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Machlup v. Tiaa-Cref Indiv. & Inst. Serv.

Court of Appeals of Ohio, Eighth District

June 27, 2013

MARILYN MACHLUP PLAINTIFF-APPELLANT
v.
TIAA-CREF INDIV. & INST. SERV., ET AL. DEFENDANTS-APPELLEES

Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-782861

ATTORNEYS FOR APPELLANT Richard N. Selby, II Angela D. Krupar Dworken & Bernstein Co., L.P.A.

ATTORNEYS FOR APPELLEES Matthew D. Golish Vincent T. Norwillo Gonzales Saggio & Harlan, L.L.P.

BEFORE: Blackmon, J., Celebrezze, P.J., and McCormack, J.

JOURNAL ENTRY AND OPINION

PATRICIA ANN BLACKMON, JUDGE

{¶ 1} In this accelerated appeal, appellant Marilyn Machlup ("Machlup") appeals the trial court's dismissal of her complaint for lack of jurisdiction and assigns the following error for our review:

The trial court erred in determining that plaintiff/ appellant's complaint was preempted by the Federal Employee Retirement Income
Security Act and improperly dismissed plaintiff/appellant's complaint.

{¶2} Having reviewed the record and pertinent law, we affirm the trial court's decision. The apposite facts follow.

Facts

{¶3} Machlup is the widow of Professor Stefan Machlup, a former physics professor at Case Western Reserve University ("University"). Professor Machlup was employed at the University for 44 years and participated in the University's ERISA-governed Section 403(b) retirement plan. Retirement annuity contracts issued by TIAA-CREF (Teachers Insurance & Annuity Association of America and College Retirement Equities Fund) fund the plan. When he enrolled in the plan, he was issued deferred annuity contracts. The annuities provided for retirement and post-retirement death benefits on a tax deferred basis until the account holders attain the age where the Internal Revenue Service mandates they take the required distributions to fulfill tax law obligations.

{¶ 4} On August 24, 2002, Professor Machlup was 70 and one-half years old, thus he requested his retirement benefits be converted into minimum distribution income streams ("MDO") based on mandatory tax obligations. At this time, Professor Machlup also exercised his contractual option to provide death benefits for each contract, instructing that his wife receive one-half of any death benefits available upon his passing and that his two sons divide the other half. He restricted each beneficiary to lifetime monthly annuity payouts.

{¶5} Professor Machlup died on August 16, 2008. TIAA-CREF's Release and Indemnification letter proposed a valuation of Machlup's property as of August 16, 2008, of $1, 033, 313.18. The beneficiaries were provided applications to separate the accumulated death benefits into self-directed individual accounts and initiate their lifetime monthly annuity payouts as Professor Machlup had directed. Machlup accepted the distribution; however, her sons rejected the distribution arrangement, questioning both the value of the accumulated death benefits as well as their father's restriction that benefits be paid monthly for life.[1] Although Machlup had been receiving the annuity payments, on May 17, 2012, she filed a complaint in the common pleas court alleging conversion, breach of fiduciary duty, breach of duty for accounting, breach of duty to act in good faith and fair dealing, unjust enrichment, fraud in the inducement, and breach of contract. Underlying these claims are her contentions that TIAA-CREF failed to pay her the full value of her husband's pension and mismanaged the fund.

{ΒΆ 6} TIAA-CREF filed a motion to dismiss pursuant to Civ.R. 12(B)(1) and (6), claiming the action was preempted by ERISA. The trial court granted the ...


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