Naumann v. Benefit Strategies W., Inc. – 4/21/2022

June 1, 2022

Arizona Court of Appeals Division One holds that state law claims arising from a third-party administrator’s failure to provide accurate pension plan contribution calculations are not preempted by ERISA.

A married couple hired a consulting firm to set up and administer a pension plan for the couple and their employees, with the firm’s owner acting as the primary service provider.  After the owner died, the couple learned that the plan had been underfunded by at least $460,000.  They sued the late owner’s estate in federal district court, alleging that the owner’s failure to provide accurate Plan contribution calculations constituted a breach of a fiduciary duty under ERISA. 

The Estate moved to dismiss, arguing that no fiduciary duty was owed because the parties had stipulated that neither the firm nor the owner were fiduciaries under ERISA.  The district court granted the motion with prejudice as to any federal claims that had been or could have been brought, but without prejudice as to state law claims.

The couple then filed an action in superior court against the Estate and the firm, alleging three state law claims arising out of the owner’s failure to provide accurate Plan contribution calculations to the couple.  The defendants moved to dismiss, arguing that express and conflict preemption under ERISA barred the claims.  The superior court agreed that ERISA preempted the claims and granted the motion to dismiss, and the couple appealed.

The court of appeals found that express preemption did not apply.  The U.S. Supreme Court has held that a state law “relates to” an ERISA plan if it “has a connection with or reference to such a plan.”  Rutledge v. Pharm. Care Mgmt. Ass’n, 141 S. Ct. 474, 479 (2020) (emphasis added).  The court said that the couple’s claims did not have a “connection with” an ERISA plan because no ERISA-regulated relationship existed between the parties that would give rise to a fiduciary duty under ERISA.  The court pointed to a recent Ninth Circuit case with similar facts to support its conclusion that the calculation of benefits pursuant to a plan formula is a ministerial function, not a fiduciary function.  See Bafford v. Northop Grumman Corp., 994 F.3d 1020 (9th Cir. 2021).  The court also found no impermissible “reference to” an ERISA plan because, even though they might have an incidental effect on an ERISA plan, the claims did not turn on the Plan itself, but on whether the plan administrator had provided accurate contribution calculations. 

The court also found that conflict preemption did not apply because ERISA’s civil enforcement scheme does not provide relief for any of the couple’s state law claims and because no remedy granted by a state court would be an obstacle to the full and complete implementation of ERISA. 

Finding that neither express nor conflict preemption applied, the court of appeals vacated the superior court’s dismissal, reinstated the complaint, and remanded the case to the superior court for proceedings on the merits.

Both parties requested attorneys’ fees under state and federal statutes.  The court denied fees under the state statute as premature and found that the federal statute did not apply.  As the successful party, the couple was entitled to taxable costs incurred on appeal under ARCAP 21. 

Judge Furuya authored the opinion; Chief Judge Cattani and Judge Thumma joined.