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Board of Trustees of the Health and Welfare Department of the Construction and General v. Allison Enterprises

October 4, 2012

BOARD OF TRUSTEES OF THE HEALTH AND WELFARE DEPARTMENT OF THE CONSTRUCTION AND GENERAL
LABORERS' DISTRICT COUNCIL OF CHICAGO AND VICINITY, PLAINTIFF,
v.
ALLISON ENTERPRISES, INC., D/B/A MID AMERICA VISION AND LAWRENCE M. SILVER, DEFENDANTS.



The opinion of the court was delivered by: Charles P. Kocoras, U.S. District Judge:

MEMORANDUM OPINION

Before the Court is a motion to dismiss by Defendants Allison Enterprises, Inc. ("Allison"), d/b/a Mid America Vision ("MAV") and Lawrence M. Silver ("Silver) (together "Defendants") under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). For the following reasons, Defendants' motion is denied.

BACKGROUND*fn1

The Plaintiff, the Board of Trustees (the "Board"), is a fiduciary to the Health and Welfare Department of the Construction and General Laborers' District Council of Chicago and Vicinity (the "Fund"). The Fund is an employee benefit plan (the "Plan") as defined by the Employee Retirement Income Security Act of 1974 ("ERISA"). See 29 U.S.C. § 1002(3). MAV, an Illinois corporation, and Silver, MAV's President and primary shareholder, were fiduciaries to the Plan.

Pursuant to their roles as fiduciaries, MAV and the Fund entered into the Vision Services Discount Fee Agreement (the "Agreement") on July 1, 1997, taking effect immediately. The Agreement provided for the Fund's participants' and beneficiaries' ("Participants") attainment and payment of vision care ("care"). Under the Agreement, Participants received care from vision care providers ("Providers"), who would invoice MAV for the rendered services at pre-negotiated rates. As the Plan's claims administrator, MAV would grant or deny Providers' claims. MAV would then submit approved claims to the Fund, which would in turn tender Plan assets to MAV. Upon receipt of Plan assets, MAV was obligated to remit payment directly to the Providers for the amount owed. Under the Agreement, "[n]either the Fund, nor its participants or beneficiaries shall have any obligation to directly pay a [MAV] participating provider any of the amounts" covered by Plan assets. The Agreement further granted the Fund the right to audit MAV's books that related to the Agreement. Unless the Agreement was terminated by either MAV or the Board, it automatically renewed annually. MAV could terminate the Agreement for cause only, while the Board could freely terminate the Agreement as long as it provided MAV at least sixty days written notice of its intent to do so.

On October 6, 2011, the Fund notified MAV of its intent to terminate the Agreement on January 1, 2012. Between October 6th and January 1st, the Fund continued to receive approved claims from, and tendered at least $1 million to MAV. Despite this, MAV and Silver withheld at least $95,000 of Plan assets owed to Providers. Silver received multiple phone calls from the Fund and shortchanged Providers who were inquiring into the whereabouts of the withheld monies, but Silver provided no substantive response. As a result of Defendants' failure to pay the Providers, the Providers have threatened to directly bill Participants for the amounts owed by Defendants.

The Board brought a four-count complaint against Allison and Silver for breach of fiduciary duty and unjust enrichment under ERISA, 29 U.S.C. §§ 1109(a), 1132(a)(3), for Defendants' withholding Plan assets and failing to pay Providers as required under the Agreement. The Board seeks damages, restitution, an audit of MAV's books, and injunctive relief. Defendants now bring a motion to dismiss under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) for lack of subject-matter jurisdiction and failure to state a claim, respectively.

LEGAL STANDARD

On a motion to dismiss under Rule 12(b)(1), the plaintiff bears the burden of establishing that the Court has jurisdiction over its claims. United Phosphorous, Ltd. v. Angus Chem. Co., 322 F.3d 942, 946 (7th Cir. 2003) (en banc). The Court may consider matters outside of the complaint in ruling on a motion to dismiss for lack of subject-matter jurisdiction. Ezekiel v. Michel, 66 F.3d 894, 897 (7th Cir. 1995).

A Rule 12(b)(6) motion to dismiss tests the legal sufficiency of the complaint. Szabo v. Bridgeport Machs., Inc., 249 F.3d 672, 675 (7th Cir. 2001). The allegations in the complaint must set forth a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). A plaintiff need not provide detailed factual allegations; it must only provide enough support to raise its right to relief above a speculative level. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Furthermore, a viable claim must be facially plausible, i.e., the plaintiff must "plead[] factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).

DISCUSSION

I. Motion to Dismiss under Rule 12(b)(1)

Defendants argue that the Board lacks standing to bring this suit under Article III of the Constitution. Article III limits federal courts' jurisdiction to claims presenting a case or controversy between the plaintiff and defendant. Warth v. Sedin, 422 U.S. 490, 498 (1975). For a plaintiff to establish Article III standing, it must demonstrate:

(i) an injury in fact, which is an invasion of a legally protected interest that is concrete and particularized and, thus, actual or ...


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