United States District Court, N.D. Illinois, Eastern Division
JOYCE E. SCHMELZER, Plaintiff,
ANIMAL WELLNESS CENTER OF MONEE, LLC, et al., Defendants.
MEMORANDUM OPINION AND ORDER
JOHNSON COLEMAN UNITED STATES DISTRICT JUDGE
Joyce E. Schmelzer originally filed a complaint against
Animal Wellness Center of Monee (“AWC”), Lynlee
Wessels-Marhanka, and Scott Marhanka alleging an Employee
Retirement Income Security Act (“ERISA”)
violation. Currently pending before the court is
Schmelzer’s four-count Second Amended Complaint
claiming ERISA interference and retaliation, the filing of
false and fraudulent information returns in violation of 26
U.S.C. § 7434, common law retaliatory discharge, and
violation of the Illinois Whistleblower Act. Defendants move
to dismiss Counts II, III, and IV of the Second Amended
Complaint pursuant to Federal Rule of Civil Procedure
12(b)(6). For the reasons discussed below, defendants’
motion  is granted.
following facts are derived from the Second Amended Complaint
and accepted as true for purposes of this motion. AWC is an
Illinois limited liability company that employed Schmelzer
from September 2004 through July 2017. In 2016 and 2017, AWC
offered its employees a Simple IRA Plan (the
“Plan”), which was subject to ERISA. Schmelzer
was a participant and beneficiary of the Plan, contributing
3% of her gross pay into the Plan. Under the Plan’s
terms, AWC was to match her contributions at a rate of 3% per
pay period, which it did until July 2016. AWC also
established a fund for each participant at Franklin Templeton
Investments (the “Fund”), and each participant
had a Fund account into which AWC deposited investment funds.
In July 2016, AWC discontinued making payments into
Schmelzer’s Fund account, yet it continued to withhold
her payroll contributions until July 2017. Neither the
amounts withheld from her payroll nor the matching amounts
were deposited into her Fund account after July 21, 2016.
From July through December 2016, defendants delivered
paystubs to Schmelzer inaccurately reporting that AWC was
matching her payroll deductions. In January 2017, AWC filed
and provided her with an IRS Form W-2, which reported that
AWC had contributed $1, 269.72 of matching payments for 2016,
though the actual matching contribution paid into her Fund
account was $648.05. In July 2017, Schmelzer demanded that
AWC make the required contributions, she notified the United
States Department of Labor (“DOL”) of the
situation, and she initiated an internal inquiry at AWC
regarding its obligations to fund the Plan. Defendants held a
meeting with Plan participants on July 8, during which
Schmelzer stated that she expected AWC to make good on its
obligation to fully fund the Plan.
26, 2017, the DOL notified AWC that there was an ERISA
violation inquiry arising from its failure to make
contributions to the Fund. AWC subsequently funded the Plan
accounts. AWC manager Wessels-Marhanka was openly hostile to
Schmelzer after she had engaged in ERISA-protected activity,
and on July 31, AWC terminated Schmelzer’s employment.
In late July or early August 2017, AWC made an additional $2,
760.81 contribution into Schmelzer’s Fund account but
submitted an IRS Form W-2 to the Social Security
Administration, the DOL, and the IRS which reported a
contribution amount of only $633.27.
motion to dismiss under Rule 12(b) challenges the sufficiency
of the complaint, not its merits. Fed.R.Civ.P. 12(b)(6);
Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th
Cir. 1990). When considering the motion, the Court accepts as
true all well-pleaded factual allegations and views them in
the light most favorable to the plaintiff. Lavalais v.
Vill. of Melrose Park, 734 F.3d 629, 632 (7th Cir.
2013). To survive a motion to dismiss, a complaint must
contain sufficient factual allegations that state a claim to
relief that is plausible on its face. Id. at 632. A
complaint is facially plausible when plaintiff alleges
“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, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).
asserts the following claims in her Second Amended Complaint:
retaliation and interference in violation of ERISA § 510
(Count I); a 26 U.S.C. § 7434 violation because
defendants willfully made false and fraudulent information
returns (Count II); and retaliatory discharge under Illinois
common law (Count III), as well as in violation of the
Illinois Whistleblower Act (Count IV). Defendants move to
dismiss Counts II through IV for failure to state a claim.
Court first addresses defendants’ arguments that
Schmelzer fails to state a claim under 26 U.S.C. § 7434
because, among other reasons, she did not identify the
specific information return that defendants allegedly filed.
Defendants also argue that she failed to plead this claim
with the particularity required by Federal Rule of Civil
Procedure 9(b). “To state a claim under 26 U.S.C.
§ 7434, Plaintiff must allege: (1) Defendant issued an
information return; (2) the information return was
fraudulent; and (3) Defendant willfully issued such a
fraudulent return.” 26 U.S.C. § 7434;
Carbonell v. Glaser, No. 1:16-CV-21539-UU, 2016 WL
10933303, at *2 (S.D. Fla. Sept. 19, 2016). The heightened
pleading standard requires that a party making fraud
allegations “state with particularity the circumstances
constituting fraud.” Fed.R.Civ.P. 9(b). This means that
a party must plead “the who, what, when, where, and
how: the first paragraph of any newspaper story.”
U.S. ex rel. Lusby v. Rolls-Royce Corp., 570 F.3d
849, 853 (7th Cir. 2009). In alleging her section 7434 fraud
claim, Schmelzer states that “[i]n January 2016,
Defendants filed and delivered a false calendar year 2016 W-2
statement”; that defendants therefore “willfully
filed a false and fraudulent information return”; that,
in late July or early August, defendants had made a
“catch-up contribution” into her Fund account
totaling $2, 760.81; that “though Defendants knew that
the amount contributed to [the Plan] for the calendar [year]
2017 was $2, 760.81, in January 2018, Defendants submitted .
. . another false and fraudulent information return, IRS Form
W-2” stating that only $633.27 had been contributed to
Schmelzer’s Plan account; and that the 2016 and 2017
information returns were “false, fraudulently and
willfully made” in violation of section 7434. The Court
concludes that, even after construing the complaint in a
light most favorable to Schmelzer, she fails to allege her
section 7434 fraud claim with the particularity required by
Rule 9(b). Because Rule 9(b) calls for a heightened pleading
standard, Schmelzer’s generalities will not suffice.
See Pirelli Armstrong Tire Corp. Retiree Med. Benefits
Trust v. Walgreen Co., 631 F.3d 436, 446-47 (7th Cir.
2011). The Court dismisses Count II without prejudice.
Counts III and IV
the Court turns to defendants’ arguments that Counts
III and IV should be dismissed because Schmelzer’s
Illinois state law claims are preempted by ERISA. Schmelzer
contends that defendants have prematurely moved to dismiss
these counts because the Court has not yet determined that
the Plan is covered by ERISA, and if it is ultimately
determined not to be an ERISA plan, there would be no
preempts “any and all State laws insofar as they may
now or hereafter relate to any [covered] employee benefit
plan.” 29 U.S.C. § 1144(a). “A law relates
to an employee benefit plan if it has a connection with or
reference to such a plan.” Kolbe & Kolbe Health
& Welfare Benefit Plan v. Med. Coll. of Wis., Inc.,
657 F.3d 496, 504 (7th Cir. 2011) (internal citations and
quotations omitted). ERISA does not preempt only state laws
dealing with the subject matters covered by ERISA; its
expansive preemption provisions are intended to ensure that
employee benefit plans regulation is exclusively a federal
concern. McDonald v. Household Int’l, Inc.,425 F.3d 424, 428 (7th Cir. 2005). ERISA preemption is not
limited to displacement of state laws affecting employee
benefit plans, but rather extends to any state cause ...