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Payne v. Pentegra Retirement Services

United States District Court, Southern District of Indiana, Indianapolis Division

March 3, 2015

JENNIFER A. PAYNE, Individually, and as Personal Representative of the Estate of Mark R. Payne, Plaintiff,
v.
PENTEGRA RETIREMENT SERVICES, PENTEGRA DEFINED BENEFIT PLAN FOR FINANCIAL INSTITUTIONS, PLAN ADMINISTRATOR OF THE PENTEGRA DEFINED BENEFIT PLAN FOR FINANCIAL INSTITUTIONS, and UNITED STATES OF AMERICA, Defendants.

ORDER ON MOTIONS TO DISMISS AND MOTION FOR LEAVE TO FILE AMENDED COMPLAINT

TANYA WALTON PRATT JUDGE

This matter is before the Court on three pending motions: a Motion to Dismiss filed pursuant to Federal Rule of Civil Procedure 12(b)(1) by Defendant the United States of America (Filing No. 31), a Motion to Dismiss and to Strike filed pursuant to Rules 12(b)(6) and 12(f) by Defendants Pentegra Retirement Services, Pentegra Defined Benefit Plan for Financial Institutions, and Plan Administrator of the Pentegra Defined Benefit Plan for Financial Institutions (collectively, "Pentegra") (Filing No. 21), and a Motion for Leave to File Amended Complaint filed by Plaintiff Jennifer A. Payne ("Mrs. Payne") (Filing No. 47). For the following reasons, the Court GRANTS the Motion to Dismiss filed by the United States, GRANTS the Motion to Dismiss and to Strike filed by Pentegra, and DENIES the Motion for Leave to File Amended Complaint filed by Mrs. Payne.

I. LEGAL STANDARDS

A motion to dismiss under Rule 12(b)(1) challenges the court's subject matter jurisdiction. Fed.R.Civ.P. 12(b)(1). The burden of proof is on the plaintiff, the party asserting jurisdiction. United Phosphorus, Ltd. v. Angus Chem. Co ., 322 F.3d 942, 946 (7th Cir. 2003), overruled on other grounds by Minn-Chem, Inc. v. Agrium, Inc ., 683 F.3d 845 (7th Cir. 2012) (en banc). "The plaintiff has the burden of supporting the jurisdictional allegations of the complaint by competent proof." Int'l Harvester Co. v. Deere & Co., 623 F.2d 1207, 1210 (7th Cir. 1980). In determining whether subject matter jurisdiction exists, the court accepts as true all well-pled facts alleged in the complaint and draws all reasonable inferences from those facts in the plaintiff's favor. Scanlan v. Eisenberg, 669 F.3d 838, 841 (7th Cir. 2012). "In deciding whether the plaintiff has carried this burden, the court must look to the state of affairs as of the filing of the complaint; a justiciable controversy must have existed at that time." Int'l Harvester Co., 623 F.2d at 1210.

When deciding a motion to dismiss under Rule 12(b)(6), the Court accepts as true all factual allegations in the complaint and draws all inferences in favor of the plaintiff. Bielanski v. County of Kane, 550 F.3d 632, 633 (7th Cir. 2008). However, the allegations must "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests, " and the "[f]actual allegations must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations and quotation marks omitted). Stated differently, the complaint must include "enough facts to state a claim to relief that is plausible on its face." Hecker v. Deere & Co., 556 F.3d 575, 580 (7th Cir. 2009) (internal citation and quotation marks omitted). To be facially plausible, the complaint must allow "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) (citing Twombly, 550 U.S. at 556).

Rule 12(f) provides that a district court "may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed.R.Civ.P. 12(f). The court may either strike on its own or on a motion by a party and has considerable discretion in striking any redundant, immaterial, impertinent or scandalous matter.

Delta Consulting Group, Inc. v. R. Randle Constr., Inc., 554 F.3d 1133, 1141 (7th Cir. 2009). The district court's decision on a motion to strike should not be arbitrary or unreasonable. Id. "[T]he general rule [is] that motions to strike are disfavored. This is because motions to strike potentially serve only to delay. But where, as here, motions to strike remove unnecessary clutter from the case, they serve to expedite, not delay." Heller Financial, Inc. v. Midwhey Powder Co., 883 F.2d 1286, 1294 (7th Cir. 1989) (internal citation omitted).

After a responsive pleading has been filed, "a party may amend its pleading only with the opposing party's written consent or the court's leave. The court should freely give leave when justice so requires." Fed. R. Civ. Pro. 15(a)(2). The rule, however, "do[es] not mandate that leave be granted in every case. In particular, a district court may deny a plaintiff leave to amend his complaint if there is undue delay, bad faith[, ] or dilatory motive . . . [, or] undue prejudice . . ., [or] futility of amendment." Park v. City of Chicago, 297 F.3d 606, 612 (7th Cir. 2002) (internal citation and quotation marks omitted). A proposed amendment is futile if it "fails to cure the deficiencies in the original pleading, or could not survive a [] motion to dismiss." Perkins v. Silverstein, 939 F.2d 463, 472 (7th Cir. 1991). "Whether to grant or deny leave to amend is within the district court's discretion." Campbell v. Ingersoll Milling Machine Co., 893 F.2d 925, 927 (7th Cir. 1990).

II. BACKGROUND

Mark Payne ("Mr. Payne"), the late husband of Plaintiff Mrs. Payne, worked for more than thirty years for the Federal Home Loan Bank, which was merged into the Office of the Comptroller of the Currency ("OCC"). Mr. Payne worked as a Field Manager in the Indianapolis, Indiana office, and, as an employee, he was a participant in the Pentegra Defined Benefit Plan for Financial Institutions ("Pentegra Defined Benefit Plan"). The OCC engaged or assigned the Pentegra Defined Benefit Plan to Pentegra, as the third-party administrator of the plan.

While employed by the OCC, Mr. Payne was diagnosed with a brain tumor in December 2010. After Mr. Payne's first surgery on December 27, 2010, the Paynes learned that Mr. Payne's tumor was a gliablastoma tumor, the deadliest type of brain tumor. Mr. Payne's physicians informed him that the life expectancy for this type of tumor was approximately twelve to sixteen months. During the next fifteen months, Mr. Payne endured two additional surgeries as well as weeks of radiation and chemotherapy. Mr. Payne also experienced seizures, memory loss, difficulties in speech and comprehension, and other neurological deficits prior to his death on March 5, 2012.

Shortly after Mr. Payne's diagnosis in December 2010, the Paynes began working with Valerie Waller ("Ms. Waller"), the Lead Expert for Compensation and Benefits at the OCC in Washington, D.C., to discuss Mr. Payne's life insurance and pension benefits. Mr. Payne wanted to ensure that Mrs. Payne and their two children would be taken care of after his death. The Paynes sought advice from Ms. Waller regarding the full impact of their options under the Pentegra Defined Benefit Plan. The Paynes and Mr. Payne's supervisor, Jill Hoyle ("Ms. Hoyle"), communicated with Ms. Waller on a frequent and regular basis to discuss questions and to confirm information related to Mr. Payne's life insurance and the Pentegra Defined Benefit Plan.

In October 2011, Mr. Payne requested that Ms. Waller provide pension calculations as of November 1, 2011 and April 1, 2012, so that the Paynes could understand their various options. Mr. Payne also requested that all options be explained to him in detail. The Paynes wanted this information to decide which option would benefit them the most. In mid-October 2011, Mr. Payne received an estimate of the pension benefits from Pentegra and Ms. Waller. The estimated pension benefit as of November 1, 2011 was a lump sum payout of approximately $975, 557.00, or an annuity of approximately $57, 480.00. The Paynes decided that the annuity was the best option for Mrs. Payne as it provided a lifetime payout to Mrs. Payne.

In January 2012, the Paynes, Ms. Waller, and Ms. Hoyle participated in a telephone conference call regarding Mr. Payne's options. During the call, Ms. Waller advised Mr. Payne to wait 120 days before he filed for a disability retirement. Ms. Waller explained there was no reason for Mr. Payne to retire earlier than the 120 days. But Ms. Waller failed to advise the Paynes that the pension figures would differ substantially if Mr. Payne died while in active service rather than after he retired. When the benefits calculation was eventually provided by Pentegra, Ms. Waller admitted that she did not know there would be a significant difference in benefits based on retirement. Ms. Waller was wrong in this understanding when she advised Mr. and Mrs. Payne in January 2012.

On March 15, 2012, soon after Mr. Payne died, Mrs. Payne spoke with Ms. Waller and Damien Samuals ("Mr. Samuals"), another OCC employee, regarding Mr. Payne's pension benefits. Ms. Waller explained that the annuity payout had not been calculated but stated that it would not be significantly different from the information that was sent to the Paynes in October 2011. Ms. Waller specifically stated that it would not be "significantly less" and that it would be "a little less, but not significantly" different.

In April 2012, Mrs. Payne received the benefits calculation from Pentegra and Ms. Waller. The lump sum benefits that would be paid were more than $200, 000.00 less than the estimate that was provided in October 2011. After learning that the benefits Mrs. Payne would receive were significantly less than what she and Mr. Payne were told in October 2011, Mrs. Payne participated in a conference call with Ms. Waller, Mr. Samuals, and Lynn Phillips ("Mr. Phillips"), a representative of Pentegra, to discuss why there was such a large difference in benefit payments. Mr. Phillips explained that the discrepancy resulted from the difference between a retirement benefit versus an active death benefit. He explained that an active death benefit yielded a much lower benefit payment than a retirement benefit. When Mrs. Payne expressed her surprise at the large difference between the two types of benefits, Ms. Waller also stated that she was not aware that the two types of benefits yielded such a significant difference. Ms. Waller demonstrated insufficient knowledge of the difference regarding active death benefits and early retirement benefits, yet she was the Lead Expert for Compensation and Benefits at the OCC. Mrs. Payne asked whether the fact that Mr. Payne did not retire, but died in service, cost Mrs. Payne more than $200, 000.00 in lump sum benefits. Mr. Phillips confirmed that it did. Mr. Payne had decided not to retire, relying on the faulty advice of Ms. Waller.

The Paynes frequently had talked with Ms. Waller who knew of Mr. Payne's imminent death and who was the individual most knowledgeable about benefits at the OCC. The Paynes had relied on Ms. Waller's advice regarding Mr. Payne's retirement and benefits. Additionally, the Paynes had relied on the benefits calculations provided by Pentegra. After relying on Ms. Waller's advice and Pentegra's benefits estimations, Mrs. Payne now will receive approximately $205, 000.00 less in lump sum benefits or a ...


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