[n]o third party is identified in the engagement contract.” Bily, 834 P.2d at 767 n.16. Although Bily might be read to require that a third party beneficiary‘s name appear in the engagement agreement in order to give rise to a duty, id., California decisions pre-dating Bily indicate that “[i]t is not necessary that an express beneficiary be specifically identified in the relevant contract; he or she may enforce it if he or she is a member of a class for whose benefit the contract was created.” Outdoor Servs., Inc. v. Pabagold, Inc., 230 Cal. Rptr. 73, 76 (Ct. App. 1986); see also Mariani, 82 Cal. Rptr. 2d at 679 (noting that despite Bily’s use of the term “express” third party beneficiaries, “it does not appear Bily meant to create a new category of specifically designated beneficiaries, whether for tort or breach of contract purposes“).
We reverse the district court’s dismissal of claims six and seven based on the intended third party beneficiary exception to the general rule announced in Bily. The Employees have alleged that Towers Perrin “provided actuarial services to the CNF Plan and the CFC Plan for the benefit of Plan participants, including Plaintiffs, from at least November 1996 forward . . . .” They have also alleged that they were “intended beneficiaries of the professional services rendered” by Towers Perrin. Towers Perrin filed its motion to dismiss before the parties conducted discovery, and Towers Perrin’s engagement agreement is not in the record. In the present procedural posture, we take the Employees’ allegations as true. Cedars-Sinai Med. Ctr., 497 F.3d at 975. Given Bily’s recognition that
[14] We hold that Towers Perrin does not generally owe a duty of ordinary care to the Employees, who are not Towers Perrin’s clients. However, we hold that Towers Perrin may owe a duty to the Employees if they can be considered intended third party beneficiaries of Towers Perrin’s service agreement. Because the record on appeal is insufficient to allow us to evaluate whether the Employees are indeed intended third party beneficiaries, we remand this question to the district court so that it may make the determination on a more complete factual record.
2.
Because we disagree with the Employees’ broad reading of Towers Perrin’s tort duties under California law, we must also
In a federal question action that involves supplemental jurisdiction over state law claims, we apply the choice of law rules of the forum state—here, California. See Patton v. Cox, 276 F.3d 493, 495 (9th Cir. 2002) (“When a federal court sits in diversity, it must look to the forum state‘s choice of law rules to determine the controlling substantive law.“); Bass v. First Pac. Networks, Inc., 219 F.3d 1052, 1055 n.2 (9th Cir. 2000) (“[A] federal court exercising supplemental jurisdiction over state law claims is bound to apply the law of the forum state to the same extent as if it were exercising its diversity jurisdiction.“).
Under California‘s choice of law rules, California will apply its own rule of decision unless a party invokes the law of a foreign state that “will further the interest of the foreign state and therefore that it is an appropriate one for the forum to apply to the case before it.” Hurtado v. Superior Court, 522 P.2d 666, 670 (Cal. 1974). California courts employ a “governmental interest analysis” to assess whether California law or non-forum law should apply:
To determine the correct choice of law, we apply a three-step analysis. First, we determine whether the two concerned states have different laws. Second, we consider whether each state has an interest in having its law applied to this case. Finally, if the laws are different and each state has an interest in having its own law applied, we apply the law of the state whose interests would be more impaired if its policy were subordinated to the policy of the other state.
Here, the choice of law inquiry ends at step one of the governmental interest analysis because California law and Oregon law do not differ. As stated above, California law generally states that the duty of ordinary care owed by a supplier of information (e.g., accountant, auditor, etc.) does not run to non-clients. See Bily, 834 P.2d at 767. However, California law recognizes an exception to the general rule, that such a supplier of information does owe a duty to intended third party beneficiaries. See id. at 767 n.16.
Similarly, under Oregon law, “a negligence claim for the recovery of economic losses caused by another must be predicated on some duty of the negligent actor to the injured party beyond the common law duty to exercise reasonable care to prevent foreseeable harm.” Onita Pac. Corp. v. Trs. of Bronson, 843 P.2d 890, 896 (Or. 1992) (footnote omitted). The Oregon Supreme Court has held, however, that in a negligence action to recover economic losses, “nongratuitous suppliers of information owe a duty to their clients or employers or to intended third-party beneficiaries of their contractual, professional, or employment relationship to exercise reasonable care to avoid misrepresenting facts.” Id. at 899.
[15] Based on the foregoing, we conclude that there is no conflict between California law and Oregon law regarding an information supplier‘s duty to third-party, non-client users of information. Both states’ laws dictate that, as a general matter, an ordinary negligence duty does not run from a provider of information to a non-client. Both states’ laws, however, make an exception for intended third-party beneficiaries. Because the Employees have not demonstrated a conflict between the states’ respective laws, we hold that the law of the forum—California law—applies to the Employees’ negligence claims against Towers Perrin. Accordingly, we affirm the district
3.
We next consider Towers Perrin’s assertion that even if California law provides for a claim by intended third party beneficiaries, it is preempted by ERISA. There are two strands of ERISA preemption: (1) “express” preemption under
a.
[16] ERISA’s preemption provision,
[17] We first address the “reference to” preemption inquiry. “To determine whether a law has a forbidden ‘reference to’ ERISA plans, we ask whether (1) the law ‘acts immediately and exclusively upon ERISA plans,’ or (2) ‘the existence of ERISA plans is essential to the law‘s operation.‘” Golden Gate Rest. Ass’n v. City & Cnty. of San Francisco, 546 F.3d 639, 657 (9th Cir. 2008) (quoting Dillingham, 519 U.S. at 325). In Abraham v. Norcal Waste Sys., Inc., we held that the plaintiffs’ claim of negligence based on state law was not preempted under the “reference to” step of the preemption analysis, explaining that “the relevant state law certainly does not act immediately and exclusively on an ERISA plan, nor is such a plan essential to the operation of the law.” 265 F.3d at 820; see also Ariz. State Carpenters Pension Trust Fund v. Citibank, 125 F.3d 715, 724 n.4 (9th Cir. 1997) (holding that state law negligence claims were not preempted under the “refers to” prong). Our case law directs a conclusion that the Employees’ state law negligence claims are not preempted under the “reference to” prong of the preemption test. The Employees’ professional negligence claims are based on common law negligence principles and
Turning to preemption under the “connection with” language, we note that the Supreme Court has not provided a succinct definition of, or analytical framework for, evaluating the phrase “connection with.” See Rutledge v. Seyfarth, Shaw, Fairweather & Geraldson, 201 F.3d 1212, 1216 (9th Cir. 2000), cert. denied 531 U.S. 992 (2000). Instead, “to determine whether a state law has the forbidden connection, we look both to the objectives of the ERISA statute as a guide to
[18] We have employed a “relationship test” in analyzing “connection with” preemption, under which a state law claim is preempted when the claim bears on an ERISA-regulated relationship, e.g., the relationship between plan and plan member, between plan and employer, between employer and employee. Providence Health Plan v. McDowell, 385 F.3d 1168, 1172 (9th Cir. 2004); see also Gen. Am. Life Ins. Co. v. Castonguay, 984 F.2d 1518, 1521 (9th Cir. 1993) (“The key to distinguishing between what ERISA preempts and what it does not lies . . . in recognizing that the statute comprehensively regulates certain relationships: for instance, the relationship between plan and plan member, between plan and employer, between employer and employee (to the extent an employee benefit plan is involved), and between plan and trustee.“); Abraham, 265 F.3d at 820-21 (same); accord Gerosa v. Savasta & Co., 329 F.3d 317, 324 (2d Cir. 2003).
[19] Under the relationship test, the Employees’ state law claims do not encroach on ERISA-regulated relationships. The duty giving rise to the negligence claim runs from a third
[20] Towers Perrin’s reliance on United Steelworkers of America, AFL-CIO, CLC v. United Engineering, Inc., 52 F.3d 1386, is unpersuasive. In United Steelworkers, the Sixth Circuit held that plan participants in a distress-terminated plan where PBGC was the designated trustee could not bring a direct claim against the plan sponsor under the Labor Management Relations Act to recover non-guaranteed pension benefits because that claim was preempted by ERISA. First, United Steelworkers is inapposite because it involved displacement of federal common law, which is analyzed under a different framework than the question of preemption of state
b.
Having determined that the Employees’ state law negligence claims are not expressly preempted under ERISA, we next address Towers Perrin’s argument that the Employees’ negligence claims are “conflict preempted” by ERISA’s exclusive civil enforcement scheme.
“ERISA section 502(a) contains a comprehensive scheme of civil remedies to enforce ERISA‘s provisions.” Cleghorn, 408 F.3d at 1225. “A state cause of action that would fall within the scope of this scheme of remedies is preempted as conflicting with the intended exclusivity of the ERISA remedial scheme, even if those causes of action would not necessarily be preempted by section 514(a).” Id. (citing Aetna Health Inc. v. Davila, 542 U.S. 200, 214 n.4 (2004)). In Ingersoll-Rand Co., the Supreme Court held that a plan participant‘s state law claim for wrongful discharge was conflict preempted because that claim fell “squarely within the ambit of ERISA § 510” and ERISA § 502(a) provided a remedy for violations of section 510. 498 U.S. at 142-45 (“Unquestionably, the Texas cause of action purports to provide a remedy for the violation of a right expressly guaranteed by § 510 and exclusively enforced by § 502(a).“). The Court also noted that “it is no answer to a pre-emption argument that a particular plaintiff is not seeking recovery of pension benefits.” Id. at 145.
Towers Perrin argues that the Employees’ claims would interfere with the statutory scheme in Title IV of ERISA,
[21] This argument is unpersuasive. The Employees are suing Towers Perrin for tort damages payable to the class of aggrieved plaintiffs based on a duty owed them by Towers Perrin under state law, not for damages for breach of fiduciary duty payable to the plan (and thus PBGC).23 Moreover, in this case the class the Employees seek to represent all participants whose benefits were reduced under PBGC’s trusteeship. Therefore, there is no encroachment on the section 4044(a) allocation scheme. The Employees’ negligence claims are not conflict preempted, and, as discussed above, are not expressly preempted.
C.
Finally, we address the Employees’ sixteenth claim for relief, which alleges that PBGC breached its fiduciary duties under
[22] In Heckler, the United States Supreme Court held that a government agency‘s discretionary decision not to pursue an enforcement action should be presumed immune from judicial review under the Administrative Procedures Act. See 470 U.S. at 832. The Court’s decision was animated by the “general unsuitability for judicial review of agency decisions to refuse enforcement,” which the Court explained:
[A]n agency decision not to enforce often involves a complicated balancing of a number of factors which are peculiarly within its expertise. Thus, the agency must not only assess whether a violation has occurred, but whether agency resources are best spent on this violation or another, whether the agency is likely to succeed if it acts, whether the particular enforcement action requested best fits the agency‘s overall policies, and, indeed, whether the agency has enough resources to undertake the action at all. An agency generally cannot act against each technical violation of the statute it is charged with enforcing. The agency is far better equipped than the courts to deal with the many variables involved in the proper ordering of its priorities.
470 U.S. at 831-32. This jurisdictional bar applies where ” ‘statutes are drawn in such broad terms that in a given case there is no law to apply.’ ” Pac. Gas & Elec. Co. v. FERC, 464 F.3d 861, 867 (9th Cir. 2006) (quoting Heckler, 470 U.S. at 830); see also Port of Seattle, Wash. v. FERC, 499 F.3d 1016, 1027 (9th Cir. 2007) (“[T]he concern is that courts should not intrude upon an agency‘s prerogative to pick and choose its priorities, and allocate its resources accordingly, by demanding that an agency prosecute or enforce.“). “[T]he presumption may be rebutted where the substantive statute has
This presumption often arises in the context of a challenge to agency action under the APA. See, e.g., Franklin v. Massachusetts, 505 U.S. 788, 818-19 (1992); Serrato v. Clark, 486 F.3d 560, 568 (9th Cir. 2007). As a result, the Employees suggests that the presumption does not apply to claims not brought under the APA. However, as we stated in Sierra Club v. Whitman, “[t]he presumption . . . has a long history and . . . is not limited to cases brought under the APA.” 268 F.3d 898, 902 (9th Cir. 2001) (holding that a challenge to the EPA Administrator‘s decision not to initiate enforcement brought under
[23] Turning to the applicability of the Heckler presumption here, PBGC retains discretion to sue on behalf of a distress-terminated plan. When PBGC is acting as trustee to a distress terminated plan, it “has the power . . . to commence, prosecute, or defend on behalf of the plan any suit or proceeding involving the plan.”
Also favoring application of the jurisdictional bar is the breadth of
[24] PBGC’s unique role in the ERISA statutory scheme further justifies application of the presumption against judicial review. PBGC’s decision regarding whether to sue on behalf of a plan involves the “complicated balancing” of all five fac
[25] PBGC must weigh additional considerations that are within the ambit of its peculiar expertise. PBGC has a broad set of agency purposes, not all of which conclusively favor suing each time it has an arguable claim. Its purposes are “(1) to encourage the continuation and maintenance of voluntary private pension plans for the benefit of their participants, (2) to provide for the timely and uninterrupted payment of pension benefits to participants and beneficiaries under plans . . . , and (3) to maintain premiums established by [PBGC] . . . at the lowest level consistent with [statutory obligations].”
[26] The preceding leads us to the conclusion that the Heckler presumption applies to PBGC’s decision not to pursue claims on behalf of the CFC Plan, and we further conclude that no ERISA provision rebuts the presumption. As stated, PBGC “has the power . . . to commence, prosecute, or defend on behalf of the plan any suit or proceeding involving the plan.”
The Employees argue that the application of the presumption does not extend to claims against the PBGC for breach of fiduciary duty under
[27] PBGC’s discretionary decision not to pursue claims against the Fiduciary Defendants and Towers Perrin comes within the Heckler presumption against judicial review, and nothing in ERISA rebuts the presumption. Accordingly, we hold that the PBGC’s decision is immune from judicial review and affirm the dismissal of the Employees’ sixteenth claim for relief.
IV.
The Employees lack Article III standing to bring their ERISA claims seeking relief under
Each party shall bear its own costs on appeal.
Notes
Any person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this subchapter shall be personally liable to make good to such plan any losses to the plan resulting from each such breach, and to restore to such plan any profits of such fiduciary which have been made through use of assets of the plan by the fiduciary, and shall be subject to such other equitable or remedial relief as the court may deem appropriate, including removal of such fiduciary.