UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

BOARD OF TRUSTEES OF THE )

HEALTH AND WELFARE DEPARTMENT )

OF THE CONSTRUCTION AND GENERAL )

LABORERS’ DISTRICT COUNCIL OF )

CHICAGO AND VICINITY, )

)

Plaintiff, )

) 12 C 4097

vs. )

)

ALLISON ENTERPRISES, INC., )

d/b/a MID AMERICA VISION and )

LAWRENCE M. SILVER, )

)

Defendants. )

MEMORANDUM OPINION

CHARLES P. KOCORAS, U.S. District Judge:

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

1

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

In assessing both the Court’s subject-matter jurisdiction and the complaint’s legal 1

sufficiency, the Court accepts all well-pled allegations as true, and draws all inferences in favor of

the plaintiff. Scanlan v. Eisenberg, 669 F.3d 838, 841 (7th Cir. 2012); Killingsworth v. HSBC Bank

Nev., N.A., 507 F.3d 614, 618 (7th Cir. 1990). 

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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

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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.

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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 limitsfederal courts’ jurisdiction to claims presenting

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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 imminent, not

conjectural or hypothetical;

(ii) a causal relationship between the injury and the challenged conduct,

such that the injury can be fairly traced to the challenged action of the

defendant; and

(iii) a likelihood that the injury will be redressed by a favorable decision.

Lee v. City of Chi., 330 F.3d 456, 468 (7th Cir. 2003); citing Lujan v. Defenders of

Wildlife, 504 U.S. 555, 560-61 (1992).

Defendants assert that the Board fails to demonstrate an injury in fact, and that

a favorable decision will not redress an injury. Defendants argue that the Board has not

satisfied the injury in fact prong because Participants have received care. As fiduciary

to the Plan and the Fund, the Board is under a legal obligation to ensure that Plan assets

are not misappropriated. See 29 U.S.C. § 1103(c)(1) (requiring ERISA plan fiduciaries

to hold and dispose of a plan’s assets for the exclusive benefit of plan participants and

their beneficiaries); id. § 1104(a)(1)(A) (a fiduciary shall discharge its duties pertaining

to an ERISA benefit plan solely in the interest of plan participants and beneficiaries);

id. § 1109 (a breach of a fiduciary’s duties with respect to an ERISA benefit plan shall

be personally liable for damages resulting from the breach). ERISA also grants

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fiduciaries a statutory right to seek legal and equitable remedies on behalf of plan

participants and beneficiaries. See 29 U.S.C. §§ 1109, 1132. The complaint allegesthat

the Board received approved claims from MAV, transferred Plan assets to MAV, and

that MAV kept at least $95,000 of Plan assets that it was obligated to pay to Providers.

As a consequence, Providers have threatened to seek payment directly from the Plan’s

beneficiaries. Based on these allegations, the Court can comfortably infer that

Defendants failed to pay Providers for the Plan Assets tendered to MAV, and that this

has deprived the Board of Plan assets. This sufficiently establishes that the Board’s

legal interests suffered concrete and particularized harm.

Defendants rely on Tobin for Governor v. Ill. State Bd. of Elections, in arguing

that the complaint’s allegations of harm to the Board and the Participants are too

speculative to pass muster under Article III. 268 F.3d 517, 528 (7th Cir. 2001). In

Tobin, the Seventh Circuit held that the plaintiffs lacked standing because “several

contingencies would have to occur” for a “realistic threat” of harm to materialize. Id.

Here, the Board complains that it has already been deprived of Plan assets as a result

of Defendants’ withholding Plan assets. Furthermore,some Providers have warned that

they will pursue the money that MAV owes them from Participants, indicating that the

potential harm is far more likely to develop than lack of a “realistic threat” present in

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Tobin. Tobin therefore does not dissuade the Court’s inclination to find that injury in

fact has been established in this case.

Defendants also assert that a decision in favor of the Board would not redress any

harm done to the Board, claiming that a favorable decision would provide a “windfall”

to the Board. The Court fails to see how MAV’s withholding Plan assets owed to

Providers for the provision of Participants’ care would provide any such ill-gotten gain

to the Board. Accordingly, this contention is unpersuasive.

Because the Board establishes Article III standing, the Defendants’ motion to

dismiss under Rule 12(b)(1) is denied.

II. Motion to Dismiss under Rule 12(b)(6)

A. The Board’s Claims for Breach of Fiduciary Duty

The Board allegesthat Defendants violated their fiduciary duties under 29 U.S.C.

§ 1104(a)(1)(A)(i) and (B) by withholding Plan assets for their own benefit and failing

to pay Providers as required under the Agreement. Defendants contend that the

complaint fails to adequately allege that Silver and Allison were fiduciaries to the Plan,

or that they breached any fiduciary duties.

A person is a fiduciary to an ERISA benefit plan if “he exercises any

discretionary authority or discretionary control respecting management of such plan or

exercises any authority or control respecting management or disposition of its assets,”

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or “he has any discretionary authority or discretionary responsibility in the

administration of such plan.” 29 U.S.C. § 1002(21)(A)(i), (iii). In determining whether

one is a fiduciary, the Court looks not to the person’s formal designation; rather, one’s

status as a fiduciary “should be viewed in functional terms of control and authority over

the plan.” Ruiz v. Cont’l Cas. Co., 400 F.3d 986, 990 (7th Cir. 2005); citing Mertens

v. Hewitt Assocs., 508 U.S. 248, 262 (1993) (quotation marks omitted). Thus, the Court

focuses on whether the Defendants exercised control or authority over a particular

ERISA plan benefit. Ruiz, 400 F.3d at 990.

As detailed above, the complaint alleges that MAV acted as the claims

administrator pursuant to the Agreement, with the authority to grant or deny individual

claims for rendered care. It pre-negotiated rates with Providers and the Fund relating

to claims. The complaint further specifies how Silver, as MAV’s owner and primary

decision-maker, repeatedly received calls from the Fund and Providers inquiring into

the status of the withheld Plan assets, but to no avail. These allegations allow for the

plausible inference that Silver and MAV exercised control and authority over the Plan’s

management and the administration of claims sufficient to establish their fiduciary

status. See Smith v. Med. Benefit Adm’rs Group, Inc., 639 F.3d 277, 281 (7th Cir. 2011)

(a claims administrator with the power to grant or deny a participant’s claim for benefits

under an ERISA benefit plan is a fiduciary under ERISA) (citation omitted).

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Defendantslastly argue that the Board’s allegations are too vague and conclusory

to state a claim under Iqbal and Twombly. To survive a motion to dismiss under Rule

12(b)(6), a plaintiff only needs to provide a defendant “fair notice of what the . . . claim

is and the grounds upon which it rests.” Agnew v. NCAA, 683 F.3d 328, 334 (7th Cir.

2012); quoting Twombly, 550 U.S. at 555 (citation omitted). The Board’s allegations

easily cross this threshold.

Because the Board has sufficiently alleged that Defendants were fiduciaries to

the Plan and the Fund, and that they breached those duties under ERISA, Defendants’

motion to dismiss is denied.

B. The Board’s Claims for Unjust Enrichment

The Board also seeks restitution for Defendants’ alleged retention of Plan assets

under a theory of unjust enrichment. 29 U.S.C. § 1132(a)(3). Defendants argue that the

remedy that the Board seeks is legal in nature, and therefore not cognizable under

§ 1132(a)(3), which permits equitable relief only.

Under ERISA, plan participants, beneficiaries, or fiduciaries may bring a civil

action “to enjoin any act or practice that violates [ERISA] or the terms of the benefit

plan, or to obtain other equitable relief (I) to redress such violations or (ii) to enforce

any provisions of [ERISA] or the terms of the plan.” 29 U.S.C. § 1132(a)(3)(A), (B).

Whether restitution is deemed a legal or equitable remedy depends on “the basis for the

plaintiff’s claim and the nature of the underlying remedies sought.” Great-West Life &

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Annuity Ins. Co. v. Knudson, 534 U.S. 204, 213 (2002). A plaintiff may seek restitution

under § 1132(a)(3) where it seeks to be restored of the property that is wrongfully in the

defendant’s possession. Id.; see also Harris Trust & Sav. Bank v. Provident Life &

Accident Ins. Co., 57 F.3d 608, 615 (7th Cir. 1995) (recognizing that a claim for

restitution under § 1132(a)(3) may lie “when one party has been enriched at another’s

expense.”).

Here, the Board alleges that it tendered Plan assets to MAV with the expectation

that MAV would satisfy Providers’ claims for care rendered to Participants. Silver and

MAV are alleged to have withheld at least $95,000 of Plan assets intended for

Providers, keeping the money for their own benefit. The Board alleges that MAV and

Silver have been enriched with Plan assets to which they are not entitled. Accordingly,

the Board states a viable claim for equitable relief. Defendants’ motion to dismiss is

denied.

CONCLUSION

For the foregoing reasons, Defendants’ motion to dismiss under Rules 12(b)(1)

and 12 (b)(6) are denied.

Charles P. Kocoras

United States District Judge

Dated: October 4, 2012

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