United States District Court, D. South Dakota, Western Division
JEFFREY L. VIKEN CHIEF JUDGE.
Little Wound School filed an action against defendant
American United Life Insurance Company in South Dakota state
court. (Docket 1-2). Defendant removed the case to this court
and filed a motion to dismiss the complaint. (Dockets 1 &
4). According to defendant, the Employee Retirement Income
Security Act (“ERISA”) preempts plaintiff's
claims and Rule 12(b)(6) of the Federal Rules of Civil
Procedure requires dismissal of the complaint for failure to
state a claim. (Docket 5); see Fed.R.Civ.P.
Rule 12(b)(6), a plaintiff must plead “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). Two “working principles” underlie Rule
12(b)(6) analysis. See Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009). First, courts are not required to accept as
true legal conclusions “couched as . . . factual
allegation[s]” in the complaint. See id.
“[A] complaint must allege ‘more than labels and
conclusions, and a formulaic recitation of the elements of a
cause of action will not do.' ” Torti v.
Hoag, 868 F.3d 666, 671 (8th Cir. 2017) (quoting
Twombly, 550 U.S. at 555). The court does, however,
“take the plaintiff's factual allegations as
true.” Braden v. Wal-Mart Stores, Inc., 588
F.3d 585, 594 (8th Cir. 2009). Second, the plausibility
standard is a “context-specific task that requires the
reviewing court to draw on its judicial experience and common
sense.” Iqbal, 556 U.S. at 678 (citation
omitted). The complaint is analyzed “as a whole, not
parsed piece by piece to determine whether each allegation,
in isolation, is plausible.” Braden, 588 F.3d
is an educational facility charted by the Oglala Sioux Tribe,
and its grades range from kindergarten to twelfth grade.
(Docket 1-2 at p. 2). In 2010, plaintiff entered into an
agreement with defendant on a 401(k) plan for plaintiff's
employees. Id. at p. 3. The 2010 plan (also referred
to as “the plan”) marked a transition from the
benefits plaintiff provided its employees in the 1990s.
relying on correspondence with defendant about the plan's
contents, plaintiff formed mistaken beliefs on how the plan
would operate, including “the exclusion of certain
classifications of employees[.]” Id. Plaintiff
asserts part the ‘90s plan included “employees
designat[ing] a specific dollar amount to be contributed to
the Plan[, ]” so the 2010 plan's “exclusion
of certain classes of employees would have had the same
effect as excluding specific types of compensation because
contract employees receiving the other types of compensation
were deferring stated dollar amounts.” Id. at
pp. 3-4. “[O]perational failure” followed, as
The operational failure is the failure to include certain
compensation in the calculation of plan participant elective
deferrals, resulting in missed elective deferrals, employer
matching contributions and earnings. This operational failure
resulted from a discrepancy between the Plan document's
language and the intent of Little Wound and the
communications to participants as to the definition of
“compensation” and the scope of participant
earnings that were subject to the right [to] defer earnings
into the Plan.
Id. at p. 4.
to plaintiff, defendant made false representations.
Specifically, that defendant “could efficiently sponsor
and design” the plan; “that it was fully familiar
with efficiently running these types of plans and could
responsibly handle all functions necessary to establish a
successful and fiscally responsible plan[;]”
“that it was familiar with the scope of benefits that
should be provided” to plaintiff's employees; and
“that the Plan would be appropriately designed to
ensure the best interests” of plaintiff's
enlisted the help of the Employee Plans Compliance Resolution
System, which uses the Voluntary Compliance Program
(“VCP”) in these situations. Id.
Plaintiff made a “corrective contribution” to the
plan totaling $137, 935.33 based on employees' missed
deferral opportunities. Id. at p. 5. Plaintiff
incurred a fee through the VCP and attorney fees by
addressing the plan's problems. Id.
complaint advances three claims: fraud, negligent
misrepresentation and negligence. Id. at pp. 5-9.
They largely relate to the “false
representations” set forth above. See supra at
p. 3; (Docket 1-2 at pp. 5-9). Plaintiff seeks damages based
on its corrective contribution, VCP fee, attorney fees and
punitive damages. (Docket 1-2 at pp. 10-11).
argues ERISA preempts plaintiff's claims. (Docket 4).
“ERISA . . . is a comprehensive statute that sets
certain uniform standards and requirements for employee
benefit plans.” Minnesota Chapter of Associated
Builders & Contractors, Inc. v. Minnesota Dep't of
Pub. Safety, 267 F.3d 807, 810 (8th Cir. 2001) (internal
quotation marks omitted). “Congress' primary
concern was with the mismanagement of funds accumulated to
finance employee benefits and the failure to pay employees
benefits from accumulated funds. To that end, it established
extensive reporting, disclosure, and fiduciary duty
requirements to insure against the possibility that the
employee's expectation of the benefit would be defeated
through poor management by the plan administrator.”
Massachusetts v. Morash, 490 U.S. 107, 115 (1989)
(internal citation and footnote omitted). Plaintiff does not
dispute the 401(k) plan at issue in this case is an ERISA
plan. (Docket 17 at p.1); see Johnston v. Paul Revere
Life Ins. Co., 241 F.3d 623, 629 (8th Cir. 2001)
(“As a preliminary matter, we must determine if the . .
. policy at issue was a plan within the meaning of ERISA
because the existence of a plan is a prerequisite to the
jurisdiction of ERISA.”) (internal quotation marks
includes a provision on preemption. 29 U.S.C. § 1144(a).
The provision reads:
Except as provided in subsection (b) of this section, the
provisions of this subchapter and subchapter III shall
supersede any and all State laws insofar as they may now or
hereafter relate to any employee benefit plan described in
section 1003(a) of this title and not exempt under section
1003(b) of this title.
Id. “The ERISA civil enforcement
mechanism” found in § 502(a) has “such
extraordinary pre-emptive power that it converts an ordinary
state common law complaint into one stating a federal claim
for purposes of the well-pleaded complaint rule.”
Aetna Health, Inc. v. Davila, 542 U.S. 200, 209
(2004) (internal quotation marks omitted). Accordingly, the
Davila Court stated “causes of action within
the scope of the civil enforcement ...