Labor Department Participation in ERISA Litigation and Significant Issues in Litigation

Compiled by the Plan Benefits Security Division Office of the Solicitor

Calendar Year 2021

Table of Contents

1. Employer Stock
2. Financing the Employer
   1. Collection of Plan Contributions and Loan Repayments
   2. Insurance Rebates
   3. Miscellaneous
3. Financing the Union
4. Prudence of Investments
5. Preemption
6. Participants' Rights and Remedies
7. Section 510
8. Participant Loans
9. MEWAs
10. Financial Institution and Service Provider Cases
11. Orphan Plans
12. Contempt and Subpoena Enforcement
13. Bankruptcy
14. Miscellaneous

Table of Cases

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A. Employer Stock

Secretary v. Heritage (D. Haw.)

On April 27, 2018, the Secretary filed a complaint against Nicholas L. Saakvitne, Brian Bowers, and Dexter Kubota, fiduciaries of the Bowers and Kubota Consulting ESOP, alleging that in 2012 they caused the plan to purchase 100% of the Bowers + Kubota Consulting Company’s stock for $40 million, which was far in excess of the stock’s fair market value at the time of the purchase.  On June 12, 2018, Bowers and Kubota filed a motion to dismiss.  On July 10, 2018, Saakvitne answered the complaint.  On September 5, 2018, the Company filed a motion to dismiss based on its claim that it is not a necessary party.  On September 28, 2018, the Department filed two opposition briefs responding to Defendants’ motions to dismiss the case.  On October 9, 2018, Saakvitne’s counsel filed a suggestion of death, stating that Saakvitne had died.  On October 12, 2018, the district judge recused himself from hearing the case, and on October 13, 2018, the new judge postponed the oral arguments for the pending motions to dismiss to January 2019.  On January 18, 2019, the court ruled in the Secretary’s favor, denying the two separate motions to dismiss.

An initial case scheduling hearing was held on January 29, 2019.  A scheduling order was issued the next day.  On February 1, 2019, the Secretary secured a stipulation from the widow of Nicolas Saakvitne, Sharon Heritage, in which she agreed to be substituted as a Defendant.  On May 7, 2019, the court issued an order declining to enter a proposed protective order that the Secretary opposed.  The court agreed with the Secretary that the definition of “confidential” contained in the proposed protective order was overly broad and inconsistent with FOIA.  The court also agreed with the Secretary that the proposed protective order conflicted with DOL’s FOIA regulations because it did not allow the Department to be the decision-maker on whether disclosure is appropriate under FOIA and because it provided that all documents produced would be deemed confidential for six weeks.  Defendants filed a motion to compel.  On November 22, 2019, the court granted, in part, Defendants’ motion to compel discovery responses.  The court affirmed the magistrate judge’s ruling on June 1, 2020.  

On May 7, 2020, the magistrate judge issued an order denying the Defendants’ request to compel the Secretary to produce unredacted documents, but also determined that the Secretary was not substantially justified in withholding certain documents and ordered the Secretary to pay Defendants’ attorneys’ fees and costs.  Both parties filed objections with the court.  On July 21, 2020, the court affirmed the magistrate judge’s denial of Defendants’ motion to compel, finding the Secretary properly asserted the applicable privileges.  The court also affirmed the magistrate judge’s decision to award attorneys’ fees and costs, but modified the award by reducing the amount of attorneys’ fees.

On July 2, 2020, the Secretary filed a motion to compel Defendants to produce the documents they had withheld or redacted.  On July 27, 2020, Defendants filed their opposition to the Secretary’s motion to compel.  The court ordered Defendants to produce the documents at issue for in camera review.  On September 28, 2020, the court granted the Secretary’s motion in part and denied it in part.  After reviewing the documents in camera, the court ordered Defendants to produce a number of documents that fell within the fiduciary exception to the attorney-client privilege.

On July 29, 2020, the Secretary filed a motion for entry of a protective order, requesting that the court preclude Defendants from seeking information and documents previously deemed by the court as outside the scope of discovery, protected from disclosure by the investigative files privilege, irrelevant, and not proportional to the needs of the case.  Defendants filed their opposition on August 3, 2020.  On August 31, 2020, the parties filed simultaneous letter briefs regarding the Secretary’s request for a second protective order to preclude Defendants from asking deposition questions that have been previously deemed by the court as outside the scope of discovery and that are the subject of the Secretary’s motion for protective order.

On September 16, 2020, the magistrate judge issued two orders that largely granted the Secretary’s motion for a protective order by significantly limiting Defendants’ broad written discovery requests and by prohibiting Defendants from asking deposition questions regarding certain topics.  Fact discovery was completed in November 2020. The parties completed expert discovery in February 2021. 

On January 15, 2021, the parties filed cross-motions for summary judgment.  The district court held oral argument on the motions for summary judgment on March 1, 2021. On March 12, 2021, the district court issued its decision on the parties’ respective motions.  The court granted in part the Secretary’s motion for partial summary judgment, which requested a ruling that the two selling shareholders, Brian Bowers and Dexter Kubota, were fiduciaries to the ESOP from the effective date of the ESOP.  The court ruled that they were fiduciaries to the ESOP after December 3, 2012, after they adopted the ESOP and appointed the independent fiduciary, but questions of fact precluded a finding regarding fiduciary status prior to December 3, 2012.  The court denied Defendants’ motion for summary judgment on all counts of the Secretary’s complaint.  The court found Defendants failed to substantiate their statute of limitations defense that the Secretary had actual knowledge of the violations alleged in this case or was willfully blind to the violations alleged in this case earlier than December of 2014.  The court also found Defendants acted as fiduciaries when they appointed Nicholas Saakvitne as the independent fiduciary and that whether this appointment was prudent is an issue for trial.  Finally, the court found that the Secretary could seek disgorgement of improper profits and that the Secretary had sufficiently alleged a claim for improper indemnification, except concerning an expired indemnification provision.

On February 3, 2021, Defendants filed a motion for contempt and sanctions against the Secretary, alleging the Department failed to produce documents ordered by the court.  On February 5, 2021, the magistrate judge denied this motion on procedural grounds, finding that the deadline to file discovery motions passed months ago and that Defendants were not diligent in filing their motion after obtaining information on November 24, 2020.  On February 18, 2021, Defendants filed motion requesting reconsideration of their motion for contempt and sanctions.  On February 23, 2021, the magistrate judge denied Defendants’ request for reconsideration. On March 9, 2021, the district court affirmed the magistrate judge’s denial of that reconsideration motion.   On April 2, 2021, the district court affirmed the magistrate’s decision that denied the merits of Defendants’ motion for contempt and sanctions, finding that Defendants were not diligent in seeking the discovery at issue and that the Secretary’s search was reasonable.  To end the discovery dispute, the court ordered the Secretary to either conduct a search previously negotiated with Defendants and produce responsive documents or submit a declaration that all responsive documents have been produced.

On February 19, 2021, a motion for entry of a consent judgment between the Secretary and the Saakvitne Defendants was filed.  Part of this proposed consent judgment barred the non‑settling Defendants from asserting contribution and indemnity claims against the settling Defendants.  Following a hearing on objections to the proposed consent order, the Saakvitne Defendants filed an amended bar order.  On April 29, 2021, the court entered the consent judgment and amended bar order, finding that the amended bar order does not prejudice any of the non-settling Defendants.  Under the consent judgment, the Saakvitne Defendants agreed to pay $1,800,000 from their fiduciary insurance policy, with $1,458,000 to be paid to the ESOP, $292,000 to be paid in § 502(l) penalties, and $50,000 to be set aside for legal costs, with any remainder after the payment of legal costs to go to the ESOP.

On May 17, 2021, the court held the final pretrial conference.  On the parties’ nine motions in limine, the court denied all the motions except three.  The court granted Defendants’ motion to exclude the transcript of administrative deposition of Nicholas Saakvitne.  The court also granted Defendants’ motion to exclude the use of transcripts from the administrative depositions of Defendant Bowers and two other witnesses.  The court also granted in part Defendants’ request to exclude certain testimony from another witness on his personal notes made prior to the Secretary’s filing of the complaint.  The court granted in part the Secretary’s motion to deviate from the court’s trial procedures, allowing the parties to call hostile witnesses for live testimony on direct examination, with a limit of 4 hours per side.

Trial was held from June 21 to June 25, 2021.  Following the trial, the parties submitted proposed findings of fact and conclusions of law.  On September 17, 2021, the court issued its Post-Trial Findings of Fact and Conclusions of Law and Order Directing Entry of Judgment in Favor of Remaining Defendants.  The court found the Secretary failed to establish that the company was worth less than $40 million on the day the ESOP purchased it and that the Secretary failed to establish that Defendants violated any provisions of ERISA.  The court also found that Defendants failed to establish any of the Secretary’s claims were barred by the statute of limitations.

On October 1, 2021, Defendants filed their bill of costs, seeking $78,341 in taxable costs from the Secretary.  The Secretary filed the objections to the bill of costs on October 8, 2021.  On November 18, 2021, the magistrate judge issued findings and recommendation to grant in part and deny in part Defendants’ bill of costs.  The magistrate judge also recommended the district court award $72,962 in taxable costs.  The Secretary filed objections to the magistrate’s findings and recommendation on taxable costs on December 2, 2021.  Defendants filed their response to the Secretary’s objections on December 13, 2021.

On October 1, 2021, Defendants also filed a motion for extension of time to file their motion for attorneys’ fees and non-taxable costs.  On October 4, 2021, the magistrate judge entered a briefing schedule limited only to Defendants’ eligibility to recover attorneys’ fees and nontaxable costs.  On October 19, 2021, Defendants filed their motion regarding their eligibility to recover attorneys’ fees and non-taxable costs under EAJA.  The Secretary filed a response on October 29, 2021.  On December 8, 2021, the magistrate judge issued his findings and recommendation to deny Defendants’ motion for attorneys’ fees and non-taxable costs.  Defendants filed objections to the magistrate’s findings and recommendation on December 13, 2021.  On January 12, 2022, the Secretary filed a response to Defendants’ objections.

On February 7, 2022, the district court ruled on the parties’ respective objections to the magistrate judge’s recommendation to award taxable costs and recommendation denying attorneys’ fees and non-taxable costs.  The district court adopted in part and modified in part the magistrate’s recommendation to award taxable costs, reducing the amount of taxable costs to $41,810.  The district court also adopted the magistrate’s recommendation to deny attorneys’ fees and nontaxable costs, finding that Defendants are not eligible to recover attorneys’ fees and non-taxable costs under section 2412(b) or (d).  Chicago Office

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Scalia v. Maine Oxy-Acetylene Supply Company, Daniel Guerin, Bryan Gentry and Carl Paine (D. Me.)

On September 15, 2020, the Secretary filed a complaint alleging that the fiduciaries of the terminated Maine Oxy, Inc. ESOP participated in a scheme to pay significantly less than fair market value for the Maine Oxy shares owned by the ESOP, thereby facilitating complete ownership of the company by new purchasers, including a corporate insider.  As a result, upon termination of the ESOP in the fall of 2013, the workers who built the company into a growing and prosperous enterprise received significantly less for the shares they owned than what was required under ERISA.  A class of former participants also filed suit.  The parties engaged in settlement discussions in early 2021.  The Secretary’s action and the private class action were subsequently consolidated for discovery purposes and discovery continues.  The parties have been ordered to be ready for trial by June 6, 2022.  Boston Office

Mohawk Hospital Equipment, Inc. Employee Stock Ownership Plan

The Secretary investigated this employee stock ownership plan and concluded that Mohawk Hospital Equipment, Inc., the plan sponsor, had paid excessive compensation to various officers at the expense of the plan and its participants and beneficiaries.  On November 23, 2021, the Secretary entered into a settlement agreement with respondents agreeing to pay the plan stock valued at $431,000 plus penalties, and injunctive relief that will empower the participants in running the company.  The Secretary has issued a press release regarding the settlement.  New York Office

Walsh v. Peterson

On October 29, 2021, the Secretary filed a complaint against Neil Brozen, as trustee of the RVNB, Inc. ESOP, as well as RVNB’s founders, Robert and Vasilia Peterson (along with their children’s trusts), and RVNB Board member Paul Generale, in connection with the 2017 sale of the company to Residential Logistics Solutions/Sterling Partners. Prior to that transaction, Brozen authorized the ESOP—which at the time owned 100% of RVNB’s stock—to sell its shares of company stock to the plan sponsor, RVNB, for $12.5M and cancellation of the internal ESOP loan.  As a result, RVNB’s founders, Robert and Vasilia Peterson (along with their children’s trusts) became 100% owners.  RVNB was then purchased by Residential Logistics Solutions/Sterling Partners for $252 million.  The complaint contends that these transactions obtained less than fair market value for the ESOP by $31.5M to $45.5M and allowed the Petersons to reap the benefits of the sale to Residential Logistics Solutions/Sterling Partners.  The Secretary alleged that, in connection with the ESOP’s sale of its assets to the plan sponsor, RVNB Holdings, Inc., for less than adequate consideration, Brozen, the Petersons, and Generale breached their fiduciary duties of prudence and loyalty, committed a prohibited transaction, and that the Petersons and the Peterson trusts were knowing participants in a prohibited transaction.  Dallas Office and Plan Benefits Security Division

Scalia v. Professional Fiduciary Services, Inc. (S.D.N.Y.)

On August 22, 2019, the Secretary filed a complaint against the trustee of the Contractors Register, Inc. ESOP, alleging that the trustee caused the ESOP to purchase employer stock for millions of dollars in excess of the stock’s fair market value.  The Secretary alleges that Professional Fiduciary Services LLC (“PFS”), as the trustee charged with determining the fair market value of the stock, ignored obvious errors in the valuation report and failed to determine whether the financial information provided by the plan sponsor was reliable.  PFS filed its answer on November 5, 2019. 

On March 9, 2020, the court held an initial conference and entered a scheduling order.  On November 27, 2020, the parties sought a two-week extension of fact discovery, which the court granted on November 30, 2020.  The court held a settlement conference on December 4, 2020.  

On January 12, 2021, the Department filed, and the court entered, a consent judgment providing that PFS would pay $750,000, plus additional amounts if PFS clears certain targets over the payment period, and that PFS and its owner would not initiate ESOPs going forward and would not seek indemnification from plan clients. New York Office

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Scalia v. Reliance Trust Company (D. Ariz.)

This case involves the purchase by the RVR Inc. ESOP of 100% of the shares of RVR, Inc., in May 2014 (the “Transaction”).  On May 16, 2019, the Secretary filed an ERISA enforcement suit against Reliance Trust Company (“Reliance”) (the ESOP’s trustee in the Transaction) and the sellers of the RVR stock – RVR’s principal officers, sole shareholders, plan fiduciaries, Randall Smalley (“Smalley”) (through three trusts (the “Smalley Trusts”)), Robert Smalley, Jr. (“Smalley Jr”), and Eric Bensen (“Bensen”) (collectively “Sellers”).  The Secretary also named the RVR Inc. ESOP Plan (“Plan”) and RVR as Rule 19 Defendants.  The Secretary alleged that Reliance caused the Plan to purchase RVR’s stock from the Sellers for more than fair market value, paying $105 million for stock that was worth tens of millions of dollars less, and that Reliance violated its fiduciary duties of prudence, loyalty, and adherence to the terms of the Plan and engaged in a transaction prohibited by ERISA by causing the Plan to purchase the RVR stock in the transaction.

The Secretary alleged, among other things, that Reliance: failed to hire a truly independent appraiser, given the prior business dealings and referral relationships between and among Reliance, the appraiser, and the Sellers’ representative; failed to provide its appraiser with complete information necessary to produce a reliable valuation report; failed to adequately scrutinize and critically question the appraiser’s valuation reports; and did not negotiate in good faith over the stock purchase price and other terms of the Transaction.  The Secretary also alleged that, in allowing Reliance to enter into a transaction prohibited by ERISA, Smalley, Smalley Jr, and Bensen violated their duties of prudence, loyalty, and adherence to plan documents, and that Smalley, Smalley Jr., and Bensen failed in their duty to monitor Reliance and consequently have co‑fiduciary liability for Reliance’s fiduciary breaches.  The Secretary further alleged that the Sellers knowingly participated in Reliance’s ERISA violations.

The Sellers and RVR filed a motion to dismiss on July 29, 2019, arguing generally that the Secretary’s complaint failed to allege any facts to support what they described as conclusory allegations.  The Secretary filed an opposition to the motion to dismiss on August 12, 2019, arguing, among other things, that the motion ignored controlling Ninth Circuit authority, misstated the law on the fiduciary duty to monitor, and glossed over the complaint’s detailed factual allegations that sufficiently alleged the ERISA violations; that RVR is a party necessary to ensure that the Secretary may obtain complete relief for parties harmed by ERISA violations; and that all parties are able to represent their interests with respect to this action.  The Sellers and RVR filed their reply in support of their motion on August 19, 2019.  Reliance filed an answer to the complaint on July 30, 2019. 

The court denied the Sellers’ and RVR’s motion to dismiss on February 18, 2020.  Mandatory Initial Discovery Responses were served on Thursday, April 2, 2020.  The Rule 26 conference was held April 7, 2020.  A Rule 26(f) Report and Proposed Case Management Plan was filed on April 30, 2020.  The court held a telephonic Rule 16 Scheduling Conference on May 7, 2020 and issued a Scheduling Order that extends into April 2022.  The court also granted the parties’ motion to bifurcate the trial into separate liability and remedies phases, with corresponding discovery: if the Secretary prevails on the merits of any claim, there will be a discovery period following the court’s merits‑based order, during which the Secretary may conduct discovery related to Defendants’ assets, including tracing funds in Defendants’ accounts.  The court also entered the protective order agreed to by the parties.  Fact discovery ended July 17, 2021, and expert discovery began.  No trial date has been set.  Plan Benefits Security Division

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Secretary v. Reliance Trust Company (D. Minn.)

On October 4, 2017, the Secretary filed a complaint against Reliance Trust Company and Steven Carlsen, Paul Lillyblad, and Kelli Watson, Board members of Kurt Manufacturing Company, Inc. and fiduciaries of the company’s ESOP.  Reliance became the trustee of the ESOP in connection with the ESOP’s October 5, 2011, $39 million purchase of all outstanding shares from Kurt’s sole shareholder.  The complaint alleged that Reliance caused the ESOP to pay more than adequate consideration for company stock and that Carlsen, Lillyblad, and Watson failed to monitor Reliance’s determination to have the ESOP purchase employer securities for more than adequate consideration.  On December 1, 2017, the court granted Defendant’s request for an extension of time to file an answer or otherwise plead until February 5, 2018.  

In response to stipulations filed by the parties, the court extended to July 31, 2018, Defendants’ time to respond to the complaints.  On July 10, 2018, the parties participated in a mediation, which did not result in a resolution of the case.  On July 31, 2018, Carlsen, Lillyblad, and Watson filed their answer to the complaint.  On August 17, 2018, the Secretary filed a Motion to Strike Affirmative Defenses of Defendants Carlsen, Lillyblad, and Watson.  On August 20, 2018, the Secretary filed an amended complaint.  On September 4, 2018, Reliance filed a Motion Pursuant to Rule 12(b)(7), or Alternatively, to Join Party under Rule 21.  On September 4, 2018, Carlsen, Lillyblad, and Watson filed an answer to the Secretary’s amended complaint.  On September 11, 2018, the Secretary filed a Memorandum in Opposition to Defendant Reliance’s Motion Pursuant to Rule 12(B)(7), or Alternatively, to Join Party under Rule 21.  On September 26, 2018, the parties filed their Rule 26(f) Report.  On October 3, 2018, the parties attended a Pretrial Conference and Hearings on Defendant Reliance’s Motion Pursuant to Rule 12(B)(7), or Alternatively, to Join Party under Rule 21 and Secretary’s Motion to Strike Affirmative Defenses of Defendants Carlsen, Lillyblad, and Watson.  At the hearing, the court denied the Secretary’s Motion to Strike Affirmative Defenses but required Carlsen, Lillyblad, and Watson to amend their answer and make it more specific.  On October 10, 2018, Reliance filed a Supplement Memorandum to its Motion Pursuant to Rule 12(B)(7), or Alternatively, to Join Party under Rule 21.  On October 11, 2018, Carlsen, Lillyblad, and Watson filed an amended answer to the Secretary’s amended complaint.  On October 22, 2018, the Secretary filed its Reply to Reliance’s Motion Pursuant to Rule 12(B)(7), or alternatively, to Join Party under Rule 21.  On October 29, 2018, the court issued an Amended Pretrial Scheduling Order.  On November 15, 2018, the parties exchanged their Initial Disclosures.  On December 18, 2018, the parties filed a Joint Proposed ESI Protocol setting forth each parties’ proposed language.  On December 21, 2018, the court held a telephonic hearing on the parties’ disputed ESI Protocol.  On December 26, 2018, the court issued an ESI Protocol. 

On January 7, 2019, the court denied Reliance’s Motion to Dismiss Pursuant to Rule 12(b)(7), or alternatively, to Join Party under Rule 21.  On January 28, 2019, Reliance filed its answer and affirmative defenses to the Secretary’s amended complaint.  On February 5, 2019, Reliance filed a third-party complaint against Gretchen Kuban Rode, who is a member of Kurt’s board of directors and also is the selling shareholder’s daughter.  On March 13, 2019, Carlsen, Lillyblad, and Watson also filed a third-party complaint against Gretchen Kuban Rode.  On May 7, 2019, Gretchen Kuban Rode filed a motion to dismiss both third-party complaints.  Also on May 7, 2019, Carlsen, Lillyblad, and Watson filed a Motion for Judgment on the Pleadings.  On May 28, 2019, the Secretary filed an opposition to the Motion for Judgment on the Pleadings.  On August 9, 2019, the court denied the Motion for Judgment on the Pleadings and granted Rode’s motion to dismiss both third-party complaints. 

On August 19, 2019, the parties filed a Stipulation to Modify the Corrected Pretrial Scheduling Order, which was granted in part on August 20, 2019, and which extended fact discovery to December 31, 2019.  The parties engaged in written discovery, and the Secretary conducted approximately 8 depositions from September through December, 2019.  The Secretary also brought four discovery disputes to the magistrate judge for informal dispute resolution.  On December 16, 2019, the Secretary filed a Motion to Compel Defendant Directors to Produce Documents and a Privilege Index and to Compel Compliance with Subpoena for Production of Documents Directed to Third−Party Thomas M. Hughes, LTD.  

On May 5, 2020, the court issued an order denying most of the relief sought in the Secretary’s Motion to Compel Defendant Directors to Produce Documents and a Privilege Index and to Compel Compliance with Subpoena for Production of Documents Directed to Third Party Thomas M. Hughes, Ltd.  The parties conducted discovery of the valuation and prudence experts, including depositions, May through July 2020.  The parties attended a settlement conference with the magistrate judge on May 20, 2020; no settlement was reached.

On July 27, 2020, the Secretary filed a motion for partial summary judgment against Reliance Trust Company and the three individual board-member Defendants – Steven Carlsen, Paul Lillyblad, and Kelli Watson.  Reliance filed a motion for partial summary judgment, and the individual Defendants filed a motion for summary judgment on all issues on the same date.  The Secretary filed responses to Reliance Trust’s and the individual Defendants’ motions for summary judgment on August 26, 2020 and filed replies to their responses to the Secretary’s motion on September 9, 2020. 

On July 27, 2020, the Defendants filed a Joint Motion to Exclude Expert Testimony of Dr. Mark Johnson, the Secretary’s prudence expert.  The Secretary filed a response on August 17, 2020 and the Defendants filed a reply on September 1, 2020.  On August 5, 2020, the Secretary filed a Motion to Exclude Expert Testimony of Corey Rosen.  The individual Defendants filed a response on August 26, 2020, and the Secretary filed a reply on September 9, 2020.  On September 15, 2020, the court held oral argument on the summary judgment motions and the motions to exclude experts.  Decisions on all of these motions are still pending.  A trial date has not been set. 

On March 2, 2021, the court denied Defendants’ joint motion to exclude Mark Johnson, the Secretary’s prudence expert, finding him qualified to opine on whether the Defendants met their fiduciary obligations.  Reliance’s motion for partial summary judgment on the Secretary’s prudence claim was denied because of conflicting expert evidence, although the Department did not rely on the prudence expert and argued expert testimony was unnecessary to establish Reliance’s breaches of fiduciary duty.  The court also denied the motion for summary judgment on all issues filed by the three individual Defendant directors.  

While the court denied the Secretary’s motion for partial summary judgment against Reliance and the directors, it found the transaction was an ERISA prohibited transaction and ruled that factual disputes about whether the exemption applied would have to be determined at trial.  The court denied the Secretary’s duty of loyalty claim against Reliance because of disputed issues of material fact.  The court also denied the Secretary’s prohibited transaction claim against Reliance because the issues raised require a fact-intensive analysis inappropriate at the summary judgment stage.

The court denied the Secretary’s duty of loyalty and prudence claims against the directors, although it did find the directors were fiduciaries at all relevant times and had a duty to monitor Reliance after they resigned as ESOP trustees.  The court also denied the Secretary’s co-fiduciary and knowing participation claims against the directors.  Finally, the court denied the Secretary’s Daubert motion to exclude the Defendant directors’ prudence expert, noting that the Secretary raised “valid concerns” that go to the weight, not admissibility, of Corey Rosen’s opinions on prudence for the directors.

On June 2, 2021, the Secretary requested that the court enter an order allowing the Secretary to communicate with any former employees, including former managers, supervisors, and/or vice presidents, of Kurt regarding non-privileged information in preparation for the trial scheduled on September 27, 2021.  On June 9, 2021, Reliance and the directors filed responses objecting to the Secretary’s motion.  

On July 1, 2021, the parties reached a $12.4 million settlement during a settlement conference before the magistrate judge.  Reliance agreed to pay $9.25 million in cash and section 502(l) penalties.  Kurt’s three individual directors agreed to pay $1.2 million in cash and section 502(l) penalties; they also agreed to forego $921,234 million in severance payments and $254,299 in stock appreciation rights.  The directors, who will be enjoined from acting as fiduciaries to the ESOP, also agreed to freeze company contributions to their executive retirement plans, and they will no longer be able to vote on their own compensation.  The directors also agreed to add a second independent director to Kurt’s board of directors.  The directors also agreed they will direct the current trustee to replace Chartwell, which represented the seller in the 2011 transaction, with a new valuation firm.  On December 2, 2021, the court granted the parties’ stipulated request to submit the consent order and judgment by January 3, 2022.  Chicago Office

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Perez v. TPP Holdings Inc. (N.D. Ga. and 11th Cir.)

On December 30, 2014, the Secretary filed a complaint against TPP Holdings Inc. and TPP’s owner and chief executive officer Robert Nicholas Preston, alleging that the ESOP fiduciaries: (1) authorized the ESOP to purchase company stock in 2006 and 2008 for more than adequate consideration; (2) failed to act solely in the participants’ interests; (3) failed to follow ESOP documents; and (4) engaged in self-dealing.  The fiduciaries also allegedly permitted improper co-mingling of ESOP and corporate funds.  The complaint further alleged that the ESOP did not exercise its voting rights in company decision-making, did not release the proper number of shares, and did not make the proper distributions to participants.  On May 15, 2015, Defendants filed a motion to dismiss, motion to stay pre-answer deadlines, and motion to extend time for Defendants to file a responsive pleading.  On June 1, 2015, the Secretary filed an opposition to Defendants’ motion to dismiss.  On June 15, 2015, the Defendants filed a reply.  The Defendants’ motion to dismiss was predicated on arguments concerning enforceability of tolling agreements as to ERISA’s six-year time limit.  The court granted the Defendants’ motion, finding that ERISA’s six-year time limit is a statute of repose and cannot be waived or contractually tolled. The Secretary, citing Eleventh Circuit and Supreme Court precedent, filed a motion for reconsideration.  On May 2, 2016, the court denied the Secretary’s reconsideration motion, but the court invited the Secretary to file a motion for certification for interlocutory appeal.  The Secretary filed the motion on September 9, 2016.  The Defendants filed a response.  The district court granted the Secretary’s motion and certified the dismissal order for interlocutory review on November 22, 2016. 

The Secretary filed a petition for interlocutory review with the Eleventh Circuit on December 2, 2016, arguing that the ERISA six-year limitation is subject to waiver.  Defendants filed a response on December 12, 2016.  On February 24, 2017, the Eleventh Circuit granted the petition for interlocutory appeal.  The Secretary filed an opening brief on April 5, 2017.  Defendants filed a response on May 5, 2017.  The Secretary filed a reply brief on May 19, 2017.  Oral argument was held on August 24, 2017.  On October 12, 2017, the Eleventh Circuit issued a favorable decision, reversing the district court and agreeing with the Secretary that ERISA’s six-year time limit is waivable.  Defendants filed a petition for panel rehearing on November 22, 2017, which was denied on December 13, 2017.  The case was remanded to the district court after the Eleventh Circuit’s decision and the denial of certiorari by the Supreme Court. 

The district court referred the case to mediation by a magistrate judge.  The Secretary and Defendants participated in mediation on November 6, 2018, but did not reach an agreement.  The parties held their 26(f) scheduling conference on November 28, 2018, and submitted their joint report and proposed discovery plan to the district court on December 12, 2018.  The Department also served initial disclosures on December 12, 2018, and first discovery requests to Defendants on December 13, 2018.  Defendants served their initial disclosures on December 21, 2018.  On December 26, 2018, in response to an emergency motion filed by the U.S. Attorney requesting a stay of all civil cases in which a federal agency is a party in light of the lapse in appropriations for the Department of Justice, the district court stayed the case.  

Discovery continued throughout 2019.  The parties exchanged tens of thousands of documents in discovery, and they exchanged expert reports regarding the valuation of the Company at the time of the ESOP transactions in 2006 and 2008.  The parties took depositions of fact in February and March 2020.  Discovery was originally scheduled to close on March 23, 2020.  In mid-March, in response to the exigent circumstances created by the COVID-19 pandemic, the parties postponed the remaining depositions and requested an extension of discovery.

The parties agreed to mediate this matter on August 14, 2020.  The mediation was unsuccessful.    The parties concluded fact witness depositions and completed expert witness depositions in February 2021, and, as of December 31, 2021, trial was scheduled for February 22, 2022.    Atlanta Office and, on appeal, Plan Benefits Security Division

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Secretary v. Vinoskey (W.D. Va. and 4th Cir.)

On October 14, 2016, the Secretary filed a complaint against Adam Vinoskey, who was the selling shareholder in an ESOP stock purchase that occurred in December 2010, Evolve Bank and Trust (“Evolve”), which was the independent fiduciary hired to approve the transaction on behalf of the Sentry Equipment Erectors, Inc. ESOP, and its senior trust officer, Michael New, who approved the transaction price and the structure of the transaction.  The complaint alleged that the ESOP paid $20.7 million for the company’s stock that was worth only about $13 million, that the debt taken on to fund this transaction lowered the value of the ESOP stock that had already been allocated to participant accounts from a stock purchase that had occurred several years earlier, and that the fiduciaries took no action to protect existing participants from this drop in the value of the shares that they owned before the 2010 transaction.  The total value of both claims is $13.34 million.  On January 17, 2017, following Defendants’ motion to dismiss for failure to state a claim, the Secretary filed an amended complaint.  On February 14, 2017, Michael New filed a motion to dismiss on the grounds that he acted only as an “employee” of the named fiduciary and therefore, an ERISA claim could not be asserted against him.  On May 2, 2017, following briefing by the Secretary, the court denied Michael New’s motion to dismiss, concluding that the Secretary had sufficiently pled facts supporting that New exercised discretionary authority or control over the management of the ESOP assets such that he could be considered a fiduciary.  On October 26, 2017, the Secretary filed a motion for summary judgment against all Defendants.  On December 1, 2017, the Secretary filed responses to the summary judgment motions of Sentry, Evolve, and Michael New.

On April 17, 2018, the court denied Defendants’ motions for summary judgment on the counts alleging that the Defendants engaged in a prohibited transaction and that related to the named fiduciaries breached their fiduciary duties to the ESOP.  The court let stand the count Vinoskey’s and the Vinoskey Trust’s knowing participation in the fiduciaries’ breaches.  The court granted New’s motion for summary judgment concluding that he was not a functional fiduciary in this transaction.  In its decision, the court rejected the Defendants’ position that their decision about fairness of the ESOP transaction should be reviewed under an abuse of discretion standard.  In rejecting this position, the court held that it “will review de novo whether Evolve violated its fiduciary obligations to the ESOP, obligations that are “the highest known to the law.”  The five-day trial of this matter took place in Lynchburg, Virginia from October 22 to October 26, 2018.    

On August 2, 2019, in a 100‑page decision, the court entered judgment in favor of the Secretary and ordered that Defendants Evolve, Vinoskey, and the Vinoskey Trust restore $6,502,500 to the ESOP.  The court determined that Evolve acted unreasonably when it repeatedly failed to question the methodology and factual assumptions used to arrive at the $406 per share valuation by their appraiser, Brian Napier of Capital Analysts, Inc.  The court stated that “Evolve’s failure to notice, or ask any questions whatsoever about, these three pro-seller discretionary choices is further evidence of Evolve’s lackluster due diligence and unreasonable reliance on [the] appraisal.”  In arriving at its decision, the court credited the testimony of the Secretary’s expert.  The court concluded that the seller, Vinoskey, was jointly and severally liable as a fiduciary knowing participant in the prohibited transaction because Vinoskey knew that his shares were worth less than $406 per share.  The court specifically rejected Vinoskey’s argument that he could legally accept an inflated price because he had recused himself from Evolve’s determination of that price.

On February 27, 2020, Vinoskey and Evolve filed a notice of appeal.  The Secretary subsequently settled the Department’s claims against Evolve.  On September 25, 2020, Vinoskey filed his opening brief with the Fourth Circuit.  The Secretary filed a response brief on November 17, 2020. 

On December 6, 2021, the Fourth Circuit issued a decision affirming in part and reversing in part.  The Fourth Circuit first affirmed the district court’s conclusion that Vinoskey was liable for being a knowing participant in Evolve’s ERISA violations.  The Fourth Circuit held that in order to be liable as a knowing participant, Vinoskey needed knowledge of “the circumstances that rendered the transaction unlawful,” and it rejected Vinoskey’s argument that he needed knowledge of legal conclusions.  As the Fourth Circuit explained, “[t]he circumstances that made the transaction here unlawful are straightforward - Evolve, as a fiduciary, caused the ESOP to purchase Sentry stock from [Vinoskey] for more than fair market value.”  Vinoskey disputed that he knew the price was too high.  While the Fourth Circuit acknowledged record evidence pointing in both directions as to whether Vinoskey knew the ESOP was overpaying for stock, it ultimately deferred to the district court’s finding that he knew the price was too high under the “clear error” standard of review.  Having determined that Vinoskey was liable as a knowing participant for the ESOP’s overpayment, the Fourth Circuit declined to address his fiduciary liability.

Fourth Circuit then turned to damages, and held that the district court erred, as a matter of law, in holding that Vinoskey could not offset the $6.5 million in ESOP losses with the $4.6 million in ESOP debt that he forgave several years after the ESOP transaction closed. The Fourth Circuit distinguished its earlier decision in Brundle v. Wilmington Tr., N.A., 919 F.3d 763 (4th Cir. 2019), in which it had declined to offset ESOP losses, because in Brundle “the Defendant’s debt cancellation was solely to make a separate stock sale go through.”  In this case, however, “no such separate sale was consummated, nor was debt cancellation ever a bargaining chip to facilitate a different transaction. Vinoskey simply wrote off the ESOP debt.”  The Fourth Circuit likewise distinguished cases from the Second Circuit and the Fifth Circuit based on the facts surrounding the forgiveness in those cases.  The Fourth Circuit rejected the Secretary’s position that, under Brundle, debt cancellation was unavailable because it was “wholly unrelated” to the ESOP transaction.  In the Fourth Circuit’s view, the debt forgiveness benefitted the ESOP both as the 100% owner of Sentry and “by reducing its debt by over $4 million.  Thus, Vinoskey’s debt write-off is better understood as reducing the final sale price at a later point in time given that the ESOP fully owned Sentry.”  According to the Fourth Circuit, “not offsetting the damages in this case would result in a windfall for the ESOP that is prohibited by ERISA and the cases interpreting it.”  Applying the $4.6 million in debt forgiveness, the Fourth Circuit concluded that Vinoskey was jointly and severally liable for $1.8 million in losses rather than $6.5 million. Philadelphia Office and, on appeal, Plan Benefits Security Division

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B. Financing the Employer

1. Collection of Plan Contributions and Loan Repayments

Secretary v. Anthony Lawrence and VOR Technology, LLC (D. MD.)

On November 4, 2021, the Secretary filed a complaint against Anthony Lawrence and his company, VOR Technology, LLC, alleging that the Defendants failed to remit, to the company’s respective benefit plans, the company’s profit-sharing contributions and employee 401(k) plan contributions totaling at least $47,226 for June 29, 2018 through December 7, 2018. The Secretary alleges that interest owed to the plan on the unremitted employee contributions is $7,452 as of July 31, 2021. The Secretary also alleges that Defendants failed to distribute terminated employees’ vested account balances of $1,000 or less as required by the plan and failed to have a fidelity bond. As of December 31, 2021, Defendants have not responded to the Secretary’s requests to waive service. Philadelphia Office

Scalia v. Aprinta Group, LLC (M.D. Ala.)

On July 17, 2020, the Secretary filed a complaint against Aprinta Group, LLC ("Aprinta") and William Austin Dolan, II ("Dolan"). The complaint alleged that Aprinta and Dolan were fiduciaries of Aprinta’s Health Plan and Aprinta’s Disability Plan. The complaint further alleged that Aprinta and Dolan breached their ERISA fiduciary duties when they withheld at least $30,418 in employee health plan contributions and $4,776 in employee disability plan contributions, but then failed to remit those contributions to the respective plans. The complaint asks the court to: (1) permanently enjoin the Defendants from serving as a fiduciary, administrator, officer, trustee, custodian, agent, employee, or representative having control over the assets of any ERISA-covered plan; (2) enjoin and restrain the Defendants from engaging in any further action in violation of Title I of ERISA; (3) appoint a successor fiduciary at the Defendants’ expense to administer the plans; and (4) order the Defendants to restore all losses, including lost opportunity costs, to the plans.

On September 10, 2021, on the Secretary’s motion, the court entered a default judgment against the Defendants. The default judgment held Defendants liable for losses suffered by the plans due to their failure to remit contributions to the plans, permanently enjoined and restrained Defendants from violating ERISA, and permanently enjoined Dolan and Aprinta from acting as fiduciaries to any ERISA-covered plan. The default judgment ordered the Defendants, jointly and severally, to make $30,418 in restitution to the Health Plan and $4,776 in restitution to the Disability Plan. Post-judgment interest was assessed against Defendants on any remaining unpaid balance from the date of judgment until both amounts are paid in full. The judgment also authorizes the Secretary to move for the appointment of an independent fiduciary at Dolan and Aprinta’s expense. See also Scalia v. Aprinta Group, LLC, Section K. Orphan Plans. Atlanta Office

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Acosta v. Avedisian and J&T Enterprises (D. Mass.); Acosta v. Suren Der Avedisian (In re Suren Der Avedisian) (Bankr. D. Mass.)

On December 18, 2017, the Secretary filed a complaint against Suren Der Avedesian and J&T Enterprises Inc. d/b/a Omni Foods Supermarkets, fiduciaries of the company’s health plan, alleging that they failed to make full employer contributions to the plan while Avedesian withdrew $132,257 from the company’s account. Because of this failure, two insurance companies could not reimburse claims. The fiduciaries also failed to inform the plan participants of the inability to reimburse claims. The participants lost $84,938. On December 6, 2016, Avedesian filed for Chapter 13 bankruptcy. Upon discovery of the bankruptcy, the Secretary filed an adversary complaint in the bankruptcy court on December 4, 2017. The Secretary also sought to withdraw the referral of the adversary complaint and to have both cases heard in district court. The district court stayed the case and did not withdraw either the proof of claim or the non-dischargeability case from bankruptcy court. A trial on those issues was set for early 2019 in bankruptcy court. On March 29, 2019, the bankruptcy court approved a stipulation filed by the parties addressing the payment of all outstanding claims through bankruptcy and non bankruptcy funds. The Chapter 13 trustee has paid the participants the bankruptcy funds required under the stipulation, and the Secretary is attempting to confirm whether the remaining requirements of the stipulation have been met. Boston Office

Scalia v. Belfer Group, Inc. (D.N.J.)

On May 31, 2020, the Secretary filed a complaint alleging that, since 2017, the Belfer Group, Inc., Bruce D. Belfer, Elaine Belfer Raucher, and Myles Merling had failed to forward employee contributions to the Belfer Group, Inc., Employee Profit Sharing Plan. On November 18, 2020, the Secretary requested a certificate of default, which was entered later that day. Defendants resolved the issues. The Department’s May 7, 2021 notice of voluntary dismissal was entered on May 11, 2021. New York Office

Secretary v. Bicallis, LLC (D. Md.)

On July 13, 2021, the Secretary filed a complaint against Bicallis, LLC and Bryan Hill, alleging they failed to remit to the Bicallis, LLC 401(k) Plan at least $51,217 in employee contributions and failed to collect for that same plan at least $25,329 in employer matching contributions and $46,251 in safe harbor contributions from October 20, 2017, through December 30, 2019. After the clerk entered default against them, Defendants filed an answer on November 4, 2021, in which they primarily contested liability for the employer contributions. Philadelphia Office

Acosta v. Bridgeport Health Care Center, Inc. and Chaim Stern (D. Conn.)

On February 1, 2018, the Secretary filed a complaint against Bridgeport Health Care Center, Inc. (“BHCC”) and Chaim Stern, fiduciaries of the company’s self-funded Health Plan. The complaint alleged that the fiduciaries failed to fund health reimbursement accounts from which third-party administrators paid health claims. As a result, checks were returned for insufficient funds and health claims remained unpaid. The fiduciaries failed to inform participants and beneficiaries that their claims may not be paid. Rather, the fiduciaries misrepresented to participants that they had health care coverage by continuing to withhold employee contributions to the Health Plan from employee paychecks and reassuring participants that their claims would be paid.

On April 18, 2018, BHCC filed for Chapter 11 bankruptcy. Shortly thereafter, various creditors, including the Secretary, moved to appoint a Chapter 11 trustee. After several days of hearing, the bankruptcy court granted the motion to appoint a Chapter 11 trustee. The Chapter 11 trustee secured fully-insured health coverage for employees.

As a result of several mediation sessions with the district court, the parties agreed to a consent judgment and order that was entered on July 13, 2020. Under the consent judgment and order, the fiduciaries paid $2,526,392 towards resolving the unpaid health claims and appointing a claims administrator.

On March 22, 2021, the district court entered an order under the All Writs Act prohibiting health care providers (or their collection agents) from direct billing and/or commencing or continuing any actions against participants and beneficiaries of the Health Plan while the claims administrator works to resolve unpaid health claims. The parties continue to implement the provisions of the consent judgment and order. See also In re Bridgeport Health Care Center, Inc., Section M. Bankruptcy. Boston Office

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Stewart v. Bross (E.D. Mo.)

On July 24, 2020, the Secretary filed a complaint against Chester Bross, Michael L. Bross, Mark K. Bross, Jeffrey W. Bross, the Chester Bross Construction Company and the Chester Bross Construction Company 401(k) Plan for failing to forward employee contributions and loan repayments to the plan and for untimely forwarding employee contributions and loan repayments to the plan.  The complaint alleged that from at least January 1, 2013 to at least July 26, 2019, the company failed to remit at least $26,247 in employee deferrals and loan repayments to the plan. The complaint further alleged that the company failed to remit $1,999,351 in employee deferrals and loan repayments to the plan in a timely manner. On March 24, 2021, the court signed a consent order and judgment ordering Defendants to restore $14,277 owed to the plan, pay $2,855 in section 502(l) penalties and enjoining them from violating ERISA. Kansas City Office

Walsh v. Chicago Metropolitan Obstetricians and Gynecologists, Ltd. (N.D. Ill.)

On March 30, 2021, the Secretary filed a complaint alleging Chicago Metropolitan Obstetricians and Gynecologists, Ltd., and Dr. Hayes, fiduciaries of the Chicago Metropolitan Obstetricians and Gynecologists, Ltd. 401(k) Plan, violated ERISA when they failed to remit and timely remit employee contributions to the plan and failed to collect employer contribution owed to the plan. The plan’s total loss alleged from these violations, including lost opportunity costs, is over $140,000. The complaint sought injunctive relief enjoining these fiduciaries from serving as an ERISA fiduciary in the future, appointing an independent fiduciary, and requiring that the fiduciaries correct the prohibited transactions by restoring delinquent contributions (with interest) to the plan. Chicago Office

Walsh v. Comprehensive Cancer Services Oncology, P.C. (W.D.N.Y.)

On June 6, 2021, the Secretary filed a complaint alleging that, in 2018, Defendants Comprehensive Cancer Services Oncology, P.C., CCS Medical, PLLC, Won Sam Yi, and CCS Oncology, P.C., withheld contributions from employee paychecks but failed to forward them to the CCS Oncology, P.C. 401(k) Plan. On December 1, 2021, the Secretary filed a consent judgment providing that Defendants would repay $35,000. The court entered the judgment on December 20, 2021. New York Office

Scalia v. Data Access/Data Patch, Inc. (D.N.J.)

On February 27, 2020, the Secretary filed a complaint against Data Access/Data Patch, Inc., and Lee W. Tardivel, alleging that, since 2017, they had failed to remit employee contributions to and failed to administer the Data Access/Data Patch, Inc. 401(k) Profit Sharing Plan. On November 13, 2020, Tardivel filed his answer. On January 4, 2021, the court held an initial conference. On June 24, 2021, the Department filed a settlement agreement, providing that Tardivel would pay $12,725 and resign, and appointing an independent fiduciary. The court entered the settlement agreement on July 22, 2021. New York Office

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Secretary v. Data Management Group, Inc. and Keith Boyer (E.D. Va.)

On November 3, 2020, the Secretary filed a complaint against Data Management Group, Inc., and Keith Boyer for failing to remit employee contributions to the company’s 401(k) plan and employee contributions to pay the premiums for its dental plan. The Secretary alleges that these fiduciary breaches occurred from 2017 to 2019. The Secretary seeks restoration to the 401(k) plan and health plan of at least $9,555 and $2,808, respectively, which includes interest. The Secretary also seeks the removal of the company and Boyer as plan fiduciaries, appointment of an independent fiduciary, and a permanent fiduciary bar against the company and Boyer. On April 15, 2021, the case settled with a consent judgment that required payment of $14,092 to both plans and payment of $2,818 as a section 502(l) penalty. Philadelphia Office

Walsh v. Ensemble Designs, Inc. (E.D. Cal.)

On December 21, 2021, the Secretary filed a complaint against Ensemble Designs, Inc. and David Wood, its CEO and President. Ensemble Designs sponsored a SIMPLE IRA employee benefit plan that permitted participating employees to request that the company make pre-tax deductions from their pay to be forwarded to the plan and allocated to participants’ individual IRA accounts. The complaint alleged that Ensemble Designs and Wood violated ERISA when they deducted money from employees’ pay without forwarding it to the employees’ retirement accounts from April 1, 2016 to August 30, 2019. On December 22, 2021, Wood began providing proof that the fiduciaries had restored money to the participants’ IRA accounts. San Francisco Office

Secretary v. Filerman (W.D. Va.)

On December 22, 2021, the Secretary filed a complaint against Joseph Filerman alleging that he failed to remit $6,361 in employee contributions to his company’s SIMPLE IRA plan from January 2016 to December 2016. Filerman sold the company in or around January 2017. The Secretary further alleges that $1,106 in interest is owed to the plan. Philadelphia Office

Secretary v. Gibson Television Service, Inc. (E.D. Mich.)

On April 27, 2021, the Secretary filed a complaint against David and Robert Gibson and Gibson Television Service, Inc., alleging that they breached their fiduciary duties by failing to remit and to timely remit employee salary deferrals and participant loan repayments to the plan from January 7, 2016 to January 25, 2019. The complaint further alleged the Defendants failed to maintain a fidelity bond for the fiduciaries of the 401(k) Plan and failed to prepare and file annual reports and distribute summary annual reports. The Secretary sought restitution of the $36,691 in principal and lost opportunity costs and an injunction permanently enjoining the fiduciaries from serving as fiduciaries or service providers to any ERISA-covered plan. As of December 31, 2021, the parties resolved the matter in principle. On January 20, 2022, the court entered the agreed upon consent order and judgment. As part of the settlement, David and Robert Gibson agree to restore $50,764 in delinquent employee salary deferrals and participant loan repayments and lost opportunity costs from their plan accounts. Further, the consent order and judgment enjoins the Defendants from serving as fiduciaries or service providers to ERISA-covered plans and appoints an independent fiduciary to administer and terminate the plan. Chicago Office

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Secretary v. Great Atlantic Graphics, Inc. (E.D. Pa.)

On July 22, 2021, the Secretary filed a complaint against Great Atlantic Graphics, Inc, Frederick Duffy, Jr., and Vincent Giarrocco, alleging that they improperly failed to terminate the company’s 401(k) plan and distribute its assets to 19 participants when the company was sold in bankruptcy in 2018, and that, from January 2016 to December 2017, they failed to forward insurance premiums and employee contributions for payment of health insurance premiums to the company’s health plan, resulting in termination of employees’ health insurance and $464,000 in unpaid health claims. The Secretary alleges that the health plan’s participants and beneficiaries are entitled to a surcharge remedy against Defendants to compensate them for the loss in healthcare coverage and related expenses, including the unpaid health claims. Defendants did not answer the complaint, and the Secretary requested that the clerk enter default against them on December 17, 2021. Philadelphia Office

Walsh v. Haskett (N.D.N.Y.)

On March 30, 2021, the Secretary filed a complaint alleging that, in 2018, Defendants Walter Haskett and Harden Furniture LLC withheld contributions from employee paychecks and failed to forward them to the Employee’s Savings & Profit Sharing Retirement Income Plan of Harden Furniture, LLC. On September 15, 2021, the Secretary filed a consent judgment providing that Defendants would repay $2,394 to the plan. New York Office

Secretary v. Herbert Long III, Legion Design/Campbell & Associates Chartered 401(k) Plan (D.D.C.)

On September 26, 2019, the Secretary filed a complaint seeking the restoration of $43,117 in employee contributions and $2,942 in participant loan repayments to the Legion Design/Campbell & Associates Chartered 401(k) Plan and at least $8,918 in related interest. Legion Design sponsored the 401(k) Plan and is now defunct. Herbert Long III was the CEO and Director of Operations for Legion Design. He also was the named plan trustee at the time of the losses. Long, who filed an answer to the complaint pro se, has represented to the court that he is unable to effectively participate in his defense. Long is in personal bankruptcy. The court issued a scheduling order closing discovery by December 4, 2020, and setting a January 29, 2021 deadline for motions for summary judgment. The Secretary did not file a motion for summary judgment. Philadelphia Office

Scalia v. Indian Mills Contracting, Inc. (D.N.J.)

On December 7, 2020, the Secretary filed a complaint alleging that, from 2015 to 2016, Indian Mills Contracting, Inc., Joshua Ferrell, Christopher Ferrell, and Jennifer Ferrell failed to remit employee and employer contributions to the Indian Mills Contracting 401(k) Plan; that Defendants had failed to administer the plan; and that Defendants had failed to obtain a fidelity bond. On March 9, 2021, the Secretary requested entry of default, which was entered on March 10, 2021. The consent judgment, entered on July 22, 2021, removed the Defendants and appointed an independent fiduciary. New York Office

Scalia v. Information Control Systems Inc. (W.D.N.C.)

On November 15, 2019, the Secretary filed a complaint alleging that the 401(k) Plan fiduciaries, Information Control Systems, Inc. (“ICS”), and David Jackson Rogers, failed to remit to the plan employee contributions withheld from employees’ salaries from January 2010 through December 2014. Further, employee contributions remitted to the plan during plan years 2010 through 2014 were not remitted timely, resulting in lost earnings owed to the plan. The complaint asks the court to: (1) order the Defendants to restore all losses, including interest and lost opportunity costs, to the plan; (2) appoint a successor fiduciary at the Defendants’ expense to administer the plan; (3) enjoin the Defendants from engaging in any further action in violation of Title I of ERISA; (4) permanently enjoin the Defendants from serving as a fiduciary, administrator, officer, trustee, custodian, agent, employee or representative having control over the assets of any ERISA-covered plan. The parties filed a proposed consent judgment on April 30, 2020, and a motion to approve the consent judgment on August 18, 2020. On March 11, 2021, the court approved and entered in full the consent judgment and order. Atlanta Office

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Scalia v. Kamphuis (E.D. Mich.)

On February 13, 2020, the Secretary filed a complaint alleging that Robert Kamphuis, Thomas Rose, as fiduciaries of the Deliver Dental Solutions, Inc. 401(k) Plan and Trust, violated ERISA sections 403, 404, and 406 when they failed to remit and timely remit to the plan employee contributions and loan repayments, totaling over $64,000, withheld from employees’ take home pay January 31, 2018, through February 28, 2019. The complaint sought removal of the Defendants Kamphuis and Rose as fiduciaries of the plan, injunctive relief enjoining Defendants from serving as ERISA fiduciaries in the future, the appointment of an independent fiduciary, and correction of the prohibited transactions, including making good on all plan losses, including lost opportunity costs, resulting from Defendants’ fiduciary breaches.

Defendants filed their answer on June 4, 2020, including eight affirmative defenses. On July 30, 2020, the court granted the Secretary’s June 25, 2020 Motion to Strike seven of the eight affirmative defenses.

Incidental to the district court case, Defendants each filed for Chapter 7 bankruptcy. The Secretary filed complaints for determination of nondischargeability of debt on January 13, 2020. Defendants did not contest these adversary proceedings, and on October 21, 2020, Defendants’ debt to the plan was held nondischargeable pursuant to 11 U.S.C. § 523(a)(4).

Due to their respective bankruptcies, Defendants have proposed a payment plan for making good on plan losses, including lost opportunity costs. Defendants and the Secretary are negotiating the final terms of a consent order and judgment.

On January 29, 2021, the district court entered a consent order and judgment ordering Kamphuis and Rose to restore $42,488 to the plan over two years, removing them as fiduciaries, enjoining them from serving as a fiduciary or service provider, and appointing an independent fiduciary to collect the restored funds and distribute them to the affected participants. Chicago Office

Secretary v. Keystrokes Transcription Service (N.D. Ill.)

On March 4, 2021, the Secretary filed a complaint against Keystrokes Transcription Service, Inc., Keystrokes Transcription Service, Inc. 401(k) Savings Plan, Lee M. Tkachuk, and Thomas D. Trainor for their failure to remit $4,925 in employee contributions and participant loan repayments as well as remitting employee contributions and participant loan repayments to the plan in an untimely manner. On April 29, 2021, the court entered a consent judgment and order requiring Defendants to restore $7,957 in lost opportunity costs to the plan, enjoining Defendants from serving or acting as fiduciaries or service providers to any ERISA-covered plan, and requiring Defendants to terminate the plan and issue distributions. Chicago Office

Acosta v. Kilen Boe (D. Minn.)

On March 28, 2019, the Secretary filed a complaint against Minn-Dak Asphalt, LLC, and Kilen Boe, as fiduciaries to the company’s 401(k) plan, health plan, dental plan, and life insurance plan, asserting that they failed to remit and timely remit employee contributions to the plans. The complaint sought to restore to the plans approximately $30,000 in unremitted employee contributions and lost opportunity costs and to enjoin Kilen Boe from serving as a fiduciary or service provider to any ERISA-covered plan. On May 31, 2019, Defendants signed and returned waivers of the service of summons. After Defendants failed to answer the complaint, the Secretary applied for an entry of default on June 18, 2019. On June 19, 2019, the clerk entered default against Defendants.

On March 16, 2020, the Secretary filed a default judgment motion. The court heard argument by telephone May 14, 2020, after which, in response to the court’s request, the Secretary filed supplemental briefing on the Secretary’s loss calculations. On September 22, 2020, the court granted the Secretary’s motion for default judgment in part and entered a default judgment against Defendants in the amount of $24,973. The court did not order the appointment of an independent fiduciary to terminate and distribute the assets of the 401(k) plan or order that the losses to the 401(k) plan be offset with Defendant Boe’s individual account in the 401(k) plan.

On January 7, 2021, the Secretary filed a motion to appoint an independent fiduciary to terminate the 401(k) plan and issue distributions to the plan’s participants and beneficiaries. On April 30, 2021, the court granted the Secretary’s motion, appointing an independent fiduciary to issue distributions to the 401(k) plan participants within 30 days, to offset the 401(k) plan’s losses against Boe’s plan account, and to have the independent fiduciary’s fees and expenses paid from Boe’s plan account. Chicago Office

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Scalia v. Krieger (E.D. Wis.)

On May 6, 2020, the Secretary filed a complaint against Gary Krieger and Stratagem, Inc., alleging the Defendants as fiduciaries failed to remit and timely remit employee contributions to the Stratagem, Inc. Savings Plan from February 29, 2016 through March 29, 2019, and failed to process participants’ distribution requests since March 2019. The complaint seeks payment of the unremitted employee contributions, payment of accrued interest on unremitted employee contributions and delayed remittances; reversal of the prohibited transactions; an injunction permanently enjoining Defendants from serving as fiduciaries and/or service providers to any ERISA-covered plan and removing them as plan fiduciaries, appointment of an independent fiduciary, and an order requiring Defendants to pay the reasonable fees and expenses of the independent fiduciary. Defendants did not waive service of the complaint and were ultimately served with a copy of the complaint and summons by the U.S. Marshals Service.

Defendants never filed an answer, and the Secretary filed a motion for a default judgment on December 16, 2020.

On January 29, 2021, the court granted the Secretary’s motion for a default judgment, entering a permanent injunction, removing Defendants from their fiduciary roles, ordering Defendants to restore $30,296 in losses to the plan, to pay $3,903 in lost opportunity costs, ordering Defendants to correct prohibited transactions, and appointing an independent fiduciary. Defendants have not attempted to comply with any part of this default judgment order.

On June 25, 2021, the Secretary moved for an order of civil contempt and a $100 daily coercive fine until Defendants purge themselves of contempt. The Secretary’s motion also sought an order requiring Defendants to pay the independent fiduciary’s reasonable fees and expenses, to reimburse the plan for those amounts, and to pay the Secretary’s costs and fees for bringing the contempt action. On February 16, 2022, the court ordered Defendants to respond to the petition by March 25, 2022. Chicago Office

Walsh v. Kubler (D. Neb.)

On March 24, 2021, the Secretary filed a complaint against Jon P. Kubler, Kubler Financial, Inc. and the Kubler Financial, Inc. SIMPLE IRA Plan. The complaint alleged that from February 16, 2017, through at least December 15, 2018, Kubler and his company withheld $20,380 in elective deferral contributions but failed to remit those contributions to the plan. The complaint further alleged that the failure to remit contributions to the plan caused participants to lose potential earnings on those contributions. On August 24, 2021, the court entered a consent order and judgment enjoining the company and Kubler from violating ERISA and requiring Kubler to restore all unremitted and untimely remitted employee contributions to the plan, including lost opportunity costs, totaling $21,591. The judgment also required payment of $4,318 in section 502(l) penalties. Kansas City Office

Walsh v. Lunar Logic (D. Or.)

On May 25, 2021, the Secretary filed a complaint against Fiduciaries Celestial Software, Inc., Celeste Edman, and Todd Edman, followed by a motion for entry of a consent judgment, for restoration of unremitted plan assets to the Celestial Software, Inc., Lunar Logic 401(k) Plan. The complaint alleged violations of ERISA from January 10, 2016 to April 10, 2019, stemming from the failure to remit $26.734 in salary withholdings, $1,730 in participant loan repayments, and $25,549 in employer matching contributions, and the lost opportunity costs. Celestial Software, Inc., Celeste Edman, and Todd Edman signed a consent judgment requiring the fiduciaries to restore $56,016 in losses plus $2,003 in lost opportunity costs to the plan, wind-up the plan, and make appropriate distributions to the 30 participants of the plan. On June 15, 2021, the court signed the consent judgment and order. San Francisco Office

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Walsh v. On the Road Marketing LLC (D.N.J.)

On August 3, 2021, the Secretary filed a complaint alleging that, beginning in 2017, Defendants On the Road Marketing LLC and Mark Meding withheld contributions from employee paychecks and failed to forward them to the On the Road SIMPLE IRA Plan and also failed to make the employer match. On September 15, 2021, the Secretary filed a consent judgment providing that Defendants would repay $4,397 to the plan, plus a $879 penalty. The court entered the judgment on November 10, 2021. New York Office

Scalia v. Paramount Industrial Machining, Inc. (E.D. Mich.)

On September 10, 2020, the Secretary filed a complaint against Paramount Industrial Machining, Inc., Sheila Rossman, and Maxwell Schwartz, as fiduciaries of the Paramount Precision Products, Inc. 401(k) Plan and the Paramount Industrial Machining, Inc. Welfare Benefit Health Plan. The complaint alleges that Rossman, a directed trustee, and Schwartz, the company’s owner, committed various ERISA violations, including failing to remit participant contributions and loan repayments to the 401(k) Plan and failing to allocate approximately $15,000 in 401(k) Plan forfeitures to participants’ accounts in accordance with the plan documents. The complaint also alleges that Paramount Industrial and Schwartz, as fiduciaries of the Health Plan, committed various ERISA violations that included failing to remit to the Health Plan participant contributions for the payment of insurance premiums, which resulted in one participant incurring unpaid health benefit claims. The 401(k) Plan violations occurred between September 18, 2015, and March 18, 2016, and between February 10, 2017, and September 8, 2017. The Health Plan violations occurred between July 1, 2017, and September 29, 2017. The Secretary is seeking restoration of losses (including lost opportunity costs) of approximately $18,000 to the 401(k) Plan and approximately $17,000 to the Health Plan, an injunction to bar the fiduciary Defendants from acting as fiduciaries or service providers to any ERISA-covered plan, and appointment of an independent fiduciary to terminate the plans. The Secretary also seeks payment of approximately $3,000 in unpaid health benefit claims.

The Secretary filed an amended complaint on December 4, 2020, alleging that Rossman is liable as a co-fiduciary for the 401(k) Plan violations from February 10, 2017, to September 8, 2017. The Defendants filed amended answers on December 16, 2020, and December 28, 2020. The court issued a scheduling order on December 10, 2020 after the initial status conference on the same date. As of December 31, 2021, the parties were attempting to negotiate a consent order and judgment to settle the case. Chicago Office

Walsh v. Perez (D. Neb.)

On September 10, 2021, the Secretary filed a complaint against Jorge A. Perez, HMC/CAH Consolidated, Inc. Employee Savings Plan, HMC/CAH Consolidated, Inc. Life and AD&D Plan and HMC/CAH Consolidated, Inc. Vision Plan. The complaint alleged that between January 2017 and May 2019, Perez failed to remit over $284,700 in employee contributions to the plans. Perez also caused over $466,880 in employee contributions and loan repayments to be untimely remitted and permitted the plans’ assets to be transferred to other Perez-owned companies. On October 27, 2021, the court granted the Secretary’s request to appoint the U.S. Marshal Service to serve Perez. On December 10, 2021, the court extended the deadline to serve Perez to February 7, 2022. Kansas City Office

Scalia v. Pinnacle Machine, LLC (E.D. Wis.)

On March 30, 2021, the Secretary filed a complaint alleging that Pinnacle Machine, LLC, Donald Miller, and Jennifer Miller, as fiduciaries of the Pinnacle Machine Savings and Retirement Plan, violated ERISA when they failed to remit and timely remit employee contributions to the plan. The alleged loss to the plan from these violations, including lost opportunity cost, is over $41,000. The complaint sought to enjoin these fiduciaries from serving as an ERISA fiduciary in the future, to appoint an independent fiduciary, and a requirement that the fiduciaries restore the delinquent contributions (with interest) to the plan.

On August 13, 2021, the court entered a default judgment against Pinnacle Machine, LLC, Donald Miller, and Jennifer Miller, requiring the fiduciaries to restore $41,870 in plan losses. The default judgment also enjoins the fiduciaries from serving as a fiduciary or service provider to any ERISA-covered plan. Chicago Office

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Secretary v. Prototype Productions, Inc. (E.D. Va.)

On May 20, 2020, the Secretary filed a complaint against Prototype Productions, Inc., Italo Travez, and Jose Travez, who were the owners and officers of the company. The Secretary alleges that the Defendants violated their fiduciary duties to the Prototype Productions, Inc. 401(k) Plan and the Prototype Productions, Inc. Welfare Plan by engaging in several related prohibited transactions. On October 9, 2020, the court approved a consent judgment providing that Defendants restore $628,547 to the 401(k) Plan and $111,299 to the Welfare Plan and pay for the cost, up to $23,250, for an independent fiduciary to distribute the 401(k) assets to participants and to terminate both plans.

On February 5, 2021, the Secretary filed a motion for contempt, alleging that Defendants had failed to pay the amounts owed under the consent judgment. The court held hearings on the motion on March 10, 2021 and April 8, 2021, ultimately declining to hold Defendants in contempt because the consent judgment did not state a specific deadline for the payments. The court ordered the parties to try to resolve the matter and ordered Defendants to make substantial efforts towards payment. On November 10, 2021, the court granted the Secretary’s motion to dismiss, without prejudice, the Secretary’s contempt motion. Philadelphia Office

Secretary of Labor v. Puccio (D. Conn.)

On March 29, 2018, the Secretary filed a complaint against Kathryn Puccio, trustee of the Thomas P. Puccio Pension Plan, alleging that while Kathryn Puccio was a trustee, she and her husband Thomas Puccio (who died in 2012) withdrew plan assets from various plan investment accounts for their own personal use and left the plan unable to satisfy the pension benefit entitlements of two plan participants. The parties engaged in discovery during 2019.

On November 2, 2020, the Secretary filed a motion for summary judgment on the issues of liability and damages. The Defendant failed to file an opposition or any other substantive reply. On February 15, 2021, the court granted the Secretary’s motion for summary judgment, ordering the Defendant to pay full restitution of $484,321 into a trust for the two non-fiduciary plan participants and enjoining the Defendant from serving as a fiduciary to any ERISA-covered plan. Boston Office

Scalia v. RCS & Associates, Ltd (N.D. Ill. and Bankr. N.D. Ill.)

On November 9, 2020, the Secretary filed a complaint against RCS & Associates, Ltd., and Rodney Scott (fiduciaries of the company’s 401(k) Plan), asserting that they failed to remit to the plan certain employee salary reduction contributions withheld from employees’ take home pay. The complaint seeks to have the $10,869 unremitted employee contributions, plus the related lost opportunity costs, paid to the plan. The complaint also seeks injunctive relief enjoining the fiduciaries from serving as an ERISA fiduciary in the future and appointing an independent fiduciary to distribute plan assets and terminate the plan. Prior to the filing of the complaint, Defendant Scott filed a bankruptcy case in which the Secretary then filed an adversary complaint for nondischargeability of debt on November 6, 2020. An answer was not filed prior to December 31, 2020 in either case.

On September 8, 2021, the district court entered a consent order and judgment in favor of the Secretary. As a result, Defendants paid to the plan all employee contributions due the plan, with lost opportunity cost. Further, Defendants were enjoined from serving as fiduciaries or service providers to ERISA-covered plans. Chicago Office

Secretary v. Regional Care Association (N.D. Ill.)

On April 15, 2021, the Secretary filed a complaint against Regional Care Association, Regional Care Association SIMPLE Plan, and Kathy Chronister for their failure to remit $24,306 in employee salary deferral contributions as well as their failure to remit employee salary deferral contributions in a timely manner. On September 15, 2021, the court entered a consent judgment and order requiring Regional Care Association to pay to the plan $1,821 plus any restitution that Regional Care Association receives from Chronister, and enjoined Defendants from serving or acting as fiduciaries or service providers to any ERISA-covered plan.

The court stayed the matter as to Chronister until a pending criminal matter against her is resolved. Chicago Office

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Secretary v. Satori Group, Inc. (E.D. Pa.)

On August 11, 2020, the Secretary filed a complaint against Satori Group, Inc., John Florio, the company’s COO, and Amy Wright, the company’s 401(k) Plan Administrator, for failing to remit employee contributions to the 401(k) plan from 2012 to 2014. The Secretary seeks restoration of at least $99,030 to the 401(k) plan, which includes interest, removal of the company and the two individuals as plan fiduciaries, appointment of an independent fiduciary, and a permanent fiduciary bar against the company and the fiduciary Defendants. The Defendants did not file a responsive pleading, and the court clerk entered default against them on November 10, 2020.

The Secretary filed a motion for default judgment on January 4, 2021, which the court granted in part on May 4, 2021. After the Secretary filed a motion for reconsideration, on June 24, 2021, the court issued an order granting the Secretary’s motion and ordering the restoration of $102,367 to the plan, the removal of the Defendants as fiduciaries of the plan, and installation of an independent fiduciary. Philadelphia Office

Scalia v. Solis (W.D. Tex.)

On June 20, 2019, the Secretary filed a complaint against Nick and Emily Solis, owners of the plan’s sponsoring employer and fiduciaries of the West Texas Bulldog Oilfield Services LLC Health Plan, for failing to remit to the plan’s insurer $19,586 deducted from employees’ wages for health insurance premiums during January 13, 2017, through March 15, 2017. The fiduciaries’ failures resulted in the retroactive cancellation of the plan’s health insurance coverage, leaving 28 employees without insurance, 10 of whom incurred unpaid claims totaling $17,000. The complaint seeks restoration of all plan losses, a surcharge against the fiduciaries for the unpaid medical benefits, injunctive relief requiring the fiduciaries’ compliance with ERISA, and a fiduciary bar against the Defendants. On October 21, 2019, the Secretary filed a motion for entry of default and, on November 13, 2019, a motion for default judgment.

On July 20, 2020, the court granted a default judgment for the Secretary. The judgment ordered the Defendants to restore to the 28 plan participants the $11,731 withheld from their wages but never remitted to the plan’s insurer and to pay $16,783 to the 10 plan participants who had incurred unpaid medical bills. Additionally, the default judgment orders the Solises to pay the costs of an independent fiduciary to administer the remittance of these funds and permanently bars the Solises from serving as fiduciaries to any ERISA covered plan.

Because Defendants failed to comply with the default judgment, the Secretary filed a motion to adjudge Defendants in contempt on September 3, 2020. On March 31, 2021, the court issued a show cause order to Defendants, requiring them to respond by April 8, 2021. After concerns arose that the Defendants may not have received the show cause order, the court on April 23, 2021, issued an order requiring the United States Marshal to serve Defendants. Following several unsuccessful efforts by the Marshall service to serve the show cause order, the Secretary provided new contact information for Defendants and on October 8, 2021, the court issued a new order, directing the United States Marshal to effect service. See also Scalia v. Solis, Section L. Contempt and Subpoena Enforcement. Dallas Office

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Scalia v. Synergy Partners, Inc. (M.D. Tenn.)

On December 31, 2020, the Secretary filed a complaint against Synergy Partners Inc. and Dr. Lance H. Harrison, Jr. The complaint alleges that the Defendants are both fiduciaries to the company’s Synergy Partners, Inc. 401(k) Profit Sharing Plan. The complaint further alleges that the Defendants breached their ERISA fiduciary duties from January 1, 2017, through September 30, 2018, when they failed to forward at least $8,458 in employee contributions to the plan and failed to ensure that the company pay at least $9,498 in safe harbor contributions that it owed to the plan. The complaint asks the court to: (1) permanently enjoin the Defendants from serving as a fiduciary, administrator, officer, trustee, custodian, agent, employee, or representative having control over the assets of any ERISA-covered plan; (2) enjoin the Defendants from engaging in any further action in violation of Title I of ERISA; (3) appoint a successor fiduciary at the Defendants’ expense to administer the plan; and (4) order the Defendants to restore all losses, including interest and lost opportunity costs, to the plan. The Secretary filed proofs of service on February 5, 2021.

On April 16, 2021, the district court entered a consent judgment that held Defendants liable for $19,259 in losses to the plan plus interest. The Secretary filed a proof of claim for the losses in the Synergy Partners pending Chapter 7 bankruptcy case. Furthermore, the consent judgment barred Harrison from being a fiduciary to any ERISA-covered plan and from violating ERISA. See also Scalia v. Synergy Partners, Inc., Section K. Orphan Plans. Atlanta Office

Scalia v. WGC Holdings LLC (N.D.N.Y.)

On December 6, 2019, the Secretary filed a complaint against WGC Holdings LLC, Alan DeForest, Michelle Fontaine-Segatti, and Jamie Santacroce. The complaint alleged that Defendants are liable for failing to remit employee contributions to the Wiltwyck Golf Club Simple IRA Plan. On February 14, 2020, Defendants WGC and DeForest filed their answers. The court held an initial conference on March 20, 2020, and entered a pretrial scheduling order. On June 18, 2020, DeForest sought an extension of time to join parties, which the court granted on June 19, 2020. On August 25, 2020, DeForest again sought further extensions of time, which the court granted on August 25, 2020.

The Secretary agreed to a settlement agreement providing that Defendants would repay $18,000. On February 11, 2021, a stipulation dismissal was filed. New York Office

Walsh v. White Stone Construction, Inc. (D. Minn.)

On September 30, 2021, the Secretary filed a complaint against Defendants Andrew Basara, John Peterson, and The White Stone Construction, Inc. 401(k) Plan, alleging that the fiduciaries violated ERISA by failing to remit employee contributions to the plan from at least April 7, 2017 through at least May 31, 2019. The complaint seeks to have $12,646 in employee contributions remitted to the plan and also seeks to enjoin these fiduciaries from serving as an ERISA fiduciary or service provider in the future. Chicago Office

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Acosta v. Williams-Russell & Johnson Inc. (N.D. Ga.)

EBSA determined that repeat ERISA violators, Williams-Russell & Johnson, Inc., and company president Charles E. Johnson, Sr., were once again failing to remit employee contributions to the Williams-Russell & Johnson 401(k) Retirement Plan, leading to more than $300,000 in damages to the plan. Additionally, Johnson had not ensured that the plan made some distributions required by the plan documents. The company and Johnson were already subject to an earlier consent judgment that barred them from fiduciary service and from future ERISA breaches. Therefore, the Secretary filed a contempt action.

In April 2019, the court scheduled a hearing on the contempt motion but ultimately ordered the parties to continue work on settlement. In August 2019, at another contempt hearing, the court held Johnson and the company in contempt and threatened them with daily fines for continued non-compliance. In September 2019, the parties agreed on a consent judgment whereby the Defendants agreed to repay the plan $315,000 (through a payment plan), to honor the fiduciary bar, and to turn over management of the plan to a third party. The court entered the consent judgment on September 24, 2019.

In August 2020, in light of Defendants’ demonstrable financial hardship, the parties filed an amendment to the amended consent judgment, adjusting the payment plan. The parties are working on another amended agreement regarding a payment schedule. See also Acosta v. Williams-Russell & Johnson Inc., Section L. Contempt and Subpoena Enforcement. Atlanta Office

Scalia v. Woldt (W.D. Wis.)

On July 28, 2020, the Secretary filed a complaint against Defendants Shawn Woldt and Thunderbird Engineering, alleging they violated ERISA by failing to remit employee contributions and loan repayments (with lost opportunity cost) to the Thunderbird Engineering, Inc. 401(k) Plan from January 1, 2014 to August 31, 2020. The complaint seeks to have $67,266 in employee contributions and $2,219 in loan repayments remitted to the plan. The complaint also seeks injunctive relief to enjoin these fiduciaries from serving as an ERISA fiduciary in the future and to appoint an independent fiduciary to distribute plan assets and terminate the plan.

On March 30, 2021, the court entered a consent order and judgment in favor of the Secretary ordering Defendants to restore $53,121 to the plan.

On December 7, 2021, on motion filed by the Secretary, the court held the Defendants in civil contempt, barred them from any fiduciary roles, and appointed an independent fiduciary to administer the plan. The court also ordered the $53,121 to be set off from Mr. Woldt’s plan account and instead allocated the money to the plan accounts of the other plan participants. Chicago Office

Secretary v. WW Contractors, Inc. (D. Md.)

On December 17, 2020, the Secretary filed a complaint against WW Contractors, Inc., and Nea Wiggins for failing to remit employee contributions and participant loan repayments to the WW Contractors, Inc. 401(k) Plan. The company (which is in bankruptcy) as the plan administrator and Wiggins as the plan trustee carried out the plan administrator functions. The Secretary alleges that the fiduciary breaches by the Defendants occurred October 2017 to February 2018. The Secretary seeks restoration of $39,000 to the plan, which includes interest. The Secretary also seeks the removal of the Defendants as plan fiduciaries, appointment of an independent fiduciary, and a permanent fiduciary bar against the Defendants.

Defendants’ counsel did not appear at the October 12, 2021 virtual settlement conference. On December 8, 2021, the court issued a revised scheduling order setting April 25, 2022 as the discovery deadline and May 23, 2022 as the deadline for dispositive motions. Philadelphia Office

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Secretary v. Yost (D. Md.)

On February 20, 2020, the Secretary filed a complaint against Saturn Corp. and Fielding Yost for failing to remit employee contributions and participant loan repayments to the Saturn Corp. Profit Sharing Plan & Trust. The company is the plan administrator and Yost is the company president and majority owner. The Secretary alleges that the fiduciary breaches by the Defendants occurred from 2014 to 2018. The Secretary seeks restoration of $78,683 to the plan, which includes interest, removal of the Defendants as plan fiduciaries, appointment of an independent fiduciary, and a permanent fiduciary bar against the Defendants. On September 28, 2021, the court clerk entered default against all Defendants. On December 17, 2021, the Secretary filed a status update with the court stating that the parties had not resolved the case and that the Secretary planned to file a motion for default after January 1, 2022. Philadelphia Office

Scalia v. Zipp Express, LLC (M.D. Tenn.)

On December 22, 2020, the Secretary filed a complaint against the now-defunct Zipp Express, LLC, and Ronnie C. Whitefield, Jr., the sole owner of the company. The complaint alleges that the Defendants are fiduciaries to the company’s Group Health Plan. The complaint further alleges the Defendants breached their ERISA fiduciary duties when they failed to forward to the plan at least $12,319 in withheld employee contributions from November 1, 2017 through December 31, 2017. The complaint asked the court to: (1) permanently enjoin Defendants from serving as a fiduciary, administrator, officer, trustee, custodian, agent, employee, or representative having control over the assets of any ERISA covered plan; (2) enjoin Defendants from engaging in any further action in violation of Title I of ERISA; (3) appoint a successor fiduciary at Defendants’ expense to administer the plan; and (4) order Defendants to restore all losses, including interest and lost opportunity costs, to the plan, and (5) set off the individual plan accounts of any Defendant against the plan’s losses. The Secretary filed executed waivers of service on January 26, 2021.

On April 26, 2021, the court entered a consent judgment holding Defendants liable for plan losses of $12,319 plus interest. Furthermore, Whitefield and Zipp are permanently barred from acting as fiduciaries to an ERISA-covered plan and from violating ERISA. Due to Whitefield’s financial status and the defunct status of Zipp Express, LLC, the Department determined that Defendants could not make full restitution. The Department negotiated a settlement wherein Whitefield is required to make partial $6,000 restitution to the plan. The consent judgment also authorizes the appointment of an independent fiduciary to the plan, whose fees will be payable from the assets of the plan, for the purposes of receiving funds from the Defendants and distributing the plans’ assets to the participants. Should Whitefield or the company’s financial condition materially improve, Whitefield is required to notify the Department immediately and will be required to pay the remaining balance owed to plan participants. Atlanta Office

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Secretary v. Zyquest, Inc. (E.D. Wis.)

On October 14, 2020, the Secretary filed a complaint against Allan Zeise and Zyquest, Inc., alleging they breached their fiduciary duties by failing to remit and timely remit to the affected plan employee salary deferrals withheld from take home pay June 30, 2016, to September 14, 2018. The Secretary sought restitution of the principal ($138,962) and lost opportunity costs and an injunction permanently enjoining the fiduciaries from serving as fiduciaries or service providers to any ERISA-covered plan. On January 5, 2021, the Secretary filed a motion for entry of default and the clerk entered default against all Defendants. On January 25, 2021, the Secretary filed a motion for default judgment against all Defendants.

On January 27, 2021, the court entered a judgment finding Defendants breached their fiduciary duties by failing to remit and timely remit withheld employee salary deferrals and loan repayments and ordering Defendants to restore $165,759 in wages, including lost opportunity costs, to the plan within 30 days of entry of judgment. The court also permanently enjoined Defendants from violating Title I of ERISA, removed Defendants as trustee and plan administrator, and permanently enjoined Defendant Zeise from serving or acting as a fiduciary or service provider with respect to any ERISA-covered plan except to the extent necessary to comply with the judgment. Furthermore, the court appointed an independent fiduciary to allocate restoration funds to plan participants’ plan accounts and determine whether employee salary deferrals and participant loan repayments withheld from take home pay September 15, 2018, through the date of judgment were all remitted to the plan. For any amounts withheld after September 15, 2018, but not remitted to the plan, Defendants were ordered to restore those assets to the plan within 60 days of the independent fiduciary’s notice of amounts owed. Finally, the court ordered Defendants to pay to the independent fiduciary the one-time conversion fee of $750 and recurring quarterly fees to cover reasonable expenses. Chicago Office

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2. Insurance Rebates

None

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3. Miscellaneous

Secretary v. Allen (W.D. Ky.)

On December 27, 2017, the Secretary filed a complaint against Anthony C. Allen, Mark N. Cain, Brian A. Lutes, James M. Staron, Linda A. Wilson, and Norman E. Zelesky. Defendants are members of the Retirement Savings Plan Advisory Committee, the named fiduciary for four plans sponsored by Sypris Solutions, Inc. The complaint alleges that Defendants failed to follow the plans’ governing documents regarding use of forfeiture funds. The governing documents required the employer to use forfeiture funds to pay plan expenses prior to using such funds to reduce employer contributions. From 2012 until 2016, Defendants caused the four plans to pay plan expenses from plan assets and used the forfeiture funds to reduce employer contributions. As a result of this practice, the employer benefited by reducing its contributions to the funds, at the expense of plan participants whose plan account balances were reduced by Defendants’ payment of plan expenses from plan assets instead of from forfeitures. The complaint seeks recovery of the losses, including lost opportunity costs, suffered by the plans as a result of this practice.

After written discovery and depositions, the Secretary amended the complaint to include the company, Sypris Solutions, Inc., as a fiduciary Defendant. At a settlement conference with the district court’s magistrate judge on April 10, 2019, the parties were unable to settle the case. The parties completed discovery on May 10, 2019. The parties each filed dispositive motions on July 10, 2019, with the Secretary moving for partial summary judgment and Defendants moving for full summary judgment. The dispositive motions were fully briefed on August 21, 2019.

On May 14, 2020, the magistrate judge issued a Report and Recommendation, denying the Secretary’s motion for partial summary judgment and granting in full Defendants’ motion for summary judgment. The Secretary filed the Department’s Objections to the magistrate’s Report and Recommendation on May 28, 2020. Defendants filed their Response to the Secretary’s Objections on June 11, 2020.

On January 26, 2022, the district court ruled on the Secretary’s objections to the magistrate’s report and recommendation. The district court sustained the Secretary’s primary objection, which mooted the remainder of the magistrate’s report and recommendation. The court set a hearing on March 22, 2022 to discuss the remaining issues in the case. Chicago Office

Secretary v. Area Wide Realty Corporation (N.D. Ill.)

On January 29, 2020, the Secretary filed a complaint against Michael Olszewski and Area Wide Realty Corporation as fiduciaries of the Area Wide Realty Corporation Cash Balance Pension Plan and Trust and the Area Wide Realty Corporation Profit Sharing Plan and Trust. The complaint alleges that these Defendants breached their fiduciary duties under ERISA by transferring plan assets to the fiduciaries and parties in interest in 2011 and 2017 and by failing to maintain a fidelity bond. To remedy these fiduciary breaches, the Secretary is seeking an order removing the Defendants as fiduciaries to the plans, appointing an independent fiduciary to administer the plans’ assets, and restoring all losses, including lost opportunity costs, to the plans. The parties were unable the settle the case at the January 27, 2022 hearing with the magistrate judge. The court entered an order providing Defendants additional time to subpoena and produce documents related to the 2017 transaction. The parties are ordered to file an updated joint status report regarding this process by March 14, 2022. The parties have been in discussions to resolve the matter. Chicago Office

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Acosta v. East Tennessee Hematology-Oncology, P.C. (E.D. Tenn.)

On June 21, 2019, the Secretary filed a complaint against William R. Kincaid, Janet Kincaid, Millard R. Lamb, Catanzarite Law Corporation, Marian Villanueva, and East Tennessee Hematology-Oncology Associates P.C., alleging that the fiduciary Defendants engaged in prohibited transfers of plan assets, failed to discharge their duties for the exclusive purpose of providing benefits to plan participants, and failed to discharge their duties to the plan in the manner required by ERISA. The complaint asserts violations of ERISA sections 404 and 406, and the complaint seeks equitable relief (including restitution of losses to the plan), a permanent injunction against the fiduciaries from acting in a fiduciary capacity to ERISA-covered plans, an injunction against Defendants from committing future ERISA violations, and disgorgement of fees earned by Defendant service providers. The complaint also seeks the appointment of a successor independent fiduciary. The Department is again attempting to schedule a Rule 26(f) conference with Defendants’ counsel.

p>The Secretary filed an amended complaint on November 16, 2021, naming the company, William Kincaid, and Janet Kincaid as Defendants and alleging violations of sections 404 and 406 of ERISA. After none of the Defendants responded to the Secretary’s discovery request, a motion to compel was filed on January 26, 2022, which was granted on February 10, 2022. Thereafter, Defendants’ counsel filed a motion to withdraw as counsel. Atlanta Office

Acosta v. Macy’s, Inc. (S.D. Ohio)

On August 16, 2017, the Secretary filed a complaint alleging that Macy’s Inc., Anthem, and Cigna failed to properly pay out-of-network claims for the Macy’s, Inc. Welfare Benefits Plan and alleging that Macy’s administered a discriminatory wellness program. The first violations concern Macy’s, Anthem’s, and Cigna’s failure to provide benefits in accordance with the health plan documents, which stated that from the beginning of July 2009, through the end of June 2012, the plan would pay for out-of-network benefits based on the Usual and Customary Rate (“UCR”) while the plan fiduciaries actually paid for these benefits on a formula tied to the Medicare Allowable Rate. These two methods, UCR and the Medicare Allowable Rate, use significantly different methodologies to determine rates. Based on the evidence, the Secretary alleges that plan participants paid more for out-of-network benefits received because the fiduciaries used the Medicare Allowable Rate instead of UCR. The Secretary alleges that Macy’s, Anthem, and Cigna failed to follow the plan documents regarding out-of-network claims reimbursement. The second set of violations stems from Macy’s tobacco surcharge wellness program, in which it charged tobacco users a monthly surcharge. The Secretary alleges that Macy’s violated ERISA’s Part 7 non-discrimination provisions when it failed to provide a lawful reasonable alternative to the surcharge and required invalid affidavits from those who attempted to utilize alternative means of compliance from July 1, 2011, through June 30, 2013. The Secretary alleges further violations of Part 7 non-discrimination provisions from July 1, 2013 through the present, based on deficiencies in the documents used by Macy’s to administer its tobacco surcharge wellness program. The Secretary’s complaint seeks the appointment of an independent fiduciary to readjudicate all out-of-network claims that were processed by Cigna from July 1, 2009 through June 30, 2012, and processed by Anthem from July 1, 2011 through June 30, 2012, in order to restore losses to the affected participants, as well as restoration of all tobacco surcharges collected from July 1, 2011 through the present.

The parties mediated the case before the district court’s magistrate judge in December 2017, February 2018, and April 2018, but were unable to reach a resolution. Each of the Defendants moved to dismiss the Secretary’s complaint on October 1, 2018, and the Secretary opposed the motions on October 31, 2018. Each of the Defendants filed a reply brief on November 21, 2018. The case was transferred to a new judge on December 11, 2019. The district court issued no orders in 2020.

The district court did not rule on the motions to dismiss until November 17, 2021 when the court granted, with prejudice, Cigna and Anthem’s motion to dismiss them from the action. The court also dismissed with prejudice the claims against Macy’s relating to: (1) the out of network benefit claims and (2) the fiduciary breach and prohibited transaction violations regarding the tobacco surcharge in wellness program relating to the 2011-2013 plan years. The court declined to find no violations of Part 7 of ERISA during the 2011-2013 plan years and granted the Secretary’s request for leave to amend the complaint relating to allegations from plan year 2014 forward.

On December 15, 2021, the Secretary filed a motion for reconsideration of the court’s opinion, arguing that the court made substantive mistakes of law regarding the legal requirements for determining: ERISA fiduciary status; the difference between fiduciary status and fiduciary breach, which resulted in the court’s failure to determine Macy’s’ status as the tobacco surcharge wellness program’s fiduciary from plan years 2011 through 2013; and ERISA’s strict prohibition on following plan documents that conflict with ERISA. Chicago Office

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Acosta v. M-E-C Company (D.S.C.)

On June 7, 2019, the Secretary filed a complaint against M-E-C Company, its former President, John A. Quick, its former Controller, Kristina Romanowski, and its Board of Directors (Reuben Andreas, Justin Andreas, John B. Andreas, Lynn Lichtenfeld and Stephen D. Parker). The complaint alleged that the fiduciaries failed to timely and completely remit to the M-E-C Group Health Plan employee contributions withheld from employees’ pay. The complaint sought recovery of the losses to the plan totaling $17,483, removal of Quick, Romanowski, and the Board of Directors as fiduciaries, appointment of a successor fiduciary, and a permanent injunction against Quick, Romanowski, and the directors operating as fiduciaries to ERISA covered plans in the future. On June 21, 2019, the Secretary filed an amended complaint, which demanded relief only against the company, Quick, and Romanowski and deleted the other Defendants that had been named in the initial complaint. The Secretary completed discovery in December 2019.

The Secretary negotiated a consent judgment with Quick, which the court entered on March 31, 2020. By the terms of the consent judgment, Quick restored losses to the plan; was removed as a fiduciary; was permanently enjoined from serving as a fiduciary, trustee, agent, or representative in any capacity to any ERISA-covered plan; and was permanently enjoined from violating Title I of ERISA. AMI Benefit Plan Administrators, Inc., was appointed successor fiduciary.

The Secretary filed a motion for default against Romanowski and the company on March 9, 2020. Default was entered as to the company on May 13, 2021. Romanowski filed an opposition to the default as to her, and she obtained new counsel to represent her. In light of Romanowski’s explanations in her opposition, the Secretary withdrew the default motion as to Romanowski. The Secretary and Romanowski have continued to litigate. Atlanta Office

Perez v. Sherrod (N.D. Ill.)

On April 29, 2016, the Secretary filed a complaint against Shirley Sherrod and Leroy Johnson, fiduciaries of the Shirley T. Sherrod, M.D., P.C. Target Pension Plan, alleging that, from September 2012 to the present, the fiduciaries failed to administer the plan, allocate distributions properly, and make distributions to the participants consistent with plan documents. On August 1, 2016, Defendants filed their answer. On October 11, 2016, Defendants filed a motion for a protective order, which they withdrew on November 7, 2016. On December 1, 2016, Defendants filed a motion to amend their answer. On December 19, 2016, the Secretary opposed their motion to amend. On December 30, 2016, Defendants filed their reply. On March 27, 2017, the court denied Defendants’ motion to amend their answer. On April 26, 2017, Defendants’ attorneys filed a motion to withdraw, which the court granted on May 2, 2017.

On December 13, 2017, the court denied Defendants’ motion seeking to limit the Secretary’s rights to seek discovery for certain years. On December 21, 2017, Defendants’ second attorney filed a motion to withdraw. On September 10, 2018, the Secretary filed a memorandum opposing Defendants’ July 18, 2018 motion to compel. On September 17, 2018, the Defendants filed their reply brief in support of their motion to compel. On December 27 and 28, 2018, the Defendants’ third set of attorneys filed motions to withdraw.

On February 1, 2019, the Defendants’ fourth attorney entered a notice of appearance. On February 7, 2019, Defendants filed a motion to reconsider the order denying Defendants’ earlier motion to amend their answer. On March 15, 2019, the Secretary filed a brief in opposition to Defendants’ motion to reconsider. On March 25, 2019, Defendants filed their reply brief for their motion to reconsider. On April 5, 2019, the Secretary filed a sur-reply to the motion to reconsider.

On April 30, 2019, the court granted part of Defendants’ motion to compel, ordered the production of one document, and denied the motion as to all other documents. The court also granted Defendants’ motion to extend discovery to take the deposition of the second Department investigator. The court denied Defendants’ motion to reconsider its order denying their motion to amend their answer.

On May 9, 2019, the Defendants requested that discovery be reopened to permit them to obtain an expert. The court granted the request. On May 29, 2019, the Secretary defended the deposition of the second Department investigator. On May 31, 2019, Defendants disclosed the name of their expert, who was an accountant.

On June 10, 2019, the Defendants filed a second motion to reconsider the order denying the motion to amend. On July 8, 2019, the Secretary filed a brief in opposition. On July 22, 2019, Defendants filed their reply brief.

On August 19, 2019, Defendants filed a motion for miscellaneous relief, essentially arguing that plaintiff’s damages should be limited. After oral arguments on the motion, the court indicated it would deny the motion, and Defendants withdrew it on August 21, 2019. In August and September 2019, Defendants filed several motions to extend their deadline to provide their expert report and the Secretary objected to each extension. The court gave a final deadline of October 11, 2019. The Defendants notified the court on November 7, 2019, they did not intend to use an expert. On November 11, 2019, the court set a summary judgment deadline of February 27, 2020, response by March 27, 2020, and reply by April 10, 2020.

On February 27, 2020, the Department filed a motion for summary judgment. On June 11, 2020, Defendant Sherrod filed a motion for appointment of pro bono counsel. On June 17, 2020, the Department filed a motion to oppose the appointment of pro bono counsel. On July 21, 2020, the court appointed pro bono counsel to represent Sherrod, but noted that Defendant Johnson reported he would proceed pro se. On November 9, 2020, Defendants filed their response to the Department’s motion for summary judgment. On December 9, 2020, the Department filed the reply brief.

On January 7, 2021, Sherrod filed a motion for leave to file a sur-reply. On February 4, 2021, the Secretary filed a motion for sanctions against Defendants for failing to disclose previously exhibits to their response to the Secretary’s motion for summary judgment. On February 4, 2021, the Secretary filed a response in opposition to Sherrod’s motion for leave to file a sur-reply. On March 1, 2021, Defendants filed separate briefs in opposition to the Secretary’s motion for sanctions against them. On March 15, 2021, the Secretary filed a reply brief in support of the Department’s motion for sanctions. On March 26, 2021, Johnson filed a motion to join Truist Bank and its affiliate SunTrust Investment Services. On April 12, 2021, Defendant Johnson filed a motion for leave to file a sur-reply to the Secretary’s motion for sanctions. On April 15, 2021, the Secretary filed a brief in opposition to Johnson’s motion to join Truist Bank and SunTrust.

On April 12, 2022, the court ordered that it would not accept briefing on Johnson’s motion for leave to file a sur-reply. Defendant Johnson filed a reply brief on April 21, 2021. On April 28, 2022, the court denied Defendant Johnson’s motion to join Truist Bank and SunTrust. On September 29, 2021, the court granted Sherrod’s motion to file a sur-reply.

As of December 31, 2021, the court has not ruled on the Secretary’s February 2019 motion for summary judgment. Chicago Office

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C. Financing the Union

Acosta v. Kavalec (N.D. Ohio)

On April 30, 2019, the Secretary filed a complaint against Robert Kavalec, Charles Alferio, and Victor Collova as trustees of the Fleet Owners Insurance Fund. The complaint alleges that the trustees committed prohibited transactions by paying themselves over $1,500,000 in compensation during November 2014 to at least December 2018. The complaint also alleges that the trustees violated ERISA by approving unreasonable and excessive travel expenses, allowing a former union officer to participate in the plan at no cost, and failing to administer the plan in accordance with the ACA and HIPAA. On November 1, 2019, over the Secretary’s objection, the court entered an order staying the case until March 1, 2020.

On March 23, 2020, Collova filed an emergency motion asking the court to compel the plan to pay his attorney’s fees incurred to date and to advance his attorney’s fees for the remainder of the litigation. In addition to opposing that motion, on April 16, 2020, the Secretary filed a motion for a preliminary injunction to enjoin the plan from paying or advancing attorneys’ fees to any of the Defendants. On July 14, 2020, the court denied Collova’s motion and granted the Secretary’s motion for a preliminary injunction. On November 25, 2020, the Secretary filed a second motion for a preliminary injunction, seeking an order barring Kavalec, the sole remaining trustee, from continuing to pay his salary from plan assets. On January 25, 2021, the court granted the Secretary’s motion and entered a preliminary injunction enjoining Kavalec from paying himself any additional direct or indirect compensation from plan assets.

On September 3, 2021, the Secretary filed a third motion for a preliminary injunction to remove the current trustee and appoint an independent fiduciary. Defendants opposed this motion, and the Secretary filed a reply brief on September 24, 2021. On October 26, 2021, the court granted the motion and entered a preliminary injunction order that removed the Fund’s trustee and appointed an independent fiduciary. On December 7, 2021, the court referred the matter to a magistrate judge to conduct a settlement conference in February 2022. Cleveland Office

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D. Prudence of Investments

Note: For other cases involving imprudent investments, please see J. Financial Institution and Service Provider Cases.

Walsh v. FCCG (M.D. Fla.)

On January 28, 2021, the Secretary filed a complaint against Florida Council on Compulsive Gambling, Inc. (FCCG), Paul Ashe, and Patricia Fowler. The complaint alleges that two of FCCG’s former executives, who also served as trustees for the FCCG 401(k) Profit Sharing Plan, committed fiduciary breaches and prohibited transactions related to plan investments in two promissory notes given by a company owned by one of the former executives. In a separate case in the Middle District of Florida, FCCG has sued the former executives, Ashe and Fowler. Atlanta Office

Gannett Co., Inc. v. Quatrone (S. Ct.)

On November 9, 2021, the Solicitor General, at the Court’s invitation, filed an amicus brief urging the Supreme Court to deny certiorari in this case alleging that the fiduciaries of Gannett’s defined-contribution plan imprudently retained investments in a single-stock fund that did not qualify as employer stock, and in so doing breached ERISA’s duties of prudence and diversification. The case followed the 2015 spin-off of the media company previously known as Gannett Co., Inc. (“Gannett”) into two separate publicly traded companies. Before the spin-off, Gannett employees received their 401(k) contributions in Gannett stock. After the spin-off, that stock no longer qualified as employer stock as to one of the spun-off companies, yet the plan’s fiduciaries continued to hold it for two years after the spin-off, during which time the stock price fell dramatically. The plaintiffs alleged that the plan’s fiduciaries breached their duties of prudence and diversification by maintaining this legacy employer stock as an investment option. The Fourth Circuit reversed the district court’s dismissal of the plaintiffs’ claims, holding that the plaintiffs plausibly alleged that the fiduciaries breached their duties by failing to monitor and timely remove the legacy employer stock fund. Plan Benefits Security Division

Hughes v. Northwestern University (S. Ct.)

This case concerns the pleading standards for challenging under ERISA the reasonableness of fees charged by service providers to defined-contribution retirement plans. On October 5, 2020, the Supreme Court sought the Government’s views on the question of whether “allegations that a defined-contribution retirement plan paid or charged its participants fees that substantially exceeded fees for alternative available investment products or services are sufficient to state a claim against plan fiduciaries for breach of the duty of prudence under ERISA, 29 U.S.C. § 1104(a)(1)(B).”

On May 21, 2021, the Government filed a brief recommending that the Court grant certiorari. The Government contended that the Seventh Circuit erroneously affirmed dismissal of the plaintiffs’ claims that (1) the fiduciaries of the Northwestern’s 403(b) retirement plans breached their fiduciary duties by including on the plans’ investment menu retail-class mutual funds when identical but cheaper institutional class funds were available, and (2) paid too much for recordkeeping services by paying two recordkeepers based on a percentage of plan assets, rather than consolidate to one recordkeeper and pay on a per-participant basis. The Government argued that the Seventh Circuit’s decision conflicts with decisions from the Third and Eighth Circuits holding that complaints on similar facts stated claims for relief.

After the Court granted certiorari on July 2, 2021, the Government filed a brief on the merits on September 10, 2021. The Government again contended that petitioners plausibly allege that respondents selected for the plans’ more than 100 retail-class mutual funds with higher expense ratios instead of available institutional-class alternatives of the same funds that differed only in their lower costs. The Government explained that the court of appeals erred in holding that petitioners claims concerning retail-class shares did not state a claim because the plans included some funds of the type that petitioners favor—index funds with low fees. That reasoning, the Government said, conflicts with the duty to monitor all investments and to remove any imprudent ones. The Government also again argued that the Seventh Circuit erroneously dismissed petitioners’ claims regarding excessive recordkeeping fees. The Government explained that the Seventh Circuit’s observations that ERISA does not necessarily prohibit using multiple recordkeepers or paying for recordkeeping through revenue sharing, while true, do not refute petitioners’ claim, which contends that respondents imprudently failed to monitor and limit recordkeeping. Plan Benefits Security Division

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Scalia v. Ruane, Cunniff & Goldfarb, Inc. (S.D.N.Y.)

This case concerns the mismanagement of plan assets, including significant failure to diversify those assets, by fiduciaries of the DST Systems, Inc. 401(k) Profit Sharing Plan (“Plan”). On October 8, 2019, the Secretary filed a complaint against Ruane, Cunniff & Goldfarb, Inc. (“Ruane”), its former chairman and CEO Robert Goldfarb, DST Systems, Inc. (“DST”), two internal DST committees, and 16 individual members of those committees for alleged violations of the duties of loyalty, prudence, diversification, and the duty to follow the Plan document under ERISA sections 404(a)(1)(A), (B), (C), and (D) in relation to the Plan, as well as – on the part of DST and its committees – for fiduciary failure to monitor an investment manager and for co-fiduciary liability. The Secretary also named the plan as a Rule 19 defendant.

The Secretary’s complaint alleged as follows. Until 2016, for the entire profit-sharing portion of the Plan’s assets, the investment manager followed a deliberate strategy of non-diversification, contrary to ERISA’s fiduciary duty to diversify a plan’s investments to minimize the risk of large losses. As a result, the plan’s investment portfolio was highly concentrated in the stocks of certain companies. One in particular, Valeant Pharmaceuticals International, Inc., constituted 45.4% of the portfolio before falling drastically in value. The plan lost tens of millions of dollars because of the fiduciaries’ failure to appropriately diversify the Plan assets.

On December 4, 2020, Defendants filed four separate motions to dismiss. In the first, DST, the two DST committees, and 13 individual DST Defendants (joined by two additional individual DST Defendants who are separately represented) argued that the Secretary’s claims are time barred by ERISA’s six-year statute of limitations because Ruane and Ruane’s investment strategy had been in place since the 1970s, and by ERISA’s three-year statute of limitations because the Secretary had actual knowledge of Ruane’s investment strategy more than three years before filing the complaint through the Plan’s annual Forms 5500 filed with the Department. In the alternative, DST asked the court to order targeted discovery and supplemental briefing on their actual knowledge defense. Ruane and Goldfarb each filed separate motions raising the same arguments as DST. Both also asserted that the Secretary may have had actual knowledge through a private complaint that the Department received under ERISA section 502(h), and both also requested targeted discovery on actual knowledge. Ruane additionally argued that the Secretary failed to state a claim for breach of fiduciary duty because Ruane had no duty to determine the percentage of Plan assets it managed and because Ruane’s investment strategy did not violate ERISA. Finally, one individual DST Defendant moved to dismiss the claims against him on the grounds that the Secretary failed to plausibly allege that his conduct while on a DST committee caused the alleged losses. He also joined DST’s statute of limitations arguments.

On January 8, 2021, the Secretary filed a combined opposition to the four motions to dismiss. The Secretary argued that the claims were not barred by the six-year statute of limitations because the violations actually alleged in the complaint – breaches of ongoing fiduciary duties to ensure the prudent management and diversification of plan assets and, for the DST Defendants, to monitor the Ruane Defendants – occurred within the limitations period. For purposes of the three-year statute, the Secretary argued that the Defendants’ assertions regarding the Forms 5500 and the private complaint amounted to charging the Secretary with constructive knowledge, while “actual knowledge” requires more than mere disclosure, as clarified by Intel Corp. Investment Policy Committee v. Sulyma, 140 S. Ct. 768 (2020). The Secretary argued that Ruane’s assertion that the Secretary failed to state a claim against them is based upon a mischaracterization of the Secretary’s allegations regarding breaches of their ongoing fiduciary obligations in their management of the Plan assets, which apply regardless of the percentage of Plan assets that Ruane managed. Finally, the Secretary explained how the complaint adequately alleged that the individual DST Defendants breached their duties to the Plan and that those breaches directly caused the Plan’s losses. Briefing was completed as of February 5, 2021.

On December 10, 2019, Ruane filed a separate declaratory judgment action (the “Ruane action”) against hundreds of participants in the Plan who are pursuing relief from Ruane in individual arbitration proceedings (the “Arbitration Claimants”). Ruane also named DST, plaintiffs in various ongoing private suits, and the Secretary as “nominal Defendants.” Ruane filed an amended complaint on December 18, 2019, in which it sought declaratory judgments and injunctive relief. On that same date, Ruane filed a motion for a preliminary injunction and appointment of a special master. Ruane sought to stay the arbitrations and sought a declaratory judgment ruling: (1) “that multiple participants here cannot at the same time seek recovery under ERISA in multiple forums for the same harm to the same Plan assets caused by the same alleged breaches of fiduciary duty” and (2) “that either Ferguson [a Plan participants’ private lawsuit] or Scalia [the Secretary’s lawsuit] represents all 10,000 Plan participants or only the approximately 500 who opted out of the Arbitration Agreement.”

On January 24, 2020, the Secretary filed an opposition to Ruane’s motion for a preliminary injunction and special master. The Secretary argued that Ruane had not met its burden for obtaining a preliminary injunction. Most notably, Ruane was unlikely to succeed on the merits because ERISA authorizes the Secretary and private litigants, including the Arbitration Claimants, to bring parallel actions to recover Plan losses. In particular, the Secretary has independent enforcement authority to further the public interest, distinct from the interests of individual Plan participants, such that the Secretary does not “represent” any participants as Ruane claimed. Additionally, Ruane would not suffer irreparable harm if the arbitrations were allowed to proceed, and neither the balance of hardships nor the public interest weigh in Ruane’s favor. On July 10, 2020, Ruane moved for voluntary dismissal of its claims after reaching a settlement with the Arbitration Claimants and certain individual plaintiffs. The Ruane action was dismissed with prejudice on September 28, 2020. New York Office and Plan Benefits Security Division

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E. Preemption

Howard Jarvis Taxpayers Association v. California Secure Choice Retirement Savings Program (E.D. Cal. and 9th Cir.)

In this case, plaintiffs allege that California’s Secure Choice Act (“the Act”) is preempted under ERISA section 514(a). As background, the Secure Choice Act requires that employers who do not have a pre-existing ERISA-covered retirement plan for their employees establish payroll deduction arrangements in order to fund IRAs managed by CalSavers, a subdivision of the California Treasurer’s Office.

The district court granted CalSavers’ motion to dismiss plaintiffs’ initial complaint on March, 2019, but gave leave to file an amended complaint. The government filed a statement of interest that opposed CalSavers’ motion to dismiss the amended complaint on September 13, 2019. The brief argues that the Act is preempted by ERISA under both the “reference to” and “connection with” doctrines, as well as general conflict preemption principles. Specifically, the brief argues that: (1) the Act makes “reference to” employee benefit plans by basing an employer’s obligation to maintain what is the functional equivalent of an ERISA-covered plan (through CalSavers) on what should be a voluntary decision to establish an ERISA-covered plan (outside of CalSavers); (2) that the CalSavers withholding arrangements are in fact ERISA covered plans because the employer’s duties under the Act are sufficient to find that the employer “maintains” the plan under ERISA section 3(2); (3) that the Act has an impermissible “connection with” employee benefit plans because state auto-IRA laws subject multi-state employers to a patchwork of different regulations affecting retirement plans; and (4) that the Act serves to force employers to establish ERISA covered plans.

On March 10, 2020, the district court granted Defendant’s motion to dismiss, holding that ERISA does not preempt the Act. Plaintiff appealed, and the Secretary filed an amicus curiae brief supporting plaintiff on June 19, 2020, contending that the Act was preempted. On February 5, 2021, the Secretary notified the Ninth Circuit that the Department had reconsidered the matter and no longer wishes to participate as amicus in the case and that the Department supports neither side. On May 6, 2021, the Ninth Circuit issued a decision affirming the district court and finding that ERISA does not preempt the Secure Choice Act. Plan Benefits Security Division

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F. Participants' Rights and Remedies

Gimeno v. NCHMD, Inc. (11th Cir.)

The case concerns a participant in an employer-sponsored group life insurance policy (a subsidiary of NCH Healthcare System, Inc.) who sought enrollment in supplemental coverage. The employer failed to ensure that the participant submitted a required “evidence of insurability” (EOI) form for the supplemental coverage, but nevertheless misrepresented to the participant that he was enrolled and deducted premiums from his paycheck. When the participant died three years later, the insurer denied the beneficiary’s claim for the $350,000 in supplemental proceeds because it had never received an EOI form. The beneficiary sued the employer for fiduciary breaches and requested equitable relief under ERISA section 502(a)(3) in the form of surcharge against the employer for the supplemental proceeds. At the pleading stage, the district court granted the employer’s motion to dismiss, holding that the beneficiary’s requested monetary relief was legal rather than equitable in nature and thus unavailable under section 502(a)(3).

On September 14, 2021, the Secretary filed an amicus brief supporting the plaintiff-appellant and urging reversal of the district court’s holding, primarily because the court relied on outdated precedent that is no longer good law in light of the Supreme Court’s decision in CIGNA Corp. v. Amara, 563 U.S. 421 (2011).

On June 28, 2022, the circuit court reversed the district court decision. Consistent with the Secretary’s position, the Supreme Court’s decision in Amara, and decisions in several other circuit courts, the circuit court held that the monetary relief the beneficiary sought was well-grounded in equity and the common law of trusts, and thus was available under section 502(a)(3). Beyond the issue of relief, the circuit court held that the employer could be held liable as a fiduciary and that the beneficiary did not improperly plead alternative claims under ERISA sections 502(a)(1)(B) and 502(a)(3). Thus, the circuit court reversed and remanded to the district court to allow the beneficiary to proceed with his fiduciary breach claims for the supplemental life insurance proceeds under section 502(a)(3). Plan Benefits Security Division

Laurent v. PwC (2d Cir.)

In a 2015 decision, the Second Circuit held that the PricewaterhouseCooper’s (PwC) pension plan violated ERISA’s accrual and vesting provisions. However, on remand, the district court held that ERISA did not provide a remedy for these ERISA violations under either section 502(a)(1)(B) or (a)(3). The participants appealed this ruling to the Second Circuit. On August 15, 2018, the Secretary filed an amicus brief supporting the participants, arguing that relief for violations of ERISA’s plan content standards are available under either section 502(a)(1)(B) or (a)(3). The Secretary also participated in oral argument on October 23, 2019.

On December 23, 2019, the Second Circuit reversed the district court’s decision, holding that ERISA sections 502(a)(3) and (a)(1)(B) authorize a two-step remedy. First, the Court read section 502(a)(3) as plainly authorizing equitable remedies, including reformation, to “redress violations ofʺ or ʺto enforce any provisions ofʺ ERISA. The Court further concluded that reformation may apply “where the written terms of a pension plan indisputably violate ERISA, but there is no allegation that the violation stems from traditional fraud, mistake, or otherwise inequitable conduct.” After holding that section 502(a)(3) authorizes the reformation of plan terms that violate ERISA, the Court had “little trouble holding that the district court [has] authority to grant . . . enforcement of the reformed Plan under [section] 502(a)(1)(B).”

PwC filed a petition for certiorari on July 10, 2020. On October 19, 2020, the Supreme Court requested the Government’s views on whether to grant certiorari on the question of whether “the Second Circuit improperly combined parts of two separate remedial sections under ERISA, interpreting section 502(a)(3) to permit reformation of a plan solely as a preparatory step to ultimate relief under section 502(a)(1)(B) in the form of money damages.”

On May 25, 2021, the Government filed an amicus brief urging the Court to deny certiorari. The Government disagreed with petitioners contention that the court of appeals erred in permitting respondents to simultaneously seek equitable reformation of the plan under section 502(a)(3) and pursue a claim for benefits pursuant to the plan as reformed under section 502(a)(1)(B). As the Government explained, the Second Circuit’s holding on that question reflects an ordinary application of the Federal Rules of Civil Procedure, which permit parties to jointly pursue such contingent claims. And the Second Circuit’s decision does not conflict with any decision of the circuit courts.

On June 28, 2021, the Supreme Court denied the petition for certiorari, in accordance with the Government’s position. Plan Benefits Security Division

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McQullin v. Hartford Life & Accident Ins. Co. (2d Cir.)

On October 5, 2021, the Secretary filed an amicus brief concerning the claims procedure regulation governing disability benefit claims. Under the claims procedure regulation, when a participant in a disability benefits plan appeals administratively a denial of benefits, the plan has 45 days to “notify a claimant . . . of the plan’s benefit determination on review.” 29 C.F.R. § 2560.503-1(i)(1)(i), (3)(i). In this case, after the participant timely appealed the plan’s denial of benefits, the plan issued a notice to the participant within the 45-day period, but it neither approved benefits nor upheld the denial in that notice. Instead, the plan told the participant that while it was overturning the denial, it would be sending the claim back to its claim department for further consideration and issuance of a new decision, which the plan made clear could result in a denial of benefits. The participant then brought a claim for benefits under section 502(a)(1)(B) without awaiting a further decision by the plan (the plan eventually denied benefits again). The district court dismissed the claim for failure to exhaust administrative remedies, holding that the plan’s vacate-and-remand decision qualified as a “benefit determination on review.” McQuillin v. Hartford Life & Accident Ins. Co., No. 20-CV-2353(JS)(ARL), 2021 WL 2323214, at *2 (E.D.N.Y. Feb. 12, 2021), report and recommendation adopted, No. 20-CV-2353(JS)(ARL), 2021 WL 2102480 (E.D.N.Y. May 25, 2021).

The Secretary argued in the amicus brief that the plan’s notice vacating the initial decision but returning it to the claim department for reconsideration was not a “benefit determination on review” because the plan did not “determine” benefits (by either approving benefits or upholding the denial). As a result, the plan failed to issue a “benefit determination on review” within the 45-day period required by the claims procedure regulation. And because the plan violated the claims procedure regulation, the participant’s administrative remedies should be “deemed exhausted.” 29 CFR § 2560.503–1(l). Plan Benefits Security Division

N.R. v. Raytheon (1st Cir.)

This case involves a suit by a beneficiary of an ERISA plan under ERISA section 502(a)(1)(B) (among other causes of action) alleging that ERISA’s MHPAEA provision (ERISA section 712, 29 U.S.C. § 1185), is a term of the plan, and that, by denying speech therapy benefits pursuant to an exclusion that violated MHPAEA, Defendants failed to pay benefits due under the plan. The district court dismissed the claim, holding that MHPAEA is not incorporated into the terms of ERISA plans but is instead a substantive provision of ERISA, the violation of which is redressable only through section 502(a)(3). Additionally, the court dismissed the plaintiff’s allegation under section 502(a)(3) that the plan’s application of the speech therapy exclusion violated ERISA’s parity requirements for a failure to allege sufficient factual details, despite the fact that the plan denied the plaintiff access to information that he requested, that he was entitled to under the Department’s claims procedure regulation and that would have allowed him to plead his parity allegation with more specificity.

On October 7, 2020, the Secretary filed an amicus brief in the case arguing that where beneficiaries have been denied plan benefits pursuant to limitations or exclusions that allegedly violate ERISA’s parity requirements, they may bring a cause of action for those benefits under ERISA section 502(a)(1)(B), and in construing their rights under the plan, a court should disregard terms contrary to ERISA’s requirements. The Secretary also argued that the court erred in failing to consider the plan’s violations of its disclosure obligations in assessing the plausibility of the plaintiff’s parity allegations.

On January 31, 2022, the First Circuit issued a favorable decision affirming in part and reversing in part the district court’s dismissal of claims asserted under ERISA, including its parity protections as amended by the Mental Health Parity and Addiction Equity Act. The Court’s decision essentially adopted the Department’s long-standing position that ERISA’s requirements (including its parity requirements) override any inconsistent plan terms. Plan Benefits Security Division

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Ovist v. Unum Life Ins. Co. of America (1st Cir.)

Plaintiff Rhonda Ovist was a professor at Rollins College and a participant in the College’s long term disability (LTD) plan insured and administered by Defendant Unum. The LTD policy had a 24 month limitation on benefits for disabilities based on self-reported symptoms (SRS), which are “manifestations” of a condition that are not objectively verifiable, such as fatigue, pain, and headaches. After independent medical review, Unum ultimately determined that Ovist’s symptoms were not objectively verifiable, and it applied the SRS limitation to terminate her benefits. Ovist filed suit in the U.S. District Court for Massachusetts, and the Court granted summary judgment for Unum, holding that Unum reasonably applied the SRS limitation. The Court also made the threshold finding that Ovist had the burden of proof to show her entitlement to benefits.

On October 21, 2020, the Secretary filed an amicus brief arguing that the burden to prove a limitation on benefits, like the burden to prove an exclusion from coverage, rests with the plan, not the participant.

On September 22, 2021, the First Circuit issued a decision upholding Unum’s decision. In so doing, the court said it need not reach the question of where the burden to prove an exclusion lies as it would not impact the outcome. Plan Benefits Security Division

Sheet Metal Workers Health and Welfare Fund of North Carolina v. Demayo (6th Cir.)

On April 9, 2021, the Secretary filed an amicus brief contending that the district court failed to correctly apply an equitable asset-tracing rule known as the “lowest intermediate balance rule.” In this case, the terms of the ERISA plan at issue entitled the plan to be paid first from settlement funds for a personal injury claim as reimbursement for medical expenses it had paid to the injured participant. After a plan participant recovered funds in a tort settlement, the law firm that represented him (the Defendant in this case) offered only partial payment to the plan, dispersing the rest of the settlement funds to the client, other lienholders, and itself. The plan filed suit against the law firm under ERISA section 502(a)(3) and tried to assert its lien against the money the law firm had paid itself. But the law firm argued that the plan had no equitable remedy because (1) the law firm had commingled the settlement funds into its general operating account, and (2) the law firm had dissipated the settlement funds. The district court granted summary judgment to the law firm, concluding that the law firm had dissipated the settlement funds after transferring them to its operating account, thereby extinguishing the Fund’s lien and defeating its claim for “equitable relief” under ERISA section 502(a)(3).

The amicus brief argued that in finding that the settlement funds were completely dissipated, the district court did not apply the lowest intermediate balance test. The lowest intermediate balance test is an equitable doctrine providing that where specifically identified funds have been commingled with other assets, a plaintiff may recover from the commingled account, up to the lowest balance of the commingled account after the specifically identified funds were deposited. The plaintiff’s equitable lien is not completely extinguished unless the balance of the commingled account drops to zero. The Secretary’s amicus brief argued that the district court erred by failing to apply this test and granting summary judgment to the law firm without ever finding that the balance of the commingled account had dropped to zero.

On December 17, 2021, the Sixth Circuit issued a deciding finding that the fund did not timely raise the lowest intermediate balance test in the proceedings below and failed to develop the evidentiary record supporting its proposed application of the test. The decision did not reach the merits of the lowest intermediate balance test, but it did clarify two concepts muddled by the district court: dissipation and commingling. The Sixth Circuit explained that “dissipating all of the plaintiff’s claimed funds bars recovery under ERISA § 502(a)(3), but commingling those funds does not.” Op. at 3. Affirming its prior decision in Zirbel v. Ford Motor Co., 980 F.3d 520 (6th Cir. 2020), the court clarified that “if a defendant only commingles the plaintiff’s claimed funds with its other assets, the defendant still possesses the claimed funds, making the plaintiff’s remedy an equitable one.” Plan Benefits Security Division

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G. Section 510

None

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H. Participant Loans

Note: This section covers loans made in violation of ERISA. For cases involving failure to forward participant loan repayments to plans, see section B.1.Collection of Plan Contributions and Loan Repayments.

None

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I. MEWAs

Scalia v. ABMS (N.D. Ga.)

On March 1, 2020, the Secretary filed a complaint against Advance Benefits Management Systems USA, Inc. (“ABMS”), its founder and CEO, C. Kenneth Johnson, and its former president, Randy Wright. ABMS was a third-party administrator that, ostensibly, administered 118 level-funded employer health benefits plans. The complaint alleges that ABMS, Johnson, and Wright diverted for their own use employer funds and employee claim funds that were owed to the plans. Due to their misuse of these funds, as well as to their failure to obtain insurance reimbursements for the plans, ABMS became insolvent and incapable of paying benefit claims that it owed and should have been able to pay. That insolvency left thousands of participants and beneficiaries, who had paid premiums believing they had health benefits coverage under the plans, personally liable for over $7,000,000 in medical charges. Thus, along with filing the complaint, the Secretary moved for judicial appointment of a successor fiduciary for the plans and for an All Writs Act order to temporarily stay any collection actions as well as other lawsuits regarding unpaid charges. On May 21, 2020, the court appointed an independent fiduciary, Larry Magarik, to administer the plans and their assets. The independent fiduciary has hired a third-party administrator to administer the payment of claims. The All Writs Act order was approved on June 2, 2020.

A consent judgment and order was entered on February 14, 2022 which ordered the Defendants to pay $735,000 in plan losses to a trust administered by the independent fiduciary. The Defendants also must pay a section 502(l) penalty. The consent order also sets forth deadlines for the independent fiduciary to complete a distribution plan and enjoins ABMS and Johnson from acting in any capacity to any ERISA-covered plan and from marketing or selling products or services to any ERISA-covered plan. It also enjoins Wright from, among other things, acting as a fiduciary to; provide administrative services to; or sell or market services to any ERISA covered plan. As well, the consent order bars Wright from selling to or attempting to sell to any ERISA covered plan: stop-loss insurance, captive insurance, reinsurance, and level funded healthcare benefits arrangements. The consent order similarly bars Wright from advising any ERISA covered plan concerning these latter four products. Wright will provide semi annual reports through 2024 regarding products he markets or sells. Atlanta Office

Acosta v. AEU Benefits, LLC (N.D. Ill.)

On November 2, 2017, the Secretary filed a complaint and motion for temporary restraining order (“TRO”) against AEU Benefits, LLC, AEU Holdings, LLC (together “AEU”), and Black Wolf Consulting, Inc. The ex parte motion and complaint alleged that participants in a multiple employer welfare arrangement (“MEWA”) are experiencing irreparable harm as a result of over $26 million in unpaid medical claims dating back to 2016, AEU and Black Wolf caused these losses as a result of the MEWA’s excessive fees, and plan assets are being unlawfully held in offshore Bermuda accounts. The court issued the TRO on November 3, 2017, temporarily removing AEU and Black Wolf from their positions as fiduciaries and service providers to the ERISA-covered plans participating in the MEWA, freezing bank accounts holding plan assets, and appointing an independent fiduciary to manage the MEWA and participating plans. On November 15, 2017, the court issued an order under the All Writs Act, staying and enjoining all state and federal court actions against the MEWA and participating plans, all actions against participants and beneficiaries for unpaid benefit claims incurred while participating in the MEWA, and prohibiting adverse credit reports against participants and beneficiaries for nonpayment of monies from health claims incurred while participating in the MEWA.

On December 13, 2017, the court entered a preliminary injunction. In addition to the relief set forth in the TRO, the preliminary injunction permits the appointed independent fiduciary to use the monies in all but one of the frozen bank accounts to pay claims and reasonable and necessary plan expenses, and requires AEU and Black Wolf to pay the independent fiduciary’s fees. On December 21, 2017, the court granted the independent fiduciary’s motion to terminate the MEWA and participating plans effective January 31, 2018, except as to plans associated with aggregator Focus Health Solutions, which will be the subject of further briefing. In addition, on November 6, 2017, the Secretary issued a cease and desist order to stop all sub-brokers and aggregators to the MEWA from marketing the MEWA and accepting new applications for enrollment, in order to limit additional harm to prospective employers and participants. Of the 53 subjects of the cease and desist order, five requested hearings before the Office of Administrative Law Judges.

Between January and May 2018, all objections to the cease and desist order were resolved by individual agreements before the Administrative Law Judge. On March 2 and 10, 2018, the AEU Defendants and Black Wolf filed answers to the complaint. On September 12, 2018, AEU Defendants filed an amended answer and third-party claims against Black Wolf and new third-parties to the action. On October 9, 2018, the Secretary filed an amended complaint and added new Defendants: James D’Iorio, Steven Goldberg, Charles LaMantia, Rod Maynor, Stephen Satler, Veritas Benefits, LLC, Veritas PEO, LLC, Wilson Benefit Services, LLC, WBS, LLC, and Donald R. Wilson. On November 14, 2018, a third-party Defendant, Tall Tree, LLC, filed a motion to dismiss AEU’s allegations against it.

On December 20, 2018, Satler, Goldberg, AEU Defendants filed an answer to the Secretary’s amended complaint. On December 20, 2018, LaMantia filed an answer to the Secretary’s amended complaint.

On January 11, 2019, the court entered a consent order and judgment against Defendants SD Trust Advisors, LLC, and Thomas Stoughton, requiring restoration of $175,000 to the MEWA. On January 17, 2019, Defendant Wilson filed an answer to the Secretary’s first amended complaint. D’Iorio and the Veritas entities filed their answer on February 7, 2019, and filed an amended answer on February 28, 2019.

On February 25, 2019, Black Wolf and Maynor filed a Motion for Leave to File a Cross-Claim against the court-appointed independent fiduciary. This motion was denied on April 24, 2019. Black Wolf and Maynor filed their answer to the Secretary’s first amended complaint on May 1, 2019. On August 20, 2019, the Secretary filed a motion to hold the AEU Defendants and Black Wolf in contempt for failing to repay the independent fiduciary’s fees and expenses as required by the preliminary injunction.

On September 25, 2019, the case was referred to a magistrate judge for a settlement conference. On October 11, 2019, the court granted the AEU Defendants’ Motion to File Their Profit and Loss Statement (an attachment to their response to the Secretary’s contempt motion) under seal. The Secretary filed a motion for reconsideration, which the court granted on December 5, 2019, unsealing the AEU Defendants’ profit and loss statement.

On December 19, 2019, the Secretary filed a second amended complaint, alleging successor liability and/or alter ego liability against new Defendants Halo P & C North America, LLC, and Halo Advisors, LLC. The second amended complaint also made new allegations of co-fiduciary liability against Defendants LaMantia, D’Iorio, and the Veritas Defendants.

On January 9, 2020, the Secretary attended settlement conferences with the following Defendants: AEU, Satler, Goldberg, Black Wolf, Maynor, LaMantia, Wilson Benefit Services LLC, WBS, LLC, and Donald Wilson.

On June 26, 2020, the court entered two consent orders and judgments. The first requires LaMantia to restore $82,140 to the MEWA. The second requires Wilson Benefit Services LLC, WBS, LLC, and Donald Wilson to restore $18,000 to the MEWA. On July 13, 2020, Veritas Benefits, LLC, Veritas PEO, LLC, and D’Iorio attempted to file a pro se answer to the Second Amended Complaint. The Secretary objected to D’Iorio filing a pro se answer on behalf of corporate Defendants, and subsequently, D’Iorio filed an amended answer on only his behalf. On September 21, 2020, the court entered a consent order and judgment against Defendants AEU Benefits, LLC, AEU Holdings, LLC, Halo P&C North America, LLC, Halo Advisors, LLC, Satler, and Goldberg, requiring them to restore $1,133,000 to the MEWA.

As of October 2020, the remaining Defendants in this matter are: Black Wolf/Maynor, Veritas Benefits, LLC, Veritas PEO, LLC, and D’Iorio. All Defendants are unrepresented by counsel. On October 19, 2020, the court granted the parties’ motion for revised scheduling order. Under the revised scheduling order, the parties have until May 28, 2021, to complete fact discovery; until June 30, 2021, for Plaintiff to disclose his expert report(s); and until November 30, 2021, to file dispositive motions.

On January 11, 2021, the Secretary filed a motion for default judgment against Veritas Benefits, LLC and Veritas PEO, LLC. On April 6, 2021, the Secretary filed a motion for default judgment against Black Wolf Consulting, Inc. and Rod Maynor.

On July 12, 2021, the court granted the Secretary’s motions for default judgment against Veritas Benefits, LLC, Veritas PEO, LLC, Black Wolf Consulting, Inc., and Rod Maynor. The final judgment order requires Veritas Benefits, LLC and Veritas PEO, LLC to restore $15.9 million to the MEWA and requires Black Wolf Consulting, Inc. and Rod Maynor to restore $55,032 to the MEWA. When the court entered a consent order and judgment on September 7, 2021 requiring D’Iorio to restore $150,000 to the MEWA, the Secretary’s litigation against all Defendants had been resolved.

However, the independent fiduciary has ongoing litigation over his motion to approve a plan of distribution and to approve an interim distribution, which was opposed by third-party brokers. On December 17, 2021, the Secretary filed a motion in opposition to the third-party brokers’ motion to intervene in the litigation. Chicago Office

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Perez v. Doyle (D.N.J. and 3rd Cir.)

On April 28, 2005, the Secretary filed a complaint involving the Professional Industrial & Trade Workers Union (“PITWU”) Health and Welfare Fund, a MEWA. The Secretary alleged that James Doyle, who marketed the plan’s health benefits, diverted employer contributions paid to the plan’s trust for non-plan purposes, including for his own commission and fees, and that Cynthia Holloway, as a trustee, failed to institute any proper administration of funds despite clear indications of diversion. The fund collapsed with more than $7 million of unpaid health claims. Following a bench trial in 2009, one Defendant, Mark Maccariella, a co-trustee, entered into a consent order in which he agreed to be enjoined from serving as a fiduciary or service provider for any ERISA-covered plan and to restore more than $195,000 to the plan. On June 30, 2010, the district court granted judgment in favor of Doyle and Holloway, finding that the Secretary failed to conclusively establish that the plan was underfunded or that the marketing fees were unreasonable.

The Secretary filed an appeal on August 27, 2010, with an opening brief filed on December 13, 2010 and a reply on March 4, 2011. The Secretary argued that the district court erred in holding that Holloway, as trustee, did not breach her duties when the evidence showed that she failed to prudently manage the trust fund and did nothing to prevent the diversion of its assets, and that there was substantial evidence, which the district court failed to address, that Doyle was a fiduciary in that he controlled plan assets and that the fees he forwarded from plan assets were unreasonable. The Third Circuit heard oral argument on April 27, 2011. The Secretary received a favorable decision on March 27, 2011, vacating the decision and remanding for further proceedings.

On January 8, 2015, the district court issued a post-remand decision against the Defendants, holding Holloway and Doyle liable for diverting over $4.6 million and $3.8 million of plan assets, respectively, in the form of bogus union dues and unnecessary sales commissions. The Defendants appealed once more to the Third Circuit. The Secretary filed a response on September 3, 2015 arguing that the paid employer contributions were plan assets, that Doyle is a functional fiduciary based on his control and discretion over the billing and receipt of the paid employer contributions, and that Holloway and Doyle had both breached multiple fiduciary duties in failing to protect these plan assets from diversion. Oral argument, in which the Secretary participated, was held on January 21, 2016.

On August 18, 2016, the Third Circuit issued a mostly favorable decision upholding the functional fiduciary status of the appealing Defendants. The Third Circuit rejected Doyle’s arguments and affirmed in full the lower court’s judgment against Doyle. The court also rejected Holloway’s arguments that the contributions were not plan assets but remanded to have the district court make findings as to when Holloway’s liability for plan losses arose. The Third Circuit found that Holloway could not simply be held liable for losses starting on the date of her installation as a fiduciary; liability could only attach when sufficient “red flags” (the Third Circuit’s phrase) put her on notice.

The district court judge then issued an “order on mandate” re-entering the case on the district court docket on November 3, 2016. The district court assigned the case to a magistrate judge for settlement discussions. Pre-trial conferences were held on March 14, 2018, and September 11, 2018. On November 5, 2018, the magistrate judge permitted the Secretary to conduct additional written discovery and take depositions of additional witnesses with respect to Holloway’s affirmative defense and set this matter for trial. On March 11 and 12, 2019, trial was held. The parties submitted posttrial briefs on July 19, 2019.

On November 13, 2020, the district court issued an opinion holding Holloway jointly and severally liable along with the other Defendants, awarding $776,709 in restitution to the fund, imposing a fiduciary bar, and ordering briefing on prejudgment interest. On December 11, 2020, the Secretary filed a brief arguing prejudgment interest should be awarded at the 26 U.S.C. § 6621(a)(2) underpayment rate, compounded daily. On January 29, 2021, Holloway filed an opposition brief, arguing that no interest was appropriate on the facts. The Secretary filed a reply on February 11, 2021. On March 16, 2021, the court issued an opinion declining to order prejudgment interest.

On May 21, 2021, the Secretary filed a consent judgment providing that Holloway would repay $390,000 and forego appeal. The court entered the consent judgment on June 16, 2021. New York Office and, on appeal, Plan Benefits Security Division

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Secretary v. Koresko (E.D. Pa. and 3rd Cir.)

This is a fiduciary breach case involving the diversion of assets from a MEWA death benefit arrangement. While the case was ongoing in the district court, Koresko and other Defendants filed multiple appeals, a motion to stay and a mandamus action. Ultimately, the Secretary was successful in getting all of the appeals dismissed as interlocutory, except the appeal from the order prohibiting the Defendants from acting as plan fiduciaries or service providers and appointing an independent fiduciary. Eventually, after numerous extensions, Koresko filed his opening brief on May 28, 2014, and the Secretary filed a response brief on June 27, 2014, arguing that the court of appeals should uphold the district court’s order. On March 6, 2015, the appeal was submitted to a panel without oral argument.

Meanwhile, the district court held a three-day bench trial in June 2014. By decisions issued in February and March 2015, the district court made the injunctions permanent and held Koresko liable for $38 million in plan losses. On April 24, 2015, the district court granted the Secretary’s and U.S. Trustee’s motion to dismiss six pending Koresko-related bankruptcy petitions with prejudice, finding that the bankruptcy process had been used as a means to impede the Department of Labor’s prosecution against the Koresko Defendants rather than to benefit the beneficiaries. On July 21, 2015, the district court issued an order appointing a forensic accountant responsible for conducting, at the Defendants’ expense, an equitable accounting of the assets of the trusts at issue, with a sub-accounting of each plan’s interest in the trust. On August 4, 2015, the district court issued an order appointing a new independent fiduciary and ordering Koresko to pay for the associated costs at the end of the appointment.

Koresko appealed the merits decision, and filed a brief on September 23, 2015, to which the Secretary responded on November 9, 2015. Koresko also appealed the August 4 order appointing an independent fiduciary, and the court ordered the appeals consolidated and asked for additional briefing on the issues relating to the order. The parties submitted letter briefing on these issues. On April 5, 2016, the Third Circuit affirmed in full the judgment against Koresko without holding oral argument.

In subsequent proceedings, the district court ordered Koresko to turn over property and assets to the Trust pursuant to the judgment. Koresko did not comply, and the court jailed Koresko for contempt. Koresko challenged the order of contempt but was denied relief. On October 15, 2016, Koresko appealed that denial. At the same time, the Secretary proceeded with collection efforts, and, on April 21, 2016, the Secretary’s representative recorded the final judgment in this case for restitution of losses and disgorgement of profits in the State of Oklahoma, based on information that Koresko held funds in escrow in Oklahoma that could be used towards satisfying Koresko’s liability. On September 23, 2016, the district court issued a writ of continuing garnishment. On October 17, 2016, the Secretary identified $50,000 held in an escrow account in which Koresko has a substantial, non-exempt interest subject to the garnishment order. On November 10, 2016, Koresko filed a motion to quash the writ of garnishment, which the court denied on December 5, 2016.

On January 13, 2017, Koresko filed another notice of appeal with respect to a garnishment order. On February 8, 2017, Koresko filed a motion to stay proceedings along with other miscellaneous relief. The Secretary filed a response on February 21, 2017. The Third Circuit, on March 15, 2017, denied Koresko’s motion for miscellaneous relief. The Third Circuit then consolidated the two appeals. On June 19, 2017, Koresko filed a letter motion for release pending appeal and a stay of briefing. The Department filed a response on August 3, 2017, and the Court denied the motion on August 18, 2017. Koresko’s opening brief was filed on August 18, 2017, and the Secretary filed a response brief on October 18, 2017. Koresko filed an Emergency Motion for Immediate Release and Vacatur of Orders on November 15, 2017. The Secretary filed a response on November 20, 2017. The Third Circuit denied the motion as moot on November 27, 2017. On December 5, 2017, Koresko filed a new motion, again urging the court to release him and the Secretary filed a similar response. On December 19, 2017, the motion was denied.

On December 15, 2017, the district court held a hearing with Koresko, asking him to sign a power of attorney, which might have released him from contempt of court. Koresko refused to sign.

Koresko filed two appeals, on January 19, 2018, and February 9, 2018, with the Third Circuit, while awaiting a decision on the contempt and garnishment orders, regarding various district court proceedings and demanding release. The Secretary responded to each appeal, arguing that the court lacked jurisdiction and that Koresko lacked standing to appeal. The Third Circuit denied both appeals for a lack of appellate jurisdiction and also denied his petitions for rehearing.

On March 23, 2018, the Third Circuit issued a decision affirming both the contempt and garnishment orders, rejecting Koresko’s arguments that he had been wrongfully imprisoned and holding the garnishment was appropriate. On June 12, 2018, the Third Circuit denied Koresko’s petition for a rehearing, and a mandate was issued on June 20, 2018. Koresko filed one additional appeal with the Third Circuit on June 20, 2018, but it was dismissed for failure to pay the filing fee for the notice of appeal. Subsequently, Koresko was released from federal custody following an order issued by the district court on June 22, 2018, vacating the contempt order once Koresko executed a power of attorney related to the real estate in Nevis.

After receiving extensions to file, on November 1, 2018, Koresko filed a petition for a writ of certiorari with the United States Supreme Court regarding the contempt order, and on November 9, 2018, Koresko filed a petition for a writ of certiorari with the United States Supreme Court regarding the garnishment order. The government waived a response to both petitions, and the Supreme Court denied both petitions.

On November 3, 2018, the district court held a day-long evidentiary hearing on the issues of whether Wilmington Trust Company (“WTC”), the court-appointed trustee, properly handled the tax liability and tax withholdings relating to the distribution of trust funds to plan sponsors and plan participants under the Court’s equitable distribution order. The Department cross-examined two witnesses from WTC who confirmed that it violated a court order prohibiting the trustee from withholding employer-side FICA taxes from the corpus of the trust. The witnesses also confirmed that WTC failed to investigate and address properly the past tax settlements between the IRS and various plan sponsors and participants when determining whether tax withholdings were proper in connection with the equitable distribution. As a result, the court ordered WTC to restore $778,485 to the trust and enjoined it from certain tax withholdings until further instruction from the court.

On April 8, 2019, the district court held a hearing on points of law to determine how WTC should handle the past tax withholding errors. Although the Department took no position on the requirements under the Internal Revenue Code, the Department suggested a possible course of action that would comply with ERISA. As a result, on August 9, 2019, the court ordered that WTC obtain refunds from the IRS relating to past tax withholding errors.

On December 3, 2020, the district court granted the Secretary’s July 31, 2020 request for final distribution of the remaining $17.7 million being held in trust for the benefit of the welfare benefit plans whose assets were misappropriated by John Koresko in the late 1990s and early 2000s. The court ordered that the final distributions be made by January 29, 2021, that the independent trustee, Wilmington Trust, submit a final accounting by February 26, 2021, and that the Department submit a proposed order to enter final judgment 30 days thereafter.

On July 28, 2021, the Secretary filed a proposed final judgment, along with a motion to allow the independent trustee, Wilmington Trust, to resolve some outstanding matters. On August 18, 2021, the court entered an order dismissing the forensic accountant and Wilmington Trust (subject to minor outstanding items) from further responsibilities for the case, and the court also entered a separate final order adding $4 million more in costs and attorney’s fees to the $20 million the court previously found Koresko owed in restitution to the plans. The court stated it will not retain jurisdiction of the case. Philadelphia Office and, on appeal, Plan Benefits Security Division

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Secretary v. Medova Healthcare Financial Group, LLC (D. Kan.)

On December 10, 2020, the Secretary filed a complaint and an ex parte motion for a temporary restraining order and preliminary injunction against the Medova Healthcare Financial Group, LLC; Daniel Whitney; Michelle Willson; Midlands Casualty Insurance Company, Inc.; Just Diabetic Supplies, LLC; Advent Health Services, LLC; Capital Advisors, Inc.; Patrick Enterprises, Inc.; Lifestyle Health Plans Group Benefit Program; Lifestyle Health Plans – Level Funded Group Benefits; Level Funded Lifestyle Self-Insured Health Plan; and Lifestyle Health Plans (collectively, the “Medova arrangement”). The ex parte motion and complaint alleged that the Defendants’ misuse of the Medova arrangement’s funds created a critical funding deficiency of over $18 million. As of November 6, 2020, the Medova arrangement provided benefits and held assets for at least 2,600 participating health plans serving more than 35,000 employees in 38 different states. On December 11, 2020, the court denied the motion, stating that the Secretary failed to show “immediate and irreparable injury” and that Defendants’ counsel “should be given an opportunity to be heard.” The complaint alleged that the Medova Defendants breached their fiduciary duties of loyalty and prudence and engaged in prohibited transactions in violation of ERISA by commingling plan assets, diverting plan assets to corporate accounts and other companies they controlled, and using plan assets belonging to one plan to pay the claims of another going back as far as 2016. The Secretary alleged the Defendants made material omissions to current and prospective participating employers regarding the Medova arrangement’s failure and its ability to pay claims, as well as the overall financially hazardous condition of the Medova arrangement. The complaint also alleged that the Medova Defendants failed to file the Form M-1 on an annual basis for the Medova arrangement as required under ERISA. The complaint sought to have the Medova Defendants removed and barred from serving as fiduciaries or service providers to the individual employer plans that participate in the Medova arrangement and the appointment of an independent fiduciary to oversee the Medova arrangement’s operations, marshal and control the assets of the plans as it relates to the underlying participant plans, perform an accounting of the Medova arrangement’s financial position, determine the Medova arrangement’s ability to pay outstanding participant health claims, work to negotiate and pay outstanding health claims, and provide sufficient notice of the Medova arrangement’s termination, if such termination is deemed appropriate. The complaint also sought to have Defendants disgorge to the Medova arrangement all profits and fees and other monies earned in connection with their violations.

On March 18, 2021, the court entered a consent order appointing an independent fiduciary on an interim basis with exclusive authority and control over the administration of the self-funded health plans participating in the Medova arrangement; the independent fiduciary is vested with exclusive authority and control over the bank accounts established for these plans and certain other Medova accounts. In addition, the consent order prohibits any distributions, draws, withdrawals, management fees or other transfers by the Medova Defendants to Defendants Whitney, Willson or Medova (including its affiliates) without the authorization of the independent fiduciary. The consent order also provides the independent fiduciary authority with oversight of all Medova’s stop-loss operations, and directs Medova and its affiliate, Midlands Casualty Insurance Company, to cease issuing stop-loss policies to Medova clients directly or through quota-share reinsurance agreements with other carriers through which Midlands ultimately carries the risk.

On June 3, 2021, the court entered an order under the All Writs Act to stay and enjoin all pending and future state court, federal court, administrative, or arbitration actions against Defendants, Medova’s Lifestyle Health Plans (“Plans”), the independent fiduciary, the participating plans, any participating plan assets, or any of the participating plans’ participants or beneficiaries relating to unpaid benefit claims incurred by the participating plans and their participants and beneficiaries. The order also protects the above-listed entities from collection actions and prohibits all known creditors of the plans, collection or credit reporting agencies, and their agents from making any adverse credit reports regarding participants or beneficiaries of the plans for unpaid health claims.

Following a court-ordered mediation on September 15, 2021, the court granted the parties’ joint motion for a stay of the proceedings pending resolution of the related Department of Justice investigation of Defendants. The court also adopted as part of its order the parties’ agreement that Defendants will not serve or act as a fiduciary with respect to any ERISA-covered plan during the pendency of the stay order. In addition, the court ordered Defendants to provide a $350,000 reimbursement for independent fiduciary fees and costs with the Secretary reserving the right to pursue additional reimbursement following the stay. Kansas City Office

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Acosta v. Riverstone Capital LLC (C.D. Cal.)

On February 1, 2019, the Secretary filed a complaint alleging that Defendants Riverstone Capital LLC (“Riverstone”), Nexgen Insurance Services, Inc., NGI Brokerage Services, Inc., James C. Kelly, Travis Bugli, and Robert Clarke, as the operators of an unlicensed MEWA, violated ERISA by failing to prudently set adequate premium rates to properly fund the 100 participating ERISA-covered plans, failing to hold the assets of the MEWA in trust, and charging excessive fees. As unpaid claims mounted, the operators of the MEWA delayed the payment of approved claims and “cherry-picked” which claims to pay. The complaint also alleged that the Defendants made misrepresentations to the participating employers and agents marketing the MEWA related to the funding of reserves.

On the same day the lawsuit was filed, the Secretary moved for an ex parte temporary restraining order. The court issued emergency relief that included freezing bank accounts containing plan assets and restraining the operators from their fiduciary functions over the MEWA. On February 7, 2019, the Secretary secured and filed, and the court approved, a stipulated amended temporary restraining order. This order temporarily appointed an independent fiduciary, Receivership Management, to take control over operation of the MEWA. The order charged Receivership Management with taking all reasonable steps necessary to marshal the existing plan assets and place them in trust, perform an accounting, pay urgent claims, communicate with impacted entities and persons, and design and implement a fair process for paying out covered claims to the extent feasible. In addition, the order temporarily protected participants and beneficiaries who are unable to pay covered medical expenses from collections actions until further order by the court. This relief was granted under the All Writs Act, 28 U.S.C. §1651.

On March 7, 2019, the Secretary filed a consent judgment against Defendants James C. Kelly, Travis Bugli, and Robert Clarke, the three individuals who owned Riverstone. The judge requested a hearing, which took place on March 13, 2019. The judge entered the consent judgment after the hearing. Under the consent judgment, all of the owners of Riverstone were debarred from serving as fiduciaries or service providers to ERISA-covered plans. They admitted to their ERISA violations and relinquished all claims on all assets seized under the Department’s February 7, 2019 order as well as all money traceable to those accounts. The Defendants were ordered to repatriate approximately $400,000 that they had sent to an account in the Cayman Islands. The Defendants surrendered all assets and administration to the independent fiduciary and consented to termination of the MEWA. The consent judgment also provides All Writs Act protection for participants and beneficiaries and allows the Department to seek a money judgment in the future should Defendants become solvent.

The Secretary filed a motion for default judgment on March 22, 2019. After a hearing on April 28, 2019, the district court on May 1, 2019, entered default judgment against the remaining corporate Defendants.

Also on May 1, 2019, the court also issued an order that deferred ruling on the independent fiduciary’s motion to liquidate the MEWA, pending revision of proposed deadlines for participating employers and providers to submit claims and pending revisions to proposed notice procedures. In response to the independent fiduciary’s proposed liquidation plan, several participating employers objected on the grounds that they allegedly signed contracts with Riverstone whereby Riverstone would fund employee claims. The Secretary filed a position statement explaining that any purported contract was with Riverstone, the corporate entity, and not with the plan; that the operative plan terms were laid out in the plan documents which, among other things, expressly stated that these were self-funded plans; that participating employers were responsible for funding employee health claims; and that participating employers were identified as plan administrators and named fiduciaries. The court agreed with the Secretary, finding that, per the plan documents, participating employers are “clearly” responsible for paying employee benefits claims.

On May 9, 2019, the court approved a revised proposed liquidation plan submitted by the independent fiduciary. Among other things, the liquidation plan provides All Writs Act protection against any collection actions outside the procedures set forth in the liquidation plan, as other actions would frustrate the purpose of allocating limited plan assets to pay health claims to the greatest extent feasible.

In April 2020, in Bugli’s personal bankruptcy case, the Secretary obtained an order holding that Bugli’s debts to the plan identified in the consent judgment were not dischargeable in bankruptcy. The Secretary continued to monitor this case and communicated regularly with the independent fiduciary.

In June 2021, the Secretary consulted with independent fiduciary’s counsel and provided comments to a motion filed against employers who continued to refuse to pay amounts owed pursuant to their employee benefit plans. On December 29, 2021, the court ordered Broad Band Integrators, Inc. to remit $133,366 to the independent fiduciary. The independent fiduciary reported that as of November 24, 2021, over $5 million in stop-loss claims had been resolved, and that of the $47,779,925 in unpaid claims that were not covered by stop-loss insurance and had been submitted by providers for the June 28, 2019 claims runs, over $41 million in claims had been resolved. On December 17, 2021, the independent fiduciary reported that 80 employers had fully funded their obligations. The Secretary continues to monitor the case and consult with the independent fiduciary. Los Angeles Office

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J. Financial Institution and Service Provider Cases

United Behavioral Health (E.D.N.Y.)

On August 11, 2021, the Secretary filed a complaint alleging that Defendants United Behavioral Health (“UBH”) and UnitedHealthcare Insurance Company (“UHIC”) had caused ERISA-covered plans to violate the Mental Health Parity and Addiction Equity Act of 2008 (“MHPAEA”) in two ways. First, Defendants reduced reimbursement rates relating to mental health services provided by non-MD providers in a way that was not comparable to any reductions performed on the medical/surgical side. Second, Defendants applied algorithms to flag and deny “outlier” usage of mental health services in a way that was not comparable to usage mechanisms used on the medical/surgical side. The same day, the Secretary filed two stipulations of settlement, providing the Defendants would pay roughly $13.5 million to affected participants and beneficiaries and roughly $2.1 million in penalties. New York

Wit v. United Behavioral Health (N.D. Cal.)

On May 19, 2021, the Secretary filed an amicus brief in this class-action ERISA health benefits case on the issue of Article III standing. The suit was brought by participants in health plans administered by United Behavioral Health (UBH). The plaintiff class alleged that UBH failed to follow plan terms and breached its duties of prudence and loyalty when it used its own internal guidelines to determine eligibility for mental health benefits. The court concluded that all the plans required “as one (though not the only) condition of coverage that the mental health or substance use disorder treatment at issue must be consistent with generally accepted standards of care.” After a 10-day bench trial, the court found that UBH’s guidelines were inconsistent with generally accepted standards of care in several ways, including that the guidelines required a showing of acute crisis, failed to sufficiently consider co-occurring conditions, failed to apply criteria specific to children and adolescents, and required measurable progress.

UBH appealed, asserting that plaintiffs lacked standing to bring these claims and should not be certified as a class because their allegations were based on procedural injury—UBH’s use of flawed guidelines not traceable to a particular benefit denial—rather than on the denial of benefits. UBH also argued that the district court failed to defer to UBH’s authority to interpret plan terms and erred by rewriting the plans to require coverage consistent with generally accepted standards. Finally, UBH argued that the district court erred by excusing absent class members from the requirement to exhaust administrative remedies.

On appeal, the Secretary filed an amicus curiae brief urging affirmance of the district court’s ruling on standing, without opining on class certification, merits, or exhaustion of administrative remedies. On standing, the Secretary asserted that plaintiffs demonstrated an injury-in-fact and traceability on their challenge to the denial of benefits based on the improper guidelines. The Secretary also disputed UBH’s argument that plaintiffs first had to demonstrate that they would be entitled to benefits under an appropriate set of guidelines in order for the district court to remand their claims to UBH for reprocessing; the fact that UBH used the wrong standard was enough. Plan Benefits Security Division

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K. Orphan Plans

Scalia v. Aprinta Group, LLC (M.D. Ala.)

On July 17, 2020, the Secretary filed a complaint against Aprinta Group, LLC (“Aprinta”) and William Austin Dolan, II (“Dolan”). The complaint alleged that Aprinta and Dolan were fiduciaries of Aprinta’s Health Plan and Aprinta’s Disability Plan. The complaint further alleged that Aprinta and Dolan breached their ERISA fiduciary duties when they withheld at least $30,418 in employee health plan contributions and $4,776 in employee disability plan contributions, but then failed to remit those contributions to the respective plans. The complaint asks the court to: (1) permanently enjoin the Defendants from serving as a fiduciary, administrator, officer, trustee, custodian, agent, employee, or representative having control over the assets of any ERISA-covered plan; (2) enjoin the Defendants from engaging in any further action in violation of Title I of ERISA; (3) appoint a successor fiduciary at the Defendants’ expense to administer the plans; and (4) order the Defendants to restore all losses, including interest and lost opportunity costs, to the plans.

On September 10, 2021, on the Secretary’s motion, the court entered a default judgment against the Defendants. The default judgment held Defendants liable for losses suffered by the plans due to their failure to remit contributions to the plans, permanently enjoined and restrained Defendants from violating ERISA, and permanently enjoined Dolan and Aprinta from acting as fiduciaries to any ERISA-covered plan. The default judgment ordered the Defendants, jointly and severally, to make $30,418 in restitution to the Health Plan and $4,776 in restitution to the Disability Plan. Post-judgment interest was assessed against Defendants on any remaining unpaid balance from the date of judgment until both amounts are paid in full. The judgment also authorizes the Secretary to move for the appointment of an independent fiduciary at Dolan and Aprinta’s expense. See also Scalia v. Aprinta Group, LLC, Section B.1. Collection of Plan Contributions and Loan Repayments. Atlanta Office

Walsh v. Clawson Construction Co. (N.D. Cal.)

On April 22, 2021, the Secretary filed a complaint seeking appointment of an independent fiduciary to distribute participants’ retirements savings from the Clawson Construction Co 401(k) Plan, and terminate the plan. The plan sponsor, Clawson Construction Company, ceased operations after John Clawson, its Chief Executive Officer, Chief Financial Officer, and President died in December 2018. Mr. Clawson was named as the sole trustee of the Clawson Construction Co., Inc 401(k) Profit Sharing Plan. After the Defendants failed to respond to the complaint by the August 3, 2021 deadline, the Secretary sought entry of default, which the clerk entered on August 19, 2021.  The Secretary filed a motion for default judgment on September 30, 2021. On October 5, 2021, the court referred the matter to a magistrate judge and ordered the Secretary to file a proposed findings of fact and conclusions of law by October 21, 2021.  After the Secretary filed proposed findings of fact and conclusions of law, on October 29, 2021, the magistrate recommended the default judgment be entered, which would appoint an independent fiduciary to distribute $998,236 to 16 plan participants and beneficiaries, and terminate the plan.  San Francisco Office

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Walsh v. Cloud Consulting Partners, Inc. (C.D. Cal.)

On July 26, 2021, the Secretary filed a complaint to recover $165,870 due to eight participants of the Cloud Consulting Partners, Inc. 401(k) Profit Sharing Plan, and requesting the appointment of an independent fiduciary to distribute plan assets to participants who could not otherwise access their retirement savings.  Prior to filing the complaint, Cloud Consulting Partner’s CEO, which was also the plan’s sole trustee, had failed to respond to the Secretary. However, on August 31, 2021, after the complaint had been filed, the Department successfully contacted the CEO, who agreed to waive service of summons and entered into discussions about the actions she would need to take to resolve the lawsuit.  After facilitating communications with the trustee and the custodian of the plan assets, on December 2, 2021, the Department received documentation showing that approximately $165,000 in plan assets had been distributed to eligible plan participants, and the trustee was in the process of terminating the plan. On December 6, 2021, the Secretary dismissed the case without prejudice. Los Angeles Office

Walsh v. Debt Free Financial Systems LLC (D. Ariz.)

On March 31, 2021, the Secretary filed a complaint seeking appointment of an independent fiduciary to distribute retirement savings to participants of the Debt Free Financial Systems LLC Profit Sharing Plan. The plan was created in 2002 by Debt Free Financial Systems LLC (“DFFS”), which ceased operations in 2017. The sole trustee, officer, and owner of DFFS, Matthew C. Golden, pled to a theft crime in Maricopa County and thereafter absconded, without appointing a successor trustee. In June 2021, the Secretary filed effected service of the complaint on the defunct corporation through the Arizona Corporation Commission. The Secretary filed a request for default judgment on July 9, 2021, and on July 12, 2021, the clerk entered default.  On September 3, 2021, the Secretary filed a motion for default judgment, which the court granted on November 3, 2021. The default judgment provides for the appointment of an independent fiduciary to distribute $187,900 in plan assets to the plan participants, and to terminate the plan. Los Angeles Office

Walsh v. Executive Imaging Systems, Inc. 401(k) Plan (D.N.J.)

On September 1, 2021, the Secretary filed a complaint alleging that fiduciaries had failed to administer the Executive Imaging Systems, Inc. 401(k) Plan. On October 19, 2021, the Secretary filed and the court entered a consent judgment appointing an independent fiduciary. New York Office

Walsh v. Gutters Perfect, Inc.(W.D. Wash.)

On June 15, 2021, the Secretary filed a complaint seeking appointment of an independent fiduciary to distribute retirement savings to participants who could not otherwise access them. The Gutters Perfect, Inc. dba Leaf Filter 401(K) Plan was created by Gutters Perfect, Inc., which ceased operations in 2013. The sole trustee, officer, and owner of Gutters Perfect died in 2019. After his death, no successor trustee was ever appointed and there was no fiduciary to act on behalf of the plan. Accordingly, participants who were eligible for distributions of their account balances had been unable to access their funds. After serving the complaint on July 12, 2021, the Secretary filed a request for entry of default on September 3, 2021. On December 17, 2021, the Secretary filed a motion for default judgment, seeking to appoint an independent fiduciary to distribute approximately $38,000 in plan assets to the plan participants, and thereafter terminate the plan. San Francisco Office

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Scalia v. Impact Solutions (N.D. Ga.)

On July 6, 2020, the Secretary filed a complaint against Impact Solutions Consulting Inc., Russell Forde, and Nashlee Young, fiduciaries to the Impact Solutions Consulting, Inc. 401(k) Profit Sharing Plan, alleging that the fiduciaries breached their ERISA fiduciary duties because they failed to terminate the plan and failed to ensure that approximately $188,654 in plan assets were distributed to seven participants. The complaint asks the court to: (1) enjoin Defendants from serving as a fiduciary, administrator, officer, trustee, custodian, agent, employee, or representative having control over the assets of any ERISA-covered plan; (2) enjoin Defendants from violating Title I of ERISA; and (3) appoint a successor fiduciary at the Defendants’ expense to administer the plan. On September 1, 2021, the court entered the parties’ corrected consent judgment holding Defendants liable for losses suffered by the plan, permanently enjoining and restraining Defendants from violating ERISA, and permanently enjoining Forde from acting as a fiduciary to any ERISA-covered plan. An independent fiduciary was appointed to wind up the plan and file the plan’s final Form 5500. Atlanta Office

Secretary v. International Teleproduction Society 401(k) Savings and Discretionary Contribution Plan (E.D. Va.)

On September 16, 2021, the Secretary filed a complaint seeking to have approximately $8,000 in assets of the International Teleproduction Society 401(k) Savings and Discretionary Contribution Plan – held by custodian American Funds Service Company – distributed to the plan’s participants by a court-appointed independent fiduciary. The plan sponsor ceased operations in 2001 and no trustee or plan administrator has been located. Philadelphia Office

Secretary v. Perwaiz (E.D. Va.)

On July 15, 2021, the Secretary filed a complaint against Javaid A. Perwaiz and his eponymous medical professional corporation alleging that, because of Perwaiz’s felony convictions on multiple counts of health care fraud, false statements, and aggravated identity fraud resulting in a 59-year prison sentence, he is barred from serving as a fiduciary to his company’s profit sharing plan, and requesting that the court appoint an independent fiduciary to terminate the plan and distribute its assets. As of September 2021, the Defendants’ criminal counsel had waived service of the complaint on behalf of Perwaiz and the company. Philadelphia Office

Walsh v. Resolvenet USA, Inc. (C.D. Cal.)

On October 20, 2021, the Secretary filed a complaint seeking appointment of an independent fiduciary to distribute plan assets to plan participants who could not otherwise access their retirement savings. Resolvenet USA, Inc. (“Resolvenet”), which sponsored the Resolvenet USA, Inc. 401(k) Profit Sharing and Trust Plan (“Plan”), ceased operations in 2004. The complaint alleged that since 2015, the sole plan trustee failed to fulfill her duties and could not be located. On December 28, 2021, the Secretary filed a motion to extend the date to serve process, and a motion for an order permitting the Secretary to serve Resolvenet through the California Secretary of State, since the registered agent for service of process was deceased and the Secretary had been unable to serve former officers of Resolvenet. Los Angeles Office

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Scalia v. Synergy Partners, Inc. (M.D. Tenn.)

On December 31, 2020, the Secretary filed a complaint against Synergy Partners, Inc., and Dr. Lance H. Harrison, Jr. The complaint alleges that the Defendants are both fiduciaries to the Synergy Partners, Inc. 401 (k) Profit Sharing Plan. The complaint further alleges that the Defendants breached their ERISA fiduciary duties from January 1, 2017, through September 30, 2018, when they failed to forward at least $8,458 in employee contributions to the plan and failed to ensure that the company pay at least $9,498 in safe harbor contributions that it owed to the plan. The complaint asks the court to: (1) permanently enjoin the Defendants from serving as a fiduciary, administrator, officer, trustee, custodian, agent, employee, or representative having control over the assets of any ERISA-covered plan; (2) enjoin the Defendants from engaging in any further action in violation of Title I of ERISA; (3) appoint a successor fiduciary at the Defendants’ expense to administer the plan; and (4) order the Defendants to restore all losses, including interest and lost opportunity costs, to the plan. The Secretary filed proofs of service on February 5, 2021.

On April 16, 2021, the district court entered a consent judgment that held Defendants liable for $19,259 in losses to the plan plus interest. The Secretary filed a proof of claim for the losses in the Synergy Partners pending Chapter 7 bankruptcy case. Furthermore, the consent judgment barred Harrison from being a fiduciary to any ERISA-covered plan and from violating ERISA. See also Scalia v. Synergy Partners, Inc., Section B.1. Collection of Plan Contributions and Loan Repayments. Atlanta Office

Acosta v. T & M Hardware, Inc. (D. Ariz.)

On December 31, 2018, the Secretary filed a complaint alleging that T & M Hardware, Inc. and Pamela Mandile-Croteau, the fiduciaries of the T & M Hardware Profit Sharing Plan, abandoned their fiduciary duties by refusing to follow the terms of the governing plan documents and authorize required distributions. The plan’s seven participants have terminated their employment and requested distributions as authorized under the plan terms. The Department sought the removal of Ms. Mandile-Croteau as the fiduciary of the plan and the appointment of an independent fiduciary to distribute the assets of the plan to eligible participants and beneficiaries.

Defendants filed an answer on January 25, 2019. On March 25, 2019, the Secretary filed a joint scheduling report with the court. On May 14, 2019, counsel for Defendants moved to withdraw as counsel, citing his clients’ “failure to communicate or cooperate and irreconcilable differences.”

A status hearing was held on June 6, 2019. Over the Secretary’s objection, the court gave Defendants until June 20, 2019, to make overdue initial disclosures and to respond to the outstanding discovery. The court advised Defendants of the importance of complying with the deadline and authorized the Secretary to proceed with a sanctions motion should Defendants fail to serve the required responses. On June 19, 2019, counsel for Defendants renewed his motion to withdraw, citing “failure to communicate or cooperate and irreconcilable differences.” The court permitted counsel to withdraw.

The Secretary moved for summary judgment or default sanctions on June 26, 2019. On August 1, 2019, the Secretary filed a declaration of non-opposition to its earlier filed motion for summary judgment or default sanctions. On August 15, 2019, the individual Defendant filed a motion for leave to extend deadlines due to medical reasons and claimed that her prior motion was never ruled upon. On September 4, 2019, the Department filed an opposition to the motion for leave to extend deadlines.

On March 30, 2020, the Secretary secured a summary judgment that awarded all relief sought, including over $9,000 in lost opportunity costs, the immediate debarment of the individual fiduciary, and the appointment of an independent fiduciary to make distributions from the plan.

On August 2, 2021, the Ninth Circuit issued a notice of receipt of appeal and a “Time Schedule Order.” On August 11, 2021, the Circuit Court dismissed the case for lack of jurisdiction, because the appeal was untimely. On October 4, 2021, the Circuit Court issued a Mandate, stating that the Secretary’s summary judgment would take effect. San Francisco Office

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L. Contempt and Subpoena Enforcement

Secretary v. Alight Solutions, LLC (N.D. Ill.)

On April 6, 2020, the Secretary filed a Petition to Enforce an Administrative Subpoena Duces Tecum to compel Alight Solutions, LLC, to produce all responsive documents. Alight provides recordkeeping, administrative, and consulting services to its ERISA plan clients to assist in managing their employee benefit plans. Alight provides an internet based portal to plan participants to manage their plan accounts. Over the years, Alight experienced numerous cybersecurity incidents relating to several of its ERISA plan clients’ accounts. The Department issued a subpoena on November 5, 2019, and, despite the Department’s numerous meetings, emails, and formal letters with Alight, Alight has refused to provide all responsive documents to the Department’s subpoena. On November 17, 2020, Alight filed its response brief to the petition.

On January 4, 2021, the Secretary filed a reply brief in support of the Department’s petition. On January 28, 2021, Alight filed a sur-response brief. On February 9, 2021, the Secretary filed a sur-reply in support of the petition. On October 28, 2021, the court granted the Secretary’s petition in full and ordered Alight to comply with the subpoena; the court also denied Alight’s “motion” or argument for a protective order. On November 17, 2021, Alight filed a motion for a protective order. On December 9, 2021, the Secretary filed a brief in opposition to Alight’s motion for a protective order. On December 9, 2021, Alight filed a notice of appeal to the Seventh Circuit from the October 28, 2021 Order. On December 23, 2021, Alight filed a motion to stay the enforcement of the October 28, 2021 order while Alight’s appeal is pending. Chicago Office

Walsh v. Allstate Marble & Granite, Kitchens and Baths (E.D.N.Y.)

On April 26, 2021, the Secretary filed a motion to enforce subpoenas for documents that the Department had issued to respondents Allstate Marble & Granite, Kitchens and Baths Inc. d/b/a Bellagio Kitchens & Bath and Serhat Soykan. On November 10, 2021, the court granted the Secretary’s motion, requiring respondents to produce documents within ten days. New York Office

Walsh v. CSG Partners, LLC (S.D.N.Y)

On March 16, 2021, the Secretary filed a subpoena enforcement action against CSG Partners, LLC, alleging that CSG had improperly withheld documents relating to its roles in four ESOP transactions. CSG filed its opposition on April 16, 2021, claiming that the documents were properly withheld because they were protected or not relevant. On June 8, 2021, the Secretary filed a reply, asserting that any privilege the documents had enjoyed was waived by sharing them with CSG and that all the sought documents were related to the ESOPs, and were properly the subject of the Secretary’s inquiry. On June 8, 2021, the court granted the Secretary’s motion and enforced the subpoena. New York Office

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Secretary v. DuPenn, Inc. d/b/a IGM Carbon (W.D. Pa.)

On May 4, 2021, the Secretary filed a subpoena enforcement petition against DuPenn, Inc. d/b/a IGM Carbon. Respondent failed to appear at a July 13, 2021 hearing. The court granted the petition and ordered respondent to produce documents by July 21, 2021. Respondent failed to produce any documents. The Secretary filed a contempt motion on September 27, 2021. The court set a hearing for November 10, 2021, then continued the hearing to December 8, 2021. The Secretary obtained a tolling agreement from DuPenn and agreed to continue the contempt hearing until January 22, 2022 to allow respondent to produce the documents by January 17, 2022. The contempt hearing is now scheduled for January 27, 2022. Philadelphia Office

Solis v. Griffith (N.D.N.Y.)

On July 2, 2021, the Secretary filed a motion for contempt of a 2011 consent judgment. The motion alleged that Defendant Herbert L. Griffith, III had failed to comply with the “lottery” provision of a 2011 consent judgment, because he earned more than the targets from 2013 through at least 2018 but failed to make payments to the ITS Communications Corporation SIMPLE IRA Plan. The court gave Defendant through November 2, 2021 to respond to the motion for contempt, but Defendant failed to do so. New York Office

Walsh v. Lifovum Fertility Management, LLC (C.D. Cal.)

The Secretary filed a subpoena enforcement action on June 7, 2021, to obtain documents needed for the Department’s investigation of Lifovum Fertility Management, LLC (“Lifoyum”).  The Department had issued a subpoena in April 2020, and Lifovum had failed to produce most of the documents requested. After the court issued a show cause notice on August 3, 2021, Lifovum began producing the documents requested, and on August 30, 2021, filed a response contending that the order to show cause was moot. On September 14, 2021, the Secretary filed a reply, indicating the outstanding documents that had not been produced and requesting a tolling agreement for the 17-month delay. After the Secretary replied, Lifovum produced additional documents. The parties filed a joint status report on September 27, 2022, advising the court that the Secretary had received documents responsive to the subpoena, and the parties filed a Stipulation and Order Tolling the Running of ERISA’s Statute of Limitations from April 20, 2020, to September 21, 2021, which the court signed on September 28, 2021. Los Angeles Office

Walsh v. Metlife, Inc. (S.D.N.Y.)

On March 31, 2021, the Secretary filed an action to enforce a subpoena for documents relating to MetLife’s role in pension de-risking transactions. On May 4, 2021, MetLife filed its opposition, arguing that the Secretary was seeking documents that were not relevant to the Department’s purposes. On May 18, 2021, the Secretary filed a reply, explaining the relevance and noting the wide latitude given to the Secretary. There has been no ruling. New York Office

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Secretary v. Robbins, Salomon, and Patt Ltd. (N.D. Ill. and 7th Cir.)

On January 25, 2019, the Secretary filed a third subpoena enforcement action involving the Department’s investigation of the United Employee Benefit Fund, which provides life insurance benefits to the Fund’s participants. The Secretary issued an administrative subpoena for documents to Robbins, Salomon, and Patt, Ltd., a law firm representing the Fund. After that law firm failed to produce all responsive documents, the court on February 8, 2019, entered a show cause order requiring the respondent law firm to explain its failure to comply with the subpoena.

On February 22, 2019, respondent moved to dismiss the Secretary’s petition. The Secretary filed a response in opposition on March 1, 2019, and respondent filed a reply on March 6, 2019. At the hearing on the motion on March 8, 2019, respondent withdrew objections to the Secretary’s subpoena.

On August 6, 2019, the Secretary filed a motion to require respondent to produce all responsive documents by August 27, 2019. On August 12, 2019, respondent filed a response in opposition. On August 13, 2019, the Court ordered respondent to produce all responsive documents by August 27, 2019, and ordered a third-party expert to be retained at respondent’s expense to retain copies of all computer hard drives and email servers used by respondent’s attorneys who provided services to the Fund. Respondent appealed that order to the Seventh Circuit Court of Appeals.

On September 12, 2019, in district court, respondent filed an objection to the Secretary’s proposed order appointing a neutral third-party expert. On October 30, 2019, the district court overruled respondent’s objections and appointed Deloitte Financial Advisory Services LLP as the neutral third-party expert. On November 19, 2019, respondent appealed that order to the Seventh Circuit, and on December 2, 2019, filed a motion for a stay pending appeal.

On November 22, 2019, the Secretary had moved to hold respondent in contempt for not having complied with the order appointing the neutral third party expert. On December 23, 2019, both motions were granted in part and denied in part; the district court ordered respondent to allow the neutral third-party expert to collect and retain all of the subpoenaed electronic information from the relevant computer hard drives and email servers.

In the court of appeals, the respondent law firm voluntarily dismissed its first appeal after the Secretary filed a motion to dismiss saying that the appeal was premature and thus left the court of appeals without jurisdiction to hear that appeal. The second appeal also was dismissed, this time pursuant to a settlement agreement reached on January 3, 2020, after a court-ordered mediation.

On February 11, 2020, the Secretary filed an Unopposed Motion to Amend the Order of October 30, 2019. The court granted the motion on February 14, 2020 and entered an Amended Order Replacing Deloitte with Mazars as Neutral Third Party Expert. On February 12, 2020, L. Steven Platt, counsel for respondent, filed a motion to withdraw because the Secretary had conducted a deposition of Robbins, Salomon, and Patt, Ltd., Platt’s law firm, and, therefore, the law firm had become a witness in the matter. The court granted that motion on February 14, 2020. On June 15, 2020, the Secretary filed a Notice to the Court Regarding Further Searches by Neutral Third Party Expert, explaining that respondent had produced 8,210 documents on May 20, 2020 and that no further searches by Mazars were necessary.

On August 14, 2020, the Secretary filed a Motion for Order Deeming Privileges Waived requesting the court deem the attorney-client privilege and attorney work product doctrine waived with respect to all of the documents respondent had produced. Respondent filed a response on August 18, 2020, and the parties filed a joint status report on September 18, 2020. The court declined to enter the Secretary’s requested Order Deeming Privileges Waived.

After the respondent complied with the subpoena, the case was dismissed on January 8, 2021, pursuant to Rule 41(a)(1)(A)(ii), with the Secretary reserving the Department’s argument regarding respondent’s waiver of privileges. Chicago Office and, on appeal, Plan Benefits Security Division

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Scalia v. Solis (W.D. Tex.)

On June 20, 2019, the Secretary filed a complaint against Nick and Emily Solis, owners of the plan’s sponsoring employer and fiduciaries of the West Texas Bulldog Oilfield Services LLC Health Plan, for failing to remit to the plan’s insurer $19,586 deducted from employees’ wages for health insurance premiums during January 13, 2017, through March 15, 2017. The fiduciaries’ failures resulted in the retroactive cancellation of the plan’s health insurance coverage, leaving 28 employees without insurance, 10 of whom incurred unpaid claims totaling $17,000. The complaint seeks restoration of all plan losses, a surcharge against the fiduciaries for the unpaid medical benefits, injunctive relief requiring the fiduciaries’ compliance with ERISA, and a fiduciary bar against the Defendants. On October 21, 2019, the Secretary filed a motion for entry of default and, on November 13, 2019, a motion for default judgment.

On July 20, 2020, the court granted a default judgment for the Secretary. The judgment ordered the Defendants to restore to the 28 plan participants the $11,731 withheld from their wages but never remitted to the plan’s insurer and to pay $16,783 to the 10 plan participants who had incurred unpaid medical bills. Additionally, the default judgment orders the Solises to pay the costs of an independent fiduciary to administer the remittance of these funds and permanently bars the Solises from serving as fiduciaries to any ERISA covered plan.

Because Defendants failed to comply with the default judgment, the Secretary filed a motion to adjudge Defendants in contempt on September 3, 2020. On March 31, 2021, the court issued a show cause order to Defendants, requiring them to respond by April 8, 2021. After concerns arose that the Defendants may not have received the show cause order, the court on April 23, 2021, issued an order requiring the United States Marshal to serve Defendants. Following several unsuccessful efforts by the Marshall service to serve the show cause order, the Secretary provided new contact information for Defendants and on October 8, 2021, the court issued a new order, directing the United States Marshal to effect service. See also Scalia v. Solis, Section B.1. Collection of Plan Contributions and Loan Repayments. Dallas Office

Secretary v. Stout Risius Ross, LLC (E.D. Pa.)

On July 29, 2021, the Secretary filed a subpoena enforcement petition against Stout Risius Ross, LLC, alleging that the company failed to produce all documents requested in two numbered items of a subpoena issued by the Department in April 2021. Respondent filed an opposition to the petition and a motion to modify the subpoena on August 11, 2021, alleging that it was able to produce a majority of the requested documents, but that producing the remainder imposed an undue burden because of respondent’s document storage and retrieval systems. After hearings on August 18, 2021 and on August 20, 2021, the court ordered respondent to produce certain documents, ordered the parties attempt to reach a resolution on the remainder, and ordered the parties to file either a joint status report or separate status reports by October 15, 2021. The Secretary and respondent were unable to agree on the remaining documents and filed separate status reports on October 15, 2021, each advancing their respective positions why the production of the documents is or is not unduly burdensome. As of December 31, 2021, the court had not ruled further on the parties’ pleadings. Philadelphia Office

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Secretary v. Supply Chain Insights, LLC (M.D. Pa.)

On September 16, 2020, the Secretary filed a petition to enforce administrative subpoena against Supply Chain Insights, LLC. The Secretary alleges in the petition that the company failed to produce any documents in response to a February 27, 2020 subpoena issued in connection with an investigation of the company’s profit sharing plan. On January 25, 2021, the court granted the enforcement action. Respondent then produced documents. The court terminated the case on February 3, 2021. Philadelphia Office

Walsh v. The Hartford Financial Services Group, Inc. (D. Conn.)

On July 1, 2021, the Secretary filed a petition to enforce an administrative subpoena against The Hartford Financial Services Group, Inc. (“The Hartford”) for failure to comply with the Department’s subpoena. The Hartford is an insurance carrier providing life insurance, life coverage, and death benefit policies to participants and beneficiaries of ERISA-covered plans. The Hartford failed to respond to inquiries from the Department and to a demand letter sent by the Secretary on March 31, 2021. As of July 1, 2021, The Hartford produced no more than 15% to 20% of the total documents requested. On September 22, 2021, The Hartford filed a response to the Secretary’s petition. The petition is pending. Boston Office

Acosta v. Williams-Russell & Johnson Inc. (N.D. Ga.)

EBSA determined that repeat ERISA violators, Williams-Russell & Johnson, Inc., and company president Charles E. Johnson, Sr., were once again failing to remit employee contributions to the Williams-Russell & Johnson 401(k) Retirement Plan, leading to more than $300,000 in damages to the plan. Additionally, Johnson had not ensured that the plan made some distributions required by the plan documents. The company and Johnson were already subject to an earlier consent judgment that barred them from fiduciary service and from future ERISA breaches. Therefore, the Secretary filed a contempt action.

In April 2019, the court scheduled a hearing on the contempt motion but ultimately ordered the parties to continue work on settlement. In August 2019, at another contempt hearing, the court held Johnson and the company in contempt and threatened them with daily fines for continued non-compliance. In September 2019, the parties agreed on a consent judgment whereby the Defendants agreed to repay the plan $315,000 (through a payment plan), to honor the fiduciary bar, and to turn over management of the plan to a third party. The court entered the consent judgment on September 24, 2019.

In August 2020, in light of the Defendants’ demonstrable financial hardship, the parties filed an amendment to the amended consent judgment, adjusting the payment plan. The parties are working on another amended agreement regarding a payment schedule. See also Acosta v. Williams-Russell & Johnson Inc., Section B.1. Collection of Plan Contributions and Loan Repayments. Atlanta Office

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M. Bankruptcy

Note: This section includes cases focusing on bankruptcy issues; where an adversarial complaint to determine the non-dischargeability of debt is incidental to a district court complaint, please see the appropriate case discussion.

In re Bridgeport Health Care Center, Inc. (Bankr. D. Conn.)

On April 18, 2018, Bridgeport Health Care Center, Inc., a Defendant in both Perez v. Bridgeport Health Care Center, Inc. and Chaim Stern and Acosta v. Bridgeport Health Care Center, Inc. and Chaim Stern filed for Chapter 11 bankruptcy. Shortly thereafter, various creditors including the Secretary moved to appoint a Chapter 11 trustee. After several days of hearing, the bankruptcy court granted the motion to appoint a Chapter 11 trustee. Chaim Stern was removed from being trustee of the Retirement Plan. The Chapter 11 trustee secured fully-insured health coverage for employees.

In August 2018, Stern paid approximately $4.1 million to the Retirement Plan. The district court also appointed an independent fiduciary for the Retirement Plan on June 24, 2019. As a result of several mediation sessions with the district court, the parties reached a resolution, and a consent order and judgment was entered on July 13, 2020. Under the consent order and judgment, the fiduciaries paid an additional $840,565 to the Retirement Plan, as well as $2,526,392 towards resolving unpaid health claims and appointing a claims administrator.

On March 22, 2021, the district court entered an order under the All Writs Act prohibiting health care providers (or their collection agents) from direct billing and/or commencing or continuing any actions against participants and beneficiaries of the Health Plan while the claims administrator works to resolve unpaid health claims. The parties continue to implement the provisions of the consent judgment and order. See also Acosta v. Bridgeport Health Care Center, Inc. and Chaim Stern, Section B.1. Collection of Plan Contributions and Loan Repayments. Boston Office

In re: Lionel, Sawyer & Collins, Ltd. (Bankr. D. Nev.)

On April 28, 2021, the bankruptcy trustee filed an objection to a 2016 proof of claim filed by the Secretary in 2016 on behalf of the Lionel, Sawyer & Collins Welfare Benefit Plan seeking recovery of over $1,000,000 in unpaid medical claims. The Department worked with the counsel for the trustee, and on July 8, 2021, the bankruptcy court issued an order approving the Stipulation Regarding Priority Portion of the Proof of Claim filed by the Department which updated the claims, effectuated payment of the priority claim, and preserved the nonpriority claim. Los Angeles Office

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In re Sky Skan Incorporated (Bankr. D.N.H.); In re Steven T. Savage and Virginia A. Savage (Bankr. D.N.H.); Acosta v. Steven T. Savage and Virginia A. Savage (Bankr. D.N.H.)

On March 26, 2018, the Secretary filed an adversary proceeding for a determination of non-dischargeability of debt against Steven and Virginia Savage, the trustees and fiduciaries of the Sky-Skan 401(k) Plan in the bankruptcy court. The Savages failed to remit employee contributions and loan repayments, and failed to collect and remit employer matching safe harbor contributions to the plan. The Secretary previously filed proofs of claim in the Savages’ Chapter 11 bankruptcy and company/plan sponsor Sky-Skan, Inc.’s Chapter 11 bankruptcy. Both are pending in the bankruptcy court. Prior to filing their bankruptcy petition, the Savages transferred $704,075 from the company to themselves as reimbursement for use of credit cards, travel expenses, rent and repayment of personal loans. The Secretary alleged that this misappropriation of employee contributions and failure to collect employer contributions while taking money for themselves was reckless and constituted defalcation.

The Secretary and the Savages entered into a stipulation that the $152,685 of outstanding employee and employer contributions and loan repayments owed to the 401(k) plan is a nondischargeable debt pursuant to 11 U.S.C. section 523(a)(4). On August 27, 2018, the court approved the Assented-to Motion for an Order Approving the Stipulation for Determination of Dischargeability of Debt between the Secretary and Debtors, and a Final Judgment was entered.

The Department continues to protect the interests of the 401(k) Plan in the two bankruptcies. The court held a plan confirmation hearing on February 13-14, 2020. Debtor Sky-Skan presented testimony from its valuation expert and interim distress CEO Brandi Bonds. The Secretary requested that payment to the plan be in cash and not equity in the reorganized company. There were no objections and Debtor agreed to put it into the Proposed Confirmation Order. The court took the matter under advisement. Some of the issues in the Confirmation hearing overlapped with an Adversary Proceeding filed by a Creditor. The hearing in the Adversary Proceeding was delayed because of the pandemic. Sky-Skan and creditor Coastal Capital mediated Coastal Capital’s Adversary Proceeding. On September 25, 2020, Debtor Sky-Skan filed a Notice of Amendment to Petition to Designate Case as a Subchapter V Proceeding, pursuant to Bankruptcy Rule 1009(a). Debtor’s counsel advised that the Debtor hoped this approach, seeking to amend the original Voluntary Chapter 11 Petition filed November 1, 2017, would help to move the matter forward, as the Department continued to await the outcome of the February 13-14, 2020 plan confirmation hearing. On October 20, 2020, Debtor Sky-Skan filed a motion to convert its Chapter 11 case to a Chapter 7 case. The company was reported to have approximately $75,000 in cash ($58,000 of which was restricted and owed to a supplier to install a dome internationally) and receivables of less than $100,000. The company reported having recently lost two jobs in excess of $1 million, which was “catastrophic.”

On November 11, 2020, the Savages filed an ex parte motion to convert their Chapter 11 case to a Chapter 7 case, which was granted on November 12, 2020. On December 1, 2020, the Creditors’ Committee filed a Committee Joinder in Debtor Sky-Skan’s motion to convert their case to Chapter 7 and an objection to Coastal Capital’s Motion to dismiss the same. On December 2, 2020, the judge denied Coastal’s motion to dismiss and granted debtor’s motion to convert in the Sky-Skan matter.

The Secretary filed an Amended Proof of Claim in the Sky-Skan Chapter 7 case on February 4, 2021. On February 8, 2021, the Secretary filed a Notice of Prior Stipulation as to NonDischargeability of Debt, in lieu of an Objection to Nondischargeability in the Savages’ Chapter 7 case. On June 2, 2021, the bankruptcy court granted the Sky-Skan Chapter 7 trustee’s motion to terminate the 401(k) Plan. On September 22 and 23, 2021, the fiduciaries’ individual retirement accounts were liquidated pursuant to a settlement agreement with the Secretary. The proceeds were subsequently reallocated pro rata to non-fiduciary participants. The amount realized from the liquidations was $13,764. Boston Office

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N. Miscellaneous

Scalia v. 300 Broadway Healthcare, L.L.C. (D.N.J.)

On January 17, 2020, the Secretary filed a complaint alleging that, in late 2015 and early 2016, 300 Broadway Healthcare, L.L.C., doing business as New Vista Nursing & Rehab Center, George Weinberger, and Steve Kleiman had improperly failed to fund health benefit claims incurred by the New Vista Nursing & Rehab Center Medical Plan. On March 23, 2020, Weinberger answered and filed a third-party complaint. On April 24, 2020, 300 Broadway and Kleiman answered and added cross-complaints. On May 6, 2020, the court held an initial conference.

On April 27, 2021, the Secretary filed a consent judgment providing that Defendants would pay up to $128,000 in denied claims and up to $20,000 in administrative costs to facilitate the resolution. The consent judgment was entered on May 10, 2021. New York Office

Acosta v. William Delaney (D.R.I.)

On April 12, 2019, the Secretary filed a complaint against William J. Delaney, a state receiver for Equity Concepts, Inc. alleging that to pay for his work for the Equity Concepts, Inc. 401(k) and Profit Sharing Plan (which he was terminating), Delaney paid to himself the plan’s entire forfeiture account. The plan document did not allow use of the forfeiture account for such purposes. The case was resolved on January 22, 2020, through a full return payment of $21,695 and a consent judgment and order requiring Delaney to assist in distributing the funds and completing the termination of the pension plan. On February 7, 2022, the parties filed a joint stipulation of dismissal since all participant accounts had been resolved. The court entered the joint stipulation of dismissal on February 10, 2022. Boston Office