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General Produce Distributors, Inc. v. Professional Benefit Trust Multiple Employer Welfare Benefit Plan & Trust

August 7, 2009


The opinion of the court was delivered by: Nan R. Nolan United States Magistrate Judge

Judge Nan R. Nolan


Plaintiff General Produce Distributors, Inc. ("General Produce") was a participating employer in the Professional Benefit Trust Multiple Employer Welfare Benefit Plan & Trust (the "PBT Trust"), a multiple employer welfare plan under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq. Plaintiffs David Mintjal and Therese Mintjal are employees of General Produce and were the company's only two participants in the PBT Trust. Plaintiffs have filed suit against the PBT Trust; the Trust's contract administrator, PBT Administration LLC; the Trust's trustee, Professional Benefit Trust, Ltd. ("PBT Ltd."); and the Managing Member of PBT Administration, Tracy L. Sunderlage, alleging breach of fiduciary duty, deprivation of benefits and failure to produce requested documents in connection with the PBT Trust. The parties have consented to the jurisdiction of the United States Magistrate Judge pursuant to 28 U.S.C. § 636(c). Defendants now move to dismiss all of Plaintiffs' claims for lack of subject matter jurisdiction and failure to state a claim. For the reasons set forth here, the motion is granted in part and denied in part.


The PBT Trust provided "death benefits and living benefits" to employees of participating employers. (Cmplt. ¶ 8.) General Produce started participating in the PBT Trust in 1995 and made annual contributions on behalf of the Mintjals. The Mintjals' benefits were funded by four whole life insurance policies issued by Amerus Life Insurance Company, and owned by the PBT Trust. (Id. ¶¶ 8, 9.)

Beginning in or about 2005, Defendants decided to terminate the PBT Trust. In that regard, Defendants implemented a termination plan "designed to permit the defendants to terminate the Trust without the defendants relinquishing control over the exclusive management of over $70,000,000.00 in trust assets together with the management fees and other financial benefits associated therewith." (Id. ¶ 23.) Specifically, Defendants set up an offshore captive insurance company called Maven Assurance Ltd. ("Maven") and, on or about July 31, 2006, transferred ownership of the $70 million in trust assets to this entity. Defendants also made the PBT Trust the death benefit beneficiary on all insurance policies, replacing the beneficiaries designated by each participant. Maven, in turn, established "protected premium accounts" for each employer participant of the PBT Trust, and credited each account with an amount equal to the employer's "beneficial interest." (Id. ¶¶ 26, 27, 29.) When the PBT Trust formally terminated on October 31, 2006, Plaintiffs' beneficial interest being held in General Produce's protected premium account was approximately $3,515,000. Under the terms of the Trust, Plaintiffs were entitled to a "termination distribution" totaling that amount. (Id. ¶¶ 30-32.)

Rather than take a termination distribution, the Mintjals followed Defendants' instruction to set up an annuity account with Acadia Life Limited in December 2006, and to use the annuity to purchase "unregistered, non voting stock" in Maven. Defendants also wanted Plaintiffs to "authorize the defendants to transfer the plaintiffs' 'beneficial interest' in the protected premium account at Maven to a new [single employer] plan, which would be managed by the defendants." Plaintiffs, however, refused to join in the single employer plan, despite criticism and pressure from Defendants. (Id. ¶¶ 33-35.)

Eventually, Plaintiffs demanded that Maven place their money back in the Acadia annuity account. On June 15, 2007, Maven transferred $1,072,744.97 in cash, plus "a piece of paper purporting to be an assignment of shares in an entity described as 'Concord Capital SPC.'" The Concord Capital note was reportedly worth another $1.7 million, but Plaintiffs claim that it was "virtually worthless." (Id. ¶¶ 36-39, 41, 43.) According to Plaintiffs, the Concord Capital note is an example of certain imprudent investments Defendants made in 2004. (Id. ¶ 42.) Specifically, Defendants spent approximately $9,335,132 on investment products they described as Guaranteed Investment Contracts ("GICs"), which pay an annual interest rate on the face amount; return the investor's principal at the end of the term; and provide a guarantee by the issuing company. (Id. ¶ 14.) In fact, Defendants had purchased Collateralized Debt Obligations ("CDOs"), "extremely complex investment products . . . subject to significant risks of illiquidity and default due to their structure and the nature of the underlying assets funding the CDO." (Id. ¶¶ 16, 17.)

On June 8, 2008, Plaintiffs requested information and plan documents from Defendants pursuant to ERISA § 502(c)(2). (Id. Count III ¶ 14.) Defendants refused, and several months later on October 6, 2008, Plaintiffs filed the instant lawsuit. Plaintiffs charge Defendants with violating their fiduciary duties (Count I), wrongfully depriving Plaintiffs of benefits (Count II), and failing to produce documents (Count III). Defendants have moved to dismiss all three Counts for lack of subject matter jurisdiction and failure to state a claim.


The purpose of a motion to dismiss is to test the sufficiency of plaintiffs' complaint, not to decide its merits. Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). A motion to dismiss will be granted only "if it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which entitles him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957). Defendants are seeking dismissal pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). With respect to Rule 12(b)(1), Defendants raise "a facial attack that the allegations of jurisdiction in the pleadings are facially insufficient to demonstrate the existence of jurisdiction." Berg v. BCS Financial Corp., 372 F. Supp. 2d 1080, 1088 (N.D. Ill. 2005) (internal quotations omitted). Thus, the standard of review is similar to the one applied on a Rule 12(b)(6) motion for failure to state a claim. Id. That is, the court accepts as true all factual allegations in the plaintiffs' complaint and draws all reasonable inferences in their favor. Franzoni v. Hartmarx Corp., 300 F.3d 767, 770 (7th Cir. 2002).

A. Subject Matter Jurisdiction

Defendants argue that Plaintiffs' complaint must be dismissed for lack of subject matter jurisdiction because they have no standing to sue under ERISA § 502(a) or Article III of the U.S. Constitution. The court considers each argument in turn.

1. Standing Under ERISA

Under ERISA, only plan participants or beneficiaries can bring claims against a plan for benefits under § 502(a). 29 U.S.C. § 1132(a); Kamler v. H/N Telecommunication Servs., Inc., 305 F.3d 672, 678 (7th Cir. 2002). A "participant" is someone who either is currently covered under a welfare plan or has "a colorable claim to vested benefits." Kamler, 305 F.3d at 678 (citing 29 U.S.C. § 1002(7) and Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 117 (1989)). A "beneficiary" is "a person designated by a participant . . . who is or may become entitled to a benefit thereunder."

29 U.S.C. § 1002(8). Defendants argue that Plaintiffs are neither participants nor beneficiaries because (1) they do not seek to recover any benefits; and (2) ERISA ceased to apply once the PBT Trust terminated, leaving Plaintiffs with only state-contract remedies.

As a preliminary matter, the court notes that Plaintiffs have failed to respond to Defendants' argument that General Produce has no standing to sue under § 502(a) because it is an employer, and not a participant or beneficiary of the PBT Trust. This argument is well-taken. APCO Willamette Corp. v. P.I.T.W.U. Health and Welfare Fund, 390 F. Supp. 2d 696, 699 (N.D. Ill. 2005) (employers have no standing to sue under § 502(a) of ERISA). Plaintiffs' conclusory assertion that General Produce is an "Employer participant" is insufficient to establish that it has standing to sue in this case. See, e.g., Chavez v. Illinois State Police, No. 94 C 5307, 1999 WL 592187, at *3 (N.D. Ill. Aug. 2, 1999) ("To the extent the allegations in the complaint directed at the plaintiffs' standing are conclusory . . . the court may disregard them.") The motion to dismiss General Produce is therefore granted.

a. Colorable Claim to Vested Benefits

With respect to the Mintjals, who are not currently covered under the PBT Trust, standing turns on whether they have a colorable claim to vested benefits. Kamler, 305 F.3d at 678. Defendants argue that they do not because Plaintiffs purportedly "made no claim for benefits during the life of the Trust [and] make no claim to any such benefits in their Complaint." (Def. Mem., at 7.) Defendants note that ERISA does not create a right to employer-provided welfare benefits, and that any such benefits are vested only if the plan contract so provides. Barnett v. Ameren Corp., 436 F.3d 830, 832 (7th Cir. 2006); Bland v. Fiatallis North America, Inc., 401 F.3d 779, 783 (7th Cir. 2005); Frahm v. Equitable Life Assur. Soc., No. 93 C 81, 1995 WL 579282, at *5 (N.D. Ill. Sept. 29, 1995) ("[W]hether welfare benefits have vested is an issue of contract interpretation.") Indeed, employers or plan sponsors are "generally free under ERISA, for any reason at any time, to . . . modify, or terminate" any welfare plan, even if it results in a deprivation of benefits. Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 78 (1995). Defendants argue that the PBT Trust neither provided for vested benefits nor created any continuing right to welfare benefits sufficient to give Plaintiffs standing to sue.

Plaintiffs barely address this argument, claiming that for purposes of a motion to dismiss, the allegations that they hold participant and/or beneficiary status must be taken as true. (Pl. Resp., at 5.) This is an oversimplification, but the Seventh Circuit has held that "the requirements for a colorable claim are not stringent; a plaintiff need have only a non-frivolous claim for the benefit in question." Kamler, 305 F.3d at 678. See also Baker v. Kingsley, No. 03 C 1750, 2007 WL 1597654, at *2 (N.D. Ill. May 31, ...

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