David Wong v. Danette Flynn-Kerper ( 2021 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
DAVID WONG, in his capacity as No. 19-56289
Trustee of the Anaplex Corporation
Employee Stock Ownership Plan, D.C. No.
Plaintiff-Appellant, 2:18-cv-04468-
SJO-AFM
v.
DANETTE K. FLYNN-KERPER, as OPINION
Executor of the Estate of Bernard M.
Kerper; DOES, 1-20, inclusive,
Defendants-Appellees.
Appeal from the United States District Court
for the Central District of California
S. James Otero, District Judge, Presiding
Argued and Submitted January 14, 2021
Pasadena, California
Filed June 7, 2021
Before: Michelle T. Friedland and Mark J. Bennett, Circuit
Judges, and Frederic Block, * District Judge.
Opinion by Judge Bennett
*
The Honorable Frederic Block, United States District Judge for the
Eastern District of New York, sitting by designation.
2 WONG V. FLYNN-KERPER
SUMMARY **
ERISA
The panel reversed the district court’s dismissal, on the
ground of equitable estoppel, of an ERISA action in which
David Wong, Trustee of the Anaplex Corporation Employee
Stock Ownership Plan, sought equitable and declaratory
relief against Danette K. Flynn-Kerper, the holder of a
promissory note from Anaplex.
Bernard Kerper, former trustee of the ESOP and late
husband of Flynn-Kerper, acquired the promissory note in
exchange for shares of Anaplex stock he sold to the ESOP.
Alleging that the ESOP had paid greater than “adequate
consideration” for the shares, Wong sought an adjustment to
the purchase price and a declaration that the ESOP had
overpaid. Flynn-Kerper moved to dismiss, arguing that
Wong was equitably estopped from asserting his claims
against her, based on an agreement between them that she
alleged settled a prior lawsuit in which she had alleged
Anaplex’s failure to repay promissory notes, including a
note that Anaplex issued in connection with the challenged
stock sale. The district court granted the motion to dismiss,
concluding that ERISA did not bar promissory or equitable
estoppel because Flynn-Kerper was not making a claim
pursuant to the ERISA agreement, but instead was seeking
to rebuff Wong’s claim for reformation of the promissory
note.
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
WONG V. FLYNN-KERPER 3
Reviewing under a summary judgment standard, the
panel held that Flynn-Kerper could not equitably estop
Wong, the ERISA Trustee, because doing so would
contradict the clear terms of the ESOP. The panel held that,
in addition to satisfying the traditional equitable estoppel
requirements, a party bringing a federal equitable estoppel
claim in the ERISA context must also allege:
(1) extraordinary circumstances; (2) that the provisions of
the plan at issue were ambiguous such that reasonable
persons could disagree as to their meaning or effect; and
(3) that the representations made about the plan were an
interpretation of the plan, not an amendment or modification
of the plan. The panel held that a party cannot maintain a
federal equitable estoppel claim against a trust fund where
recovery on the claim would contradict written plan
provisions. Here, if Wong were correct that the Anaplex
shares were overvalued during an appraisal, applying
equitable estoppel would require Wong to pay Flynn-Kerper
greater than the fair market value of the shares on the date of
purchase. This would contravene Section 6(d) of the ESOP,
which required that the shares be purchased at fair market
value on the date of purchase. Joining the Fourth Circuit, the
panel held that the defensive use of equitable estoppel is
barred when estopping the plaintiff would contradict an
ERISA plan’s express terms. The panel therefore reversed
the district court’s judgment and remanded.
COUNSEL
Marc S. Schechter (argued) and Corey F. Schechter,
Butterfield Schechter LLP, San Diego, California, for
Plaintiff-Appellant.
4 WONG V. FLYNN-KERPER
Shannon C. Papazis (argued) and Lauren E. Martin,
Ferruzzo & Ferruzzo, LLP, Newport Beach, California, for
Defendant-Appellee.
OPINION
BENNETT, Circuit Judge:
In this ERISA case, Defendant Danette Flynn-Kerper
succeeded in equitably estopping ERISA Trustee Plaintiff
David Wong in his suit seeking equitable and declaratory
relief, even though her equitable estoppel claim contradicted
the written provisions of the ERISA plan. But “a party
cannot maintain a federal equitable estoppel claim against a
trust fund where recovery on the claim would contradict
written [ERISA] plan provisions,” Greany v. W. Farm
Bureau Life Ins., 973 F.2d 812, 821 (9th Cir. 1992), or where
it “would, as a practical matter, result in an amendment or
modification of a plan,” Gabriel v. Alaska Elec. Pension
Fund, 773 F.3d 945, 956 (9th Cir. 2014).
Flynn-Kerper tries to reframe the issue as whether a
defendant can equitably estop a plaintiff contrary to the
terms of an ERISA plan. This is a distinction without a
difference. “The actuarial soundness of pension funds is,
absent extraordinary circumstances, too important to permit
trustees to obligate the fund to pay pensions to persons not
entitled to them under the express terms of the pension plan,”
id. (citation omitted), whether those “persons” be plaintiffs
or defendants. Flynn-Kerper cannot equitably estop the
ERISA Trustee from affirmatively enforcing the terms of the
ERISA plan. For this and other reasons, we reverse.
WONG V. FLYNN-KERPER 5
I. FACTS
Wong, in his capacity as Trustee of the Anaplex
Corporation Employee Stock Ownership Plan (ESOP), is
suing Flynn-Kerper, in her individual capacity as the present
holder of a $1,000,654.20 promissory note from Anaplex.
Bernard Kerper, the former trustee of the ESOP and the
late husband of Flynn-Kerper, originally acquired that
promissory note in April 2015, in exchange for shares of
Anaplex stock he sold to the ESOP. Kerper—negotiating
the purchase price for both himself and the ESOP—based
the purchase price for this conflicted transaction on a
valuation conducted by independent appraiser Brian Turner.
Turner determined the fair market value of the Anaplex
shares, in seeming compliance with the ESOP’s
requirements. In particular, consistent with the ERISA
requirements for transactions between an ERISA trust and
its trustee, 1 Section 6(d) of the ESOP provides:
Purchases of Company Stock by the Trust
will be made at a price which . . . does not
exceed the fair market value of such
Company Stock . . . . [I]f the purchase of
Company Stock is from a “disqualified
1
Section 406(a)(1)(A) of ERISA defines the “sale . . . of any
property between the plan and a party in interest” as a prohibited
transaction. 29 U.S.C. § 1106(a)(1)(A). Yet § 408(b)(17)(A) makes an
exception for such a transaction where “the plan receives no less, nor
pays no more, than adequate consideration.” Id. § 1108(b)(17)(A). And
§ 408(e)(1) makes an exception for the “acquisition . . . by a plan of
[company shares] . . . if such acquisition . . . is for adequate
consideration.” Id. § 1108(e)(1). Section 3(18) defines “adequate
consideration” as “the fair market value of the asset as determined in
good faith by the trustee or named fiduciary pursuant to the terms of the
plan.” Id. § 1002(18).
6 WONG V. FLYNN-KERPER
person” as defined in Code Section
4975(e)(2), the fair market value shall be
determined as of the date of purchase. 2
To ensure a proper determination of fair market value, the
ESOP also provides that “[t]he determination of fair market
value . . . shall be made by an independent appraiser.”
Although Kerper seemed to follow these requirements
by hiring Turner to conduct an independent valuation of the
shares, Wong alleges that the ESOP paid more than fair
market value for Kerper’s shares. First, Wong claims that
Turner was unaware of an omission in Anaplex’s accounting
records caused by Kerper. Kerper had written checks to
himself—or instructed employees to issue checks to or make
payments for him—out of Anaplex’s general checking
account. This resulted in Kerper owing Anaplex more than
$1,000,000, a debt that was carried on Anaplex’s books as
an asset. Wong alleges that at the time Anaplex hired Turner
to value the shares, Kerper knew that even though the debt
was carried on the books as a real asset of Anaplex, the debt
was in default and would be uncollectible by the time of the
April 2015 transaction. Wong also alleges that Kerper knew
that no one had informed Turner of that fact. Thus,
according to Wong, Kerper knew that Turner’s appraisal
necessarily overvalued the company by more than
$1,000,000, the difference between a debt that was fully
collectible and one that was in default and uncollectible.
Wong contends that when Kerper died, four months after the
2
The parties do not dispute that Kerper was a “disqualified person”
and therefore fair market value should have been determined as of the
date of purchase.
WONG V. FLYNN-KERPER 7
April 2015 sale, the uncollectible amount he owed Anaplex
was $1,085,876.29 plus interest.
Second, Wong alleges that Kerper failed to disclose to
Turner that Anaplex was being investigated by the U.S.
Environmental Protection Agency (EPA) and was thus
incurring hundreds of thousands of dollars in legal fees and
facing hundreds of thousands of additional dollars in
potential fines and penalties at the time of the valuation,
further contributing to Turner’s overvaluing the shares.
Wong alleges that without this information, Turner’s
valuation was “materially flawed” and resulted in a purchase
price in excess of the fair market value—contrary to the
ESOP’s terms. In his declaration, attached to Wong’s
opposition to the motion to dismiss, Turner stated that when
he prepared the valuation, he did not know that the loans—
which he treated as assets of Anaplex—were in default and
would become legally uncollectible prior to the April 2015
sale. He also stated he did not know of the EPA
investigation. He explained that both pieces of information
would have been material to his valuation and would have
resulted in a valuation reflecting a reduced value of the
shares, which were probably “worth significantly less than
the $93.87 purchase price used by Mr. Kerper.”
Wong thus brought this action in May 2018. He sought
equitable relief pursuant to 29 U.S.C. § 1132(a)(3)—ERISA
§ 502(a)(3)—because the ESOP had paid greater than
“adequate consideration” for the shares. Wong sought an
adjustment to the purchase price and a declaration that the
ESOP had overpaid.
Flynn-Kerper moved to dismiss for failure to state a
claim. She argued that Wong was equitably estopped from
asserting his claims against her, based on an agreement
8 WONG V. FLYNN-KERPER
between them that she alleged settled a prior lawsuit. Flynn-
Kerper had sued Anaplex in state court in 2016, alleging
Anaplex’s failure to repay various promissory notes,
including the April 2015 note that Anaplex issued in
connection with the challenged stock sale. Wong and
Anaplex then entered into a Note Repayment Agreement
(NRA) with Flynn-Kerper, (1) establishing a new repayment
schedule for the April 2015 promissory note and
(2) requiring Flynn-Kerper to dismiss her first four causes of
action (but not her claim for overdue payments on the April
2015 note). In October 2017, Flynn-Kerper dismissed all her
claims. Though the NRA does not specify whether the
required dismissals were to be with or without prejudice,
Flynn-Kerper dismissed without prejudice, including the
claim for overdue payments on the April 2015 note.
Flynn-Kerper and Wong do not agree on four facts
relating to the NRA. First, regarding Wong’s intent in
entering the NRA, Flynn-Kerper argues that Wong entered
the agreement to “confirm” the amount owed and the
ESOP’s obligation to pay it. Wong argues that the “NRA
did nothing more than acknowledge the original obligation
of the ESOP under the Promissory Note” and “in no way . . .
‘confirmed[]’ . . . that the Purchase Price represented no
more than adequate consideration for the Shares as of the
Transaction date.”
Second, regarding Wong’s knowledge when entering the
agreement, Flynn-Kerper argues that “Wong was on notice
of the unenforceability of the debt given the State Action was
actively litigating the propriety and enforceability of that
alleged debt,” and that the “same can be said of Wong’s
knowledge of the EPA investigation, fines, and litigations.”
Wong responds that it was his “honest belief . . . at the time
he entered into the NRA that the Debt would be recovered,”
WONG V. FLYNN-KERPER 9
and that “although [he] was aware of the existence of the
EPA investigation” prior to entering the NRA, he was
unaware of Kerper’s failure to report that investigation to
Turner, the pertinent fact for purposes of this litigation, until
later.
Third, regarding Flynn-Kerper’s knowledge when
entering the agreement, Flynn-Kerper asserts (though not in
a declaration) that she “never would have signed the NRA if
she were aware [Wong] intended not to pay her yet continue
to litigate the value of the Note owed to her.” Wong counters
that it “was known to [Flynn-Kerper] at the time she
dismissed the State Case . . . that the ESOP would most
likely be bringing a federal claim challenging the Purchase
Price of the Shares,” citing language in the NRA that he
believes “expressly retained . . . the right to later bring
claims.” 3
Finally, regarding Flynn-Kerper’s reliance on the NRA
in dismissing her claims in the state action, she argues she
did so “[a]s a result of and in reliance upon the NRA and
negotiations.” Wong responds that “it cannot reasonably be
argued that [Flynn-Kerper] reasonably and foreseeably
relied on, or was enticed by, the NRA when she voluntarily
chose to dismiss claims in the State Case.” He bases this
assertion on (1) Flynn-Kerper’s five-month delay between
entering the NRA and filing the request for dismissal
3
Wong points to language in the NRA stating that “[t]he Parties
hereby acknowledge and agree that [the NRA] does not fully settle all
outstanding claims existing between the Executor, the ESOP, and
Anaplex Corporation.” He also points to language stating that
“payments shall continue to be made to [Flynn-Kerper] until further . . .
order of the Court” and that “[n]o modification, amendment or waiver of
any of the [NRA] provisions . . . shall be binding . . . unless . . . ordered
by the Court.”
10 WONG V. FLYNN-KERPER
(despite that the NRA required her to dismiss the first four
causes of action in five days); (2) the fact that the NRA did
not require her to dismiss the cause of action involving the
April 2015 note; (3) the fact that Flynn-Kerper dismissed all
the claims without prejudice in the state action, including the
cause of action involving the April 2015 note; 4 and (4) her
willingness to dismiss the case even after receiving an email
from Wong’s counsel one day prior stating, “the amount due
on the note is not being warrantied that it is not subject to
change to the extent the [ESOP] over-paid.” 5
Other than the argument that Flynn-Kerper did not rely
on the NRA in dismissing her claims, Wong raised these
factual disputes in his opposition to the motion to dismiss,
which he supported with his declaration, as well as
declarations from Turner and the president of Anaplex.
Wong also requested that the district court take judicial
notice of the state court decision finding Kerper’s debt to
Anaplex legally uncollectible after the parties entered the
NRA.
The district court granted Flynn-Kerper’s motion to
dismiss without leave to amend, acknowledging the factual
disagreements between Wong and Flynn-Kerper but finding
4
At argument, we asked Flynn-Kerper’s counsel whether the NRA
required dismissal with or without prejudice. However, she was unable
to answer, even though it is obvious that whether the NRA’s dismissal
clause required permanent or temporary dismissal of claims is relevant
to whether the NRA settled the ESOP’s note repayment obligations.
5
Furthermore, the evidence of Flynn-Kerper’s knowledge that
Wong might later bring a lawsuit relating to the April 2015 promissory
note is also relevant to whether she relied on the NRA when she
dismissed her claims in the state action.
WONG V. FLYNN-KERPER 11
Wong’s arguments “unconvincing.” 6 The district court thus
concluded:
[T]here is no question that [Wong] made a
clear and unambiguous promise to pay
[Flynn-Kerper the outstanding balance on the
April 28, 2015 note, plus interest. Flynn-
Kerper] reasonably and foreseeably relied on
this promise when she voluntarily dismissed
her various claims in state court. Permitting
[Wong] to now renege on this agreement and
reform the promissory note would punish
[Flynn-Kerper] for her reliance on [Wong’s]
representation. This is an impermissible
outcome.
Wong then filed a motion for reconsideration, raising
many of the same arguments as in his opposition to the
motion to dismiss, along with several new ones: (1) that a
trust may not be equitably estopped if doing so contradicts
written ERISA plan provisions; and (2) that Flynn-Kerper
did not rely on the NRA in dismissing all of her state court
claims (for the reasons already discussed).
The district court addressed each of these arguments on
the merits, including those raised for the first time in the
motion for reconsideration, and it denied the motion.
Regarding the issue of ERISA preemption, the district court
adopted Flynn-Kerper’s position that ERISA “does not bar
6
The district court left almost all of Wong’s arguments unaddressed,
including that the NRA did “not fully settle all outstanding claims
existing between” him and Flynn-Kerper, and that the NRA did not
require Flynn-Kerper to dismiss the claim pertaining to the April 2015
promissory note.
12 WONG V. FLYNN-KERPER
promissory or equitable estoppel in this context,” where
“Defendant is not making a claim pursuant to the [ERISA]
agreement, but is instead seeking to rebuff Plaintiff’s own
claim for reformation of a promissory note.” According to
the district court, “estoppel [has] no effect whatsoever on the
plan’s written provisions” in such a scenario.
Wong now appeals to this court, where we review the
Rule 12(b)(6) dismissal de novo. Ariz. Students’ Ass’n v.
Ariz. Bd. of Regents, 824 F.3d 858, 864 (9th Cir. 2016).
II. DISCUSSION
When “matters outside the pleadings are presented to and
not excluded by the court” on a Rule 12(b)(6) motion, “the
motion must be treated as one for summary judgment under
Rule 56.” Fed. R. Civ. P. 12(d). Thus, because both parties
submitted exhibits, and because Wong submitted
declarations, we look at the findings of the district court
under a summary judgment standard. Under that standard, a
district court may dismiss a case only if there is “no genuine
dispute as to any material fact,” Fed. R. Civ. P. 56(a),
viewing the evidence “in the light most favorable to the
opposing party,” Adickes v. S.H. Kress & Co., 398 U.S. 144,
157 (1970).
Equitable estoppel applies if the party to be estopped
knew the facts and intended for his conduct to be acted on,
and if the party asserting estoppel was ignorant of the true
facts and relied on the other party’s conduct to her injury.
Ellenburg v. Brockway, Inc., 763 F.2d 1091, 1096 (9th Cir.
1985), abrogated on other grounds as recognized by
Watkins v. Westinghouse Hanford Co., 12 F.3d 1517 (9th
Cir. 1993). Thus, applying equitable estoppel to Wong’s
claim would raise questions about Wong’s knowledge and
intent when entering the NRA, and Flynn-Kerper’s
WONG V. FLYNN-KERPER 13
knowledge when entering the NRA and reliance on the NRA
in dismissing her claims in the state action. All of these are
factual issues. See Simmons v. United States, 805 F.2d 1363,
1368 (9th Cir. 1986) (knowledge is an issue of fact); Nat’l
Union Fire Ins. v. Argonaut Ins., 701 F.2d 95, 97 (9th Cir.
1983) (contractual intent is an issue of fact); Atkins, Kroll
(Guam), Ltd. v. Cabrera, 295 F.2d 21, 23 (9th Cir. 1961)
(reliance is an issue of fact). And all are subject to genuine
dispute. Under the appropriate Rule 56 standard, then, even
assuming estoppel principles were available in the ERISA
context presented here, the district court could not equitably
estop Wong’s claims at this stage of the proceedings merely
because it found Wong’s position “unconvincing.” 7
7
The same holds true for Flynn-Kerper’s arguments that we can
affirm on grounds not addressed by the district court. For example,
Flynn-Kerper argues that we can dismiss this case under the doctrine of
judicial estoppel, which bars inconsistent positions by the same party in
different court proceedings. But the parties have a factual disagreement
about whether the NRA reflects a prior inconsistent position on Wong’s
part. See New Hampshire v. Maine, 532 U.S. 742, 750 (2001) (naming
clear inconsistency in a party’s earlier and later positions before a court
as one of “several factors typically inform[ing] the decision whether to
apply [judicial estoppel] in a particular case”). This factual dispute
cannot be resolved at this stage of the proceedings.
Flynn-Kerper also argues that Wong should be barred from seeking
equitable relief because he has “unclean hands” and acted in “bad faith,”
characterizing Wong’s lawsuit as “nothing more than the ESOP’s
devious attempt to completely avoid its contractual obligation to pay for
stock that it purchased from [Kerper].” But whether Wong has “unclean
hands” or acted in bad faith turns on his intent in entering the NRA, as
well as his knowledge before doing so. See Fuddruckers, Inc. v. Doc’s
B.R. Others, Inc., 826 F.2d 837, 847 (9th Cir. 1987) (“To prevail [on a
defense of unclean hands], the defendant must demonstrate that the
plaintiff’s conduct is inequitable . . . .”).
14 WONG V. FLYNN-KERPER
But more fundamentally, the district court also erred in
its ERISA analysis. Flynn-Kerper cannot equitably estop
Wong, the ERISA Trustee, because doing so would
contradict the clear terms of the ESOP. “[F]ederal equitable
estoppel principles can, in certain circumstances, apply to
some claims arising under ERISA.” 8 Greany, 973 F.2d at
821 (emphasis added). However, in addition to satisfying
the traditional equitable estoppel requirements, a party
bringing a federal equitable estoppel claim in the ERISA
context must also allege: “(1) extraordinary circumstances;
(2) that the provisions of the plan at issue were ambiguous
such that reasonable persons could disagree as to their
meaning or effect; and (3) that the representations made
about the plan were an interpretation of the plan, not an
Finally, Flynn-Kerper argues that Wong’s claims are barred by the
statute of limitations, which she believes expired on April 28, 2018, at
the latest. But again, whether the statute of limitations has run on
Wong’s claim likely turns, at least in part, on when Wong acquired the
knowledge that Turner’s valuation was too low and whether Kerper
concealed information, which are both disputed facts. See 29 U.S.C.
§ 1113 (“No action may be commenced under this subchapter . . . after
. . . three years after the earliest date on which the plaintiff had actual
knowledge of the breach or violation; except that in the case of . . .
concealment, such action may be commenced not later than six years
after the date of discovery of such breach or violation.”).
8
In contrast, promissory estoppel never applies in the ERISA
context. See DeVoll v. Burdick Painting, Inc., 35 F.3d 408, 412 (9th Cir.
1994). Wong contends that the district court committed reversible legal
error by applying promissory estoppel, rather than equitable estoppel. It
is unclear from the district court’s decision whether it intended to apply
equitable estoppel but used the wrong terminology, or whether it
intended to apply the related doctrine of promissory estoppel, which
would have been an error. We assume, therefore, that the reference to
promissory estoppel was a mistake in terminology. But for the reasons
explained below, applying equitable estoppel in this context was
likewise error.
WONG V. FLYNN-KERPER 15
amendment or modification of the plan.” Gabriel, 773 F.3d
at 957 (quotation marks and citation omitted). “[A] party
cannot maintain a federal equitable estoppel claim against a
trust fund where recovery on the claim would contradict
written plan provisions.” Greany, 973 F.2d at 821.
The policy concerns motivating these requirements are
straightforward. “The actuarial soundness of pension funds
is, absent extraordinary circumstances, too important to
permit trustees to obligate the fund to pay pensions to
persons not entitled to them under the express terms of the
pension plan.” Gabriel, 773 F.3d at 956 (citation omitted).
“If the effective terms of the plan may be altered by
transactions between officers of the plan and individual plan
participants . . . , the rights and legitimate expectations of
third parties to retirement income may be prejudiced.”
Bloemker v. Laborers’ Loc. 265 Pension Fund, 605 F.3d
436, 440 (6th Cir. 2010) (citation omitted). Even if the use
of equitable principles might foster the fair treatment of one
litigant, we will not use those principles to modify the plan
and thereby unfairly treat the other plan participants. Cf.
Kramer v. Toyota Motor Corp., 705 F.3d 1122, 1133 (9th
Cir. 2013) (“The ‘linchpin’ for equitable estoppel is
fairness.”).
Here, allowing Flynn-Kerper to assert her equitable
estoppel claim against Wong would contradict the clear
terms of the ESOP. If Wong is correct that Turner
overvalued the Anaplex shares during his appraisal, applying
equitable estoppel would require Wong to pay Flynn-Kerper
greater than the fair market value of the shares on their date
of purchase. This would contravene Section 6(d) of the
ESOP, which requires that the shares be purchased at fair
market value on the date of purchase.
16 WONG V. FLYNN-KERPER
Flynn-Kerper contends that the “defense of estoppel is
never addressed by the body of case law Wong cites to.” She
tries to distinguish her use of equitable estoppel against
Wong by emphasizing that she is using it as “a shield to
protect against a claim asserted by the ESOP,” rather than
“an offensive tool to extract benefits from the plan.” While
our circuit has yet to decide whether a defense of equitable
estoppel is barred in an ERISA case brought by the ERISA
plan, the same reasons for prohibiting equitable estoppel
apply to both the affirmative use and the “defensive” use.
Regardless of whether it is a plaintiff or a defendant who
seeks to estop a trustee from enforcing an ESOP’s terms,
such estoppel would come at the expense of plan
participants, who have relied on the plan terms and who are
not responsible for the conduct that gave rise to the claimed
estoppel. 9 See Bloemker, 605 F.3d at 440.
Furthermore, were it relevant, the distinction Flynn-
Kerper draws between the use of equitable estoppel as an
“offensive tool” and equitable estoppel as a “shield” would
be inapplicable here. Wong is acting preemptively in
advance of Flynn-Kerper’s attempt to collect on the note. If
Wong had done nothing and refused to pay on the note,
Flynn-Kerper would have had to sue again to collect. Wong
would have interposed the ESOP terms as a defense, and
Flynn-Kerper would have argued that Wong was equitably
estopped. That Wong acted first does not change the
analysis. A party, whether a plaintiff or a defendant, cannot
9
“[E]stoppel requires reasonable or justifiable reliance by the party
asserting the estoppel.” Sprague v. Gen. Motors Corp., 133 F.3d 388,
404 (6th Cir. 1998) (en banc). A “party’s reliance can seldom, if ever,
be reasonable or justifiable if it is inconsistent with the clear and
unambiguous terms of plan documents available to or furnished to the
party.” Id.WONG V. FLYNN-KERPER 17
use equitable estoppel to contradict the express terms of an
ERISA plan in litigation with the plan. 10
In so holding, we join the Fourth Circuit, which bars the
defensive use of equitable estoppel when estopping the
plaintiff would contradict an ERISA plan’s express terms.
See Ret. Comm. of DAK Ams. LLC v. Brewer, 867 F.3d 471,
485 (4th Cir. 2017). And we defer to “ERISA’s focus on
what a plan provides,” consistent with Supreme Court
precedent. US Airways, Inc. v. McCutchen, 569 U.S. 88, 100
(2013) (declining to apply “equitable defenses alleging
unjust enrichment,” id. at 95, when doing so would
contradict “the plan’s clear terms,” id. at 98, and noting that
this holding “fits lock and key with ERISA’s focus on what
a plan provides,” id. at 100). Equitable estoppel has no place
10
Flynn-Kerper cites two cases for the proposition that ERISA plans
should not bar equitable claims by third parties. See The Meadows v.
Emps. Health Ins., 47 F.3d 1006, 1009 (9th Cir. 1995); Cath. Healthcare
West-Bay Area v. Seafarers Health & Benefits Plan, 321 F. App’x 563,
564 (9th Cir. 2008). But Flynn-Kerper is not a “third party” here. As
discussed above, her husband was the former trustee of the ESOP and
allegedly withheld information that would have materially affected the
valuation of his shares. “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 . . . , and between plan and trustee.”
Gen. Am. Life Ins. v. Castonguay, 984 F.2d 1518, 1521 (9th Cir. 1993)
(second emphasis added). Thus, ERISA supersedes laws and equitable
principles that would otherwise interfere with a trustee’s relationship to
the trust, given that “ERISA already regulates the trust-trustee
relationship.” Id. at 1522. That Flynn-Kerper is a successor in interest
to a prior trustee—her late husband—who is alleged to have improperly
benefited from an overvaluation of the shares, rather than the original
trustee, does not alter the conclusion that she is a non–third party whose
relationship to the ESOP is governed by the ESOP’s terms.
18 WONG V. FLYNN-KERPER
at any stage in this litigation, and the district court erred in
dismissing the case based on it. 11
REVERSED AND REMANDED. 12
11
Flynn-Kerper does not argue that Wong waived this issue by
failing to raise it until his motion for reconsideration. Flynn-Kerper thus
waived the defense of waiver. See Gallardo v. United States, 755 F.3d
860, 865 (9th Cir. 2014) (“Because the [appellee] failed to argue waiver
in its answering brief, its waiver argument is itself waived.”). Even were
that not the case, “we may exercise discretion to consider a waived issue
in certain cases, one such case being when the issue presented is a pure
question of law.” Self-Realization Fellowship Church v. Ananda Church
of Self-Realization, 59 F.3d 902, 912 (9th Cir. 1995). Because ERISA
preemption is a question of law, we may exercise our discretion to
consider the issue on appeal—especially given that the district court had
the opportunity to consider and did address the issue on its merits in the
order denying the motion for reconsideration. See PFS Distrib. Co. v.
Raduechel, 574 F.3d 580, 598 (8th Cir. 2009).
12
Wong also challenges the district court’s denial of his motion for
leave to amend. In light of our reversal of the dismissal of Wong’s
complaint, we need not decide whether the district court abused its
discretion by denying Wong’s motion. But we note that district courts
should apply Rule 15(a) liberally, particularly when no answer has been
filed, as was the case here. See Schreiber Distrib. Co. v. Serv-Well
Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986) (“[L]eave to amend
should be granted unless the court determines that the allegation of other
facts consistent with the challenged pleading could not possibly cure the
deficiency.”).