IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

REGIONAL EMPLOYERS’ ASSURANCE : CIVIL ACTION 

LEAGUES VOLUNTARY EMPLOYEES’ :

BENEFICIARY ASSOCIATION TRUST :

:

v. :

:

GRETCHEN HUTTO CASTELLANO :

:

v. :

:

REGIONAL EMPLOYERS’ ASSURANCE :

LEAGUES VOLUNTARY EMPLOYEES’ :

BENEFICIARY ASSOCIATION TRUST, :

BY PENN-MONT BENEFIT SERVICES, :

INC., PLAN ADMINISTRATOR, et al. : No. 03-6903

MEMORANDUM

McLaughlin, J. August 24, 2015

This case arises out of a decision made by the 

Regional Employers’ Assurance League Voluntary Employees’ 

Beneficiary Association (the “REAL VEBA”) Trust, through its 

Plan administrator, Penn-Mont Benefit Services, Inc. (“PennMont”), to deny benefits to Gretchen Hutto Castellano

(“Castellano” or “Mrs. Castellano”). Before a final 

determination of the benefits due to Mrs. Castellano was made, 

REAL VEBA brought a declaratory judgment action against 

Castellano, who then asserted counterclaims against REAL VEBA 

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fand other related defendants. Both sides have moved for 

summary judgment.1 

The Court will deny the plaintiff REAL VEBA’s and 

grant the defendant Castellano’s motion for summary judgment on 

the declaratory judgment action. The Court will grant

counterclaimant Castellano’s motion for summary judgment with 

respect to her claim under Section 502(a)(1)(B) of the 

Employment Retirement Income Security Act of 1974 (“ERISA”), 

29 U.S.C. § 1001 et seq., and deny counterclaimant Castellano’s 

motion for summary judgment with respect to her Racketeer 

Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. 

§ 1961 et seq., and common law claims.

I. Summary Judgment Standard

Summary judgment is appropriate if there is “no 

genuine dispute as to any material fact and the movant is 

entitled to judgment as a matter of law.” Fed. R. Civ. P. 

56(a). The moving party bears the initial burden of informing 

the court of the basis for its motion. Celotex Corp. v. 

Catrett, 477 U.S. 317, 323 (1986). Once a properly supported 

 1 The plaintiff’s motion for summary judgment is Docket No. 

127. The defendant/counterclaim plaintiff Castellano filed a 

motion for summary judgment (Docket No. 125) and then a 

supplemental motion for summary judgment (Docket No. 249) after 

the Court reopened discovery in the related Perez v. Koresko, 

09-cv-988, case. 

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motion is made, the burden shifts to the nonmoving party to set 

forth specific facts showing that there is a genuine issue of 

material fact for trial. Anderson v. Liberty Lobby, Inc., 

477 U.S. 242, 250 (1986). 

A fact is “material” if it might affect the outcome of 

the suit under the governing law. Id. at 248. A dispute is 

genuine if the evidence is such that a reasonable jury could 

return a verdict for the nonmoving party. Id. The Court 

considers properly supported facts genuinely disputed only when

the party opposing the fact provides citations to the record.

II. Factual Background2

A. The Parties

Plaintiff REAL VEBA Trust, by its Plan administrator, 

Penn-Mont, brought a declaratory judgment suit against Mrs. 

Castellano and Domenic M. Castellano, D.D.S., P.A. (the “Dental 

Practice”) in late 2003. The Dental Practice settled and is no 

longer a party in this case (Docket No. 58).

Mrs. Castellano is the widow of Dr. Domenic 

Castellano, who owned and managed the Dental Practice prior to 

 2 This section will refer frequently to the following 

documents: Koresko Stmt. (Docket No. 128); Castellano Stmt. 

Resp. (Docket No. 134); Castellano Stmt. (Docket No. 249); 

Koresko Stmt. Resp. (Docket No. 264). Castellano exhibits will 

be denoted “CX” and Koresko exhibits will be denoted “KX.”

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his death.3 Mrs. Castellano has brought various ERISA, RICO, and 

state law counterclaims against the plaintiff as well as against 

a host of Koresko-affiliated entities (collectively the “Koresko 

entities”). The counterclaim defendants are: the REAL VEBA 

Trust; Penn-Mont; Koresko & Associates, P.C.; Koresko Financial 

L.P.; John J. Koresko, V (“John Koresko” or “Mr. Koresko”); 

Jeanne D. Bonney; and Lawrence Koresko. See Castellano Stmt. 

¶¶ 2-4; Reply to Interrogatories ¶ 17 (KX14); Counterclaim 

(Docket No. 27).

The Regional Employers’ Assurance League (“REAL” or 

the “League”) is an unincorporated association of employers. 

Employers belonging to the REAL may adopt a benefit structure 

for their employees under REAL’s welfare benefit plan, whose 

assets are held in trust. Penn-Mont is the Plan administrator 

for the REAL VEBA Plan. Koresko Stmt. ¶ 2; Castellano Stmt. 

Resp. ¶ 2; Castellano Stmt. ¶ 2. 

John Koresko, a lawyer and public accountant, is the 

author of the Plan and Trust documents for the REAL VEBA. See 

generally Perez v. Koresko, No. 09-cv-988, 2015 WL 505471 (E.D. 

Pa. Feb. 6, 2015) judgment entered, No. 09-cv-988, 2015 WL 

1182846 (E.D. Pa. Mar. 13, 2015) amended, No. 09—cv-988, 2015 WL 

 3 The plaintiff claims that the fact that Mrs. Castellano is 

the widow of Dr. Castellano is a “conclusion of law,” but cites 

nothing in the record to dispute that fact. Koresko Stmt. Resp. 

¶ 4. The Court, therefore, accepts the fact as true. 

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2236692 (E.D. Pa. May 13, 2015). He is also the sole 

shareholder of his law firm, Koresko & Associates, P.C. 

(subsequently renamed Koresko Law Firm, P.C.), which performs 

functions on behalf of Penn-Mont and the REAL VEBA. Id. PennMont, a Pennsylvania corporation formed by Mr. Koresko, is a 

corporate affiliate of Koresko & Associates, P.C., and has no 

employees of its own. Id. Ms. Jeanne Bonney, an attorney, was

an employee of Koresko & Associates, P.C. (and then its 

successor) and also represented Penn-Mont as counsel. Id.; see

5/4/04 Koresko Aff. ¶¶ 1, 3, 13-16 (CX21); Castellano Stmt. 

¶¶ 21-23, 26; Koresko Stmt. Resp. ¶¶ 21-23, 26.4

B. Dr. Castellano’s Association with the REAL

Thomas Morris served as a financial advisor to Dr. 

Castellano in 1998 and was the broker who secured life insurance 

 4 In the related case of Perez v. Koresko, brought by the 

Secretary of Labor against Koresko, Koresko related entities, 

and Jeanne Bonney, the Court found, after a bench trial, that 

the defendants had violated ERISA in a variety of ways in 

connection with their involvement in the Single Employer Welfare 

Benefit Plan Trust (“SEWBPT”), the REAL VEBA Trust, and the 

constituent employer-level employee benefit plans of the SEWBPT 

and the REAL VEBA Trust. The Court removed the defendants from 

any position with regard to the SEWBPT, the REAL VEBA Trust, or 

any of the Plans and permanently enjoined them from further 

service in any capacity with the Trusts. Id.

The Court has appointed a new administrator and Trustee for 

the Trusts and has appointed a forensic accountant to conduct an 

equitable accounting of the assets of the Trusts, with a subaccounting by Plan of each plan’s interest in the Trusts.

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coverage for the Dental Practice through the REAL VEBA. Mr.

Morris was asked by John Koresko’s brother, Lawrence Koresko, to 

market the REAL VEBA to his clients as a vehicle for a tax 

advantaged purchase of life insurance. Aff. of Thomas Morris 

(CX4).

On or about July 10, 1998, Dr. Castellano executed 

three documents: (1) an Adoption Agreement on behalf of the 

Dental Practice, which specified that the Dental Practice agrees

to and adopts the REAL VEBA Plan and Trust; (2) an Employee 

Participation Agreement and Limited Power of Attorney on his own 

behalf5

; and (3) a beneficiary nomination form on his own behalf. 

Koresko Stmt. ¶¶ 14, 23, 24; Castellano Stmt. Resp. ¶ 14, 23, 

24.

The Adoption Agreement reflects the Dental Practice’s 

agreement to become a member of the REAL and adopt the REAL VEBA 

Plan and its companion Trust. Among other provisions, the 

agreement incorporates the REAL VEBA Trust agreement. Adoption 

Agreement (CX5). 

Under the Employee Participation Agreement and Limited 

Power of Attorney that he signed on his own behalf, Dr. 

Castellano agreed to participate in the Dental Practice’s 

welfare benefit plan adopted under the REAL VEBA. By signing 

 5 Each employee who participates in her employer’s plan must 

sign an Employee Participation Agreement and Limited Power of 

Attorney. Castellano Stmt. ¶ 46; Koresko Stmt. Resp. ¶ 46.

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the form, Dr. Castellano also appointed Penn-Mont and John 

Koresko, or their authorized agent, employee, or delegate, to 

serve as “Limited Attorney in Fact with respect to all matters 

connected with and/or related to the procurement and maintenance 

of benefits payable to [Dr. Castellano].” The form also 

indicates Dr. Castellano’s agreement to release the REAL VEBA 

Trustee, Penn-Mont, John Koresko, and their agents and employees 

from “any liability which may result from any action taken in 

reliance on or in connection with this document and the powers 

granted hereunder.” Employee Participation Agreement (CX8).

The beneficiary nomination form signed by Dr. 

Castellano in 1998 specified that Gretchen Hutto Castellano was 

to receive $150,000.00 of the $750,000.00 life insurance benefit 

and that Dr. Castellano’s three sons would each receive 

$200,000.00. The nomination form is directed to the Trustee of 

the “Domenic M. Castellano, D.D.S., P.A. Voluntary Employees’ 

Beneficiary Association” under the REAL Trust. 1998 Beneficiary 

Nomination Form (CX47).

In connection with the Dental Practice’s association 

with the REAL VEBA, the Dental Practice received a Summary Plan 

Description (“SPD”) for the “Domenic M. Castellano, D.D.S. P.A. 

Voluntary Employees’ Beneficiary Association Health and Welfare 

Benefit Plan Under the Regional Employer’s Assurance Leagues 

Trust.” The SPD informs employees that the Dental Practice “has 

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adopted a benefits program which provides you and your family 

valuable financial protection against the possibility of your 

death.” Castellano Stmt. ¶¶ 8(b); Koresko Stmt. Resp. ¶¶ 8(b); 

SPD (CX6). 

Dr. Castellano sent contributions on behalf of the 

Dental Practice to the REAL VEBA Trust so that qualified 

participating employees of the Dental Practice might receive 

benefits from the Trust. A portion of these contributions were 

used to purchase a life insurance policy on Dr. Castellano’s 

life and on the lives of other participating employees.6

Castellano Stmt. ¶ 11; Koresko Stmt. Resp. ¶ 11 (admitting that 

the Dental Practice made contributions to the Trust); Jefferson 

Pilot Policy (CX10); Ltr. from Jeanne Bonney (CX14) 

(acknowledging receipt of an $80,500.00 check for contributions 

as well as $2,890.00 in administrative fees).

The life insurance policy on Dr. Castellano’s life was 

a flexible premium adjustable life insurance policy for 

$750,000.00. The beneficiary named on the policy is “as stated 

in application attached unless later changed.” Jefferson Pilot 

Policy 3 (CX10). Mrs. Castellano does not dispute that the 

 6 Mr. Koresko disputes the fact that the contributions were 

used to purchase a life insurance policy on Dr. Castellano’s 

life, but cites no facts in the record to the contrary. Koresko 

Stmt. Resp. ¶ 12. Koresko’s own statement of facts states that 

the Trustee purchases life insurance policies on the lives of 

participating employees to reinsure the REAL VEBA’s promise to 

pay benefits. Koresko Stmt. ¶ 4. 

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Trustee of the REAL VEBA Trust was named as the beneficiary of 

Dr. Castellano’s life insurance policy. Cf. Castellano Stmt. 

¶ 14 (noting that the insurance policy was paid into the REAL 

VEBA Trust); Plan Document § 7.05(a) (CX7) (“The policy shall be 

a contract between the Trustee and the Insurer and shall reserve 

to the Trustee all rights, options, and Benefits provided by the 

Policy and permitted by the Insurer ... .”).

C. Dr. Castellano’s Death, Castellano’s Claim for 

Benefits, and the Proposed Settlement Agreements

Dr. Castellano died on June 17, 2003. On or about 

July 7, 2003, Mr. Morris, Dr. Castellano’s insurance agent, 

notified Penn-Mont by letter of Dr. Castellano’s death. 

Subsequently, the REAL VEBA Trust received a letter and check in 

the amount of $751,266.18 from the life insurance policy on Dr. 

Castellano’s life. That letter and check were addressed to 

Jeanne Bonney – counsel to Penn-Mont and an employee at 

Koresko’s law firm – “as Trustee.” Castellano Stmt. ¶ 13; 

Koresko Stmt. Resp. ¶ 13; CX16. 

On July 15, 2003, a sum of $751,266.18 (the same 

amount that the REAL VEBA Trust received from Dr. Castellano’s 

insurance policy) was deposited into a high performance money 

market account at Wachovia Bank, under the name “Castellano 

Death Benefit Trust.” Both John Koresko and Jeanne Bonney were

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listed as Trustees. Those moneys collected interest and were 

subsequently transferred to other bank accounts under the 

“Castellano Death Benefit Trust” account name, with Mr. Koresko 

and Ms. Bonney again named as Trustees. See generally CX54.

At a temporary restraining order (“TRO”) hearing in 

May 2011, Mr. Koresko represented to the Court that the 

“Castellano Death Benefit Trust” account was later closed out 

and that all moneys were transferred out into a central trust 

bank account without the “Castellano” moniker.7 5/27/11 TRO 

Hearing Tr. 21 (CX33) (“[T]he amount was placed into a central 

trust account with a new bank.”). 

On July 29, 2003 – weeks after informing Penn-Mont of 

Dr. Castellano’s death – Mr. Morris submitted a REAL VEBA Death 

Benefit Form to Penn-Mont, naming Gretchen Hutto Castellano as 

the claimant, and attaching a beneficiary nomination form signed 

on January 22, 2000, which named Mrs. Castellano as the sole 

beneficiary.8 On July 30, 2003, upon receipt of the death 

 7 The documents show that, on February 24, 2010, the 

“Castellano Death Benefit Trust” account at TD Bank, the last 

bank to have such an account designation, was closed out. CX54 

at 2. Castellano filed the TRO shortly after receiving 

documents in discovery indicating that the account was closed 

out. The Court denied the TRO without prejudice after receiving 

a letter from Koresko indicating that there were sufficient 

funds in the Trust to satisfy the amount of controversy in the 

litigation (Docket No. 218).

8 The 2000 beneficiary nomination form was witnessed and 

signed by Thomas Morris. 2000 Beneficiary Nomination Form 

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benefit claim form, Penn-Mont forwarded a proposed Settlement 

Agreement for Payment of Death Benefit to Mrs. Castellano 

through Mr. Morris, as well as a Receipt, Release, Refunding, 

and Indemnification Agreement. Koresko Stmt. ¶¶ 25, 26, 28, 30; 

Castellano Stmt. Resp. ¶ 25, 28, 30; Aff. of Jeanne Bonney ¶ 20 

(ECF No. 35); KX8; KX9.

The proposed Settlement Agreement asked Mrs. 

Castellano to choose between two forms of death benefit payment: 

(1) ten years of payments of $75,000.00 per year or (2) a lumpsum accelerated death benefit of $597,560.14. The Receipt, 

Release, Refunding, and Indemnification Agreement asked Mrs. 

Castellano to release and discharge all claims, legal or 

equitable, against the Trustee, Penn-Mont, and the REAL. 

Proposed Settlement Agreement ¶ 3 (KX9); Indemnification 

Agreement ¶ 4 (KX0).

In response to these proposed agreements, which 

offered less than what Mrs. Castellano believed she was due, she

retained Holland & Knight as counsel. Holland & Knight 

subsequently contacted Penn-Mont on Mrs. Castellano’s behalf and

demanded a lump-sum payment of $750,000.00. Penn-Mont responded 

 

(CX48). On May 19, 2005, however, Mr. Morris sent a signed 

statement to Penn-Mont, indicating that Dr. Castellano did not 

change his beneficiary designation during his lifetime. KX17. 

On August 3, 2007, Mr. Morris executed an affidavit correcting 

his 2005 statement. He attested that he had, in fact, witnessed 

Dr. Castellano execute the 2000 beneficiary nomination form. 

8/3/07 Aff. of Thomas Morris ¶¶ 6-11 (CX48). 

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in a letter dated September 24, 2003, threatening litigation and 

challenging Holland & Knight’s right to represent Mrs. 

Castellano. CX51. Holland & Knight responded with a lengthy 

letter dated October 8, 2003, telling Ms. Bonney that she should 

deal exclusively with Holland & Knight on the matter, and

discussing the law with response to Mrs. Castellano’s claim. 

Id.

Rather than responding to Holland & Knight, however, 

Ms. Bonney contacted Mrs. Castellano directly on October 13, 

2003, and advised her that: (1) Penn-Mont would not recognize 

Holland & Knight as Mrs. Castellano’s legal representative 

because the firm was not named on her death benefit claim form 

and because the lawyers were not admitted to practice in the 

state of Pennsylvania; and (2) no payment would be made without 

Mrs. Castellano’s signature on the proposed settlement and 

indemnification agreements. CX19.

D. Initiation of Litigation and Final Claim Determination 

On November 26, 2003, before Penn-Mont issued a formal 

final denial of benefits, the REAL VEBA Trust, by and through 

Penn-Mont, filed the instant declaratory judgment action against 

Castellano and the Dental Practice in state court, which was 

subsequently removed to this Court. Docket No. 1; Complaint 

(CX3). 

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On August 23, 2004, the Koresko entities moved to 

compel exhaustion of the administrative process and to stay 

proceedings pending the completion of the administrative 

process, even though it was the Koresko entities that had 

initiated the case (Docket No. 22). The following May, Judge 

Green9 granted the parties 15 days to exhaust the administrative 

process (Docket No. 56).

On May 20, 2005, before the time period for exhaustion 

had expired, Ms. Bonney again sent a letter to Mrs. Castellano, 

this time requesting answers to a series of questions to aid in 

the completion of the administrative process. Mrs. Castellano’s 

counsel submitted responses to the questions on her behalf in 

early June. 5/20/05 Ltr. from Bonney to Castellano (CX50); 

6/6/05 Ltr. from Silverstein to Miller (CX52). 

Finally, on June 29, 2005, Ms. Bonney issued a final 

claim determination on behalf of Penn-Mont, denying Mrs. 

Castellano’s claim in its entirety. Among the reasons for the 

denial were the following:

(1) the 2000 beneficiary nomination form presented by Mrs. 

Castellano was “questionable and possibly illegitimate”; 

 9 Over the course of this litigation, four different judges

have been assigned this case: Judge Green from removal until 

June 2007, Judge Dalzell from June 2007 until November 2008, 

Judge Jones from November 2008 until May 2010, and the 

undersigned from May 2010. 

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(2) the Dental Practice terminated its participation in the 

REAL VEBA, and no beneficiary is entitled to a benefit 

after termination of the Plan by an employer10; 

(3) Mrs. Castellano took actions detrimental to the REAL by 

filing counterclaims against the Plan, and no beneficiary 

is entitled to a benefit if the beneficiary takes actions 

detrimental to the REAL, the employer, or the Plan 

administrator, pursuant to the “bad boy” clause11;

(4) Mrs. Castellano “likely engaged” in a prohibited pledge 

or alienation of Plan benefits by allowing her past or 

present counsel to work on a contingent-fee basis and 

thereby assert a charging lien on any benefit that would be 

paid.12 

 10 Section 3.01 of the REAL VEBA Plan Document specifies 

that an employee “shall be a participant ... only during the 

period the Employer is a member of the League. Upon termination 

of the Employer’s League membership, whether voluntary or 

involuntary, the Employee shall have no further right to the 

benefits hereunder, including without limitation, those benefits 

for which claims have been made but not yet paid on the date 

League membership terminates.” Plan Document § 3.01 (CX7)

11 The Plan Document’s “bad boy” clause provides: 

“Notwithstanding any provisions of this Plan and Trust, a 

Participant who has less than ten (10) years of participation 

shall forfeit any benefit payable hereunder if it is determined 

by the Plan Administrator that he has engaged in a disqualifying 

act with respect to the Employer, Employees, or to the League. 

A Participant shall be deemed to have engaged in a disqualifying 

act if he is determined by the Plan Administrator to have: ... 

(2) committed any criminal act or malicious act (not rising to 

the level of a crime) which damages the person or property of 

the Employer, Employees or the League. The judgment of the Plan 

Administrator as to whether a Participants has committed a 

disqualifying act shall be final, unless made without evidence 

to support such judgment.” Plan Document § 5.10 (CX7).

12 The Plan Document’s “anti-alienation” clause provides 

that “no payment to any person under any Policy, nor the right 

to receive such payments, nor any interest in the Trust, shall 

be subject to assignment, alienation, transfer or anticipation, 

either by voluntary or involuntary act of any Participant or 

Beneficiary or by operation of law.” Plan Document § 10.04 

(CX7). 

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6/29/05 Final Claim Determination 3, 19 (CX20).

E. The Dental Practice Settlement

On June 7, 2005, one of Dr. Castellano’s sons, David 

Castellano, signed a settlement agreement with REAL VEBA Trust 

on behalf of the Dental Practice. Dr. Castellano’s two sons, 

step-sons of Mrs. Castellano, inherited the dental practice from 

their father. The settlement agreement was filed with the Court 

on July 20, 2005, and the Dental Practice was dismissed from the 

suit shortly thereafter (Docket Nos. 58, 59). That settlement 

agreement stated that the Dental Practice voluntarily terminated 

participation in the REAL VEBA on October 22, 2003. Settlement 

Agreement ¶¶ M, N, O (CX53). 

III. Analysis

This Court concluded in the related Perez v. Koresko

matter that, although the REAL VEBA Trust was not itself an 

employee welfare benefit plan covered by ERISA, the Castellano 

Plan nevertheless was, along with 532 other plans. Perez, 

2015 WL 505471, at *8. Nothing in the Court’s review of the 

record in this case disturbs that conclusion. Indeed, the SPD

for the Castellano Plan –- which was not in the record in 

Perez but is in the record here -- explicitly states that the 

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Plan is “covered by the Employee Retirement Income Security Act 

of 1974 (‘ERISA’).” SPD § 13 (CX6). 

At oral argument, the parties both acknowledged the 

applicability of ERISA and that the effective claims in the case 

come down to whether Castellano has a 29 U.S.C. § 1132(a)(1)(B) 

claim to recover benefits due under the terms of the Plan, or, 

in the alternative, for equitable relief under 29 U.S.C. 

§ 1132(a)(3) and Cigna v. Amara, 131 S. Ct. 1866 (2011). 

See 10/22/12 Oral Argument Tr. 5-7. 

A. ERISA Section 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B)

When making discretionary decisions regarding 

eligibility for plan benefits, a plan administrator engages in a 

fiduciary act and must therefore be treated as a plan fiduciary. 

Varity Corp. v. Howe, 516 U.S. 489, 511 (1996). A fiduciary is 

obliged to act “in accordance with the documents and instruments 

governing the plan insofar as such documents and instruments are 

consistent with the provisions of [Title I] and [Title IV] of 

ERISA.” 29 U.S.C. § 1104(a)(1)(D); Kennedy v. Plan Adm’r for 

DuPont Sav. & Inv. Plan, 555 U.S. 285, 300 (2009). 

ERISA Section 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B), 

provides potential relief to beneficiaries when a plan 

administrator does not act consistently with plan documents. 

That provision allows a civil action by a participant or 

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beneficiary to “recover benefits due to him under the terms of 

his plan, to enforce his rights under the terms of the plan, or 

to clarify his rights to future benefits under the terms of the 

plan.” 

1. Standard of Review

Although ERISA on its own does not specify a standard 

of review for an action brought under § 1132(a)(1)(B), the 

Supreme Court has held that “a denial of benefits challenged 

under § 1132(a)(1)(B) is to be reviewed under a de novo standard 

unless the benefit plan gives the administrator or fiduciary 

discretionary authority to determine eligibility for benefits or 

to construe the terms of the plan.” Firestone Tire & Rubber Co. 

v. Bruch, 489 U.S. 101, 115 (1989). In a decision involving the 

appropriate standard of review, the Supreme Court clarified 

that, where a plan gives the administrator such discretionary 

authority, the appropriate standard of review is abuse of 

discretion or an arbitrary and capricious standard. 

Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105 (2008); Miller 

v. Am. Airlines, Inc., 632 F.3d 837, 845 (3d Cir. 2011) (noting 

that, in the ERISA context, the two standards are essentially 

the same).

In this case, the REAL VEBA Plan Document (the “Plan 

Document”) grants the administrator discretion to determine 

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eligibility of benefits and to construe the terms of the Plan. 

The Plan Document contains many references to the

administrator’s discretion.13 The appropriate standard of review 

for the administrator’s decision is therefore abuse of 

discretion. An administrator’s decision is arbitrary and 

capricious if it is without reasons, unsupported by substantial 

evidence, or erroneous as a matter of law. Miller, 632 F.3d 845 

(citing Abnathya v. Hoffmann-La Roche, Inc., 2 F.3d 40, 45 (3d 

Cir. 1993)); Doroshow v. Hartford Life & Accident Ins. Co., 574 

F.3d 230, 234 (3d Cir. 2009). A plan administrator’s 

interpretation of the plan will not be disturbed if reasonable. 

Conkright v. Frommert, 130 S. Ct. 1640, 1651 (2010). 13 In particular, Section 5.02 of the Plan Document 

specifies:

The “Life Benefit” may be paid in a form of survivor 

income Benefit to a named Beneficiary ... . Such 

Benefit may be payable upon the death of the 

Participant in a series of monthly payments not to 

exceed 120 or as otherwise provided in an annuity 

purchased by the Plan or as agreed by the Beneficiary 

and the Administrator, in the Administrator’s sole and 

absolute discretion. 

Plan Document § 5.02(a) (CX7). In addition, the Plan documents 

provide that the administrator shall:

exercise all of its discretion in a uniform, 

nondiscriminatory manner and shall have all necessary 

power to accomplish those purposes, including but not 

limited to the power: ... (b) To compute and certify 

to the Trustee the amount and kind of Benefit payable 

to Participants and their Beneficiaries.

Plan Document § 6.03 (CX7).

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2. Factors Affecting the Abuse-of-Discretion 

Analysis: Conflict of Interest and Procedural

Irregularities_______________________________

Following the Supreme Court’s decision in Glenn, the 

existence of a conflict of interest no longer changes the 

standard of review from abuse of discretion to a more searching 

review. Glenn, 554 U.S. at 117; see also Doroshow v. Hartford 

Life & Acc. Ins. Co., 574 F.3d 230, 234 (3d Cir. 2009). If a 

benefit plan, however, gives discretion to an administrator or 

fiduciary who is operating under a conflict of interest, that 

conflict must be weighed as one factor in determining whether 

there is an abuse of discretion. Glenn, 554 U.S. at 117; 

Miller, 632 F.3d at 845; Viera, 642 F.3d at 413. 

Procedural irregularities in how a benefits claim is 

reviewed can also be a factor in whether there is an abuse of 

discretion.14 See Glenn, 554 U.S. at 118. 

 14 Under the pre-Glenn sliding scale approach under the 

Third Circuit’s decision in Pinto, procedural anomalies in the 

review of the claimant’s application for benefits was cause for 

heightened review. See Kosiba v. Merck & Co., 384 F.3d 58, 66 

(3d Cir. 2004) (citing Pinto v. Reliance Std. Life Ins. Co., 214 

F.3d 377, 393 (3d Cir. 2000)). The Supreme Court in Glenn

addressed whether a conflict of interest affects the standard of 

review and concluded that it should be a factor in abuse of 

discretion analysis. However, Glenn did not similarly address 

how the presence of procedural irregularities factors into the 

standard of review. 

Post-Glenn, the Third Circuit has not explicitly addressed 

how, if at all, procedural irregularities affect the standard of 

Case 2:03-cv-06903-WB Document 351 Filed 08/25/15 Page 19 of 34
20

a. Conflict of Interest

“The potential for a conflict of interest arises 

because [the same entity] both funds and administers the welfare 

benefits plan.” Smathers v. Multi-Tool, Inc., 298 F.3d 191, 197 

(3d Cir. 2002). The record in this case leads the Court to 

conclude that there was a structural conflict of interest.

The REAL VEBA Trust funds the Plan in that the Trust 

reinsures its obligations to pay out benefits by using employer 

contributions to buy life insurance policies on the 

participating employees’ lives. The life insurance policies 

name the REAL VEBA trustee as the beneficiary. Because nothing 

gets paid to beneficiaries until the life insurance carrier pays 

the REAL VEBA Trust, the funding for the death benefits comes 

from the life insurance policy, which REAL VEBA - not the 

employer - owns. See Section 7.05(g) of the Plan Document 

(CX7).

The Trustee of the REAL VEBA Trust entered into a 

Custodial Agreement with Koresko’s law firm, whereby Koresko’s 

law firm “agrees to act as agent for the custody of certain 

insurance policies which Trustee owns pursuant to the REAL VEBA 

TRUST.” Custodial Agreement ¶ 1 (CX40). That agreement also 

review, or whether, like conflicts of interest, they are a 

factor in whether there is an abuse of discretion. But 

extending the reasoning of Glenn, considerations previously part 

of the sliding scale approach should be factors in whether there 

has been an abuse of discretion. 

Case 2:03-cv-06903-WB Document 351 Filed 08/25/15 Page 20 of 34
21

granted the Koresko law firm control over “surrender of, change 

of beneficiary of, application of premium payment to, change of 

ownership of, withdraw of cash value from, and/or borrowing from 

any Insurance Policy.” Id. ¶ 12.

Penn-Mont administers the Plan and, like the Trust, is 

a Koresko-controlled entity. The record shows that Penn-Mont 

has no employees, is majority-owned by John Koresko, and John 

Koresko’s law firm performs its work. Jeanne Bonney, Koresko’s 

employee, is counsel for Penn-Mont. Finally, Koresko decides 

whether a claimant, like Mrs. Castellano, receives the insurance 

proceeds or whether Koresko keeps control of them as “surplus.”

The Court, therefore, finds that there is a structural 

conflict of interest that factors into the analysis of whether 

there has been an abuse of discretion by the Plan administrator.

b. Procedural Irregularities

Penn-Mont’s decision to deny benefits to Castellano 

was marked by certain procedural irregularities. Written notice 

of the disposition of Castellano’s claim was not furnished until 

June 29, 2005. 6/29/05 Final Claim Determination (CX 20). 

Prior to that, the Koresko entities had sent letters with offers 

of settlement and then filed a declaratory judgment lawsuit 

against Castellano when those offers were not accepted. This 

disposition of the claims after the initiation of litigation and 

Case 2:03-cv-06903-WB Document 351 Filed 08/25/15 Page 21 of 34
22

a court-ordered expedited administrative process was irregular 

and inconsistent with the terms of the Plan documents.15 The 

Court, therefore, will consider the procedural irregularities as 

a factor in evaluating whether Penn-Mont’s denial of benefits 

was an abuse of discretion. 

3. Whether Penn-Mont’s Denial of Benefits was an 

Abuse of Discretion_________________________

The Court must decide whether the decision to deny 

Mrs. Castellano benefits was an abuse of discretion.16 In its 

final claim determination, the plaintiff offered four reasons 

for the denial of benefits. See 6/29/05 Final Claim 

Determination (CX 20), at 3. The Court finds each of these 

justifications invalid on the record before the Court.

 15 See 5.06(d) of the Plan Document (CX 7)(“Written notice 

of the disposition of the claim [for benefits] shall be 

furnished [to] the claimant within thirty (30) days after the 

application thereof is filed. In the event the claim is denied, 

the reasons for the denial shall be specifically set forth, 

pertinent provisions of the Plan shall be cited and, where 

appropriate, an explanation as to how the claimant can perfect 

the claim will be provided.”).

16 At oral argument, counsel for Castellano clarified that 

the action taken by Penn-Mont for which court review is sought 

is the June 29, 2005, denial of benefits, not the prior 

settlement letters that offered less than the $750,000 lump sum. 

See Oral Arg. Tr. 40, Oct. 22, 2012.

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23

The first, third and fourth reasons are very weak and 

appear to be make weight. The Court will discuss them before

discussing the second reason for the denial.

The first reason was that the 2000 beneficiary form 

presented by Mrs. Castellano was “questionable and possibly 

illegitimate.” But there is nothing in the summary judgment 

record to justify the plaintiff’s suspicions of forgery or 

mistaken identity.17 There was inconsistency in Thomas Morris’ 

statement but there was no evidence that Mrs. Castellano forged 

any documents. See, supra, n.8.

The third reason for denial of benefits was that Mrs. 

Castellano violated the “bad boy” clause when she “filed 

 17 Following are some of the baseless findings of fact the 

plaintiff made in connection with this reason for denial:

The administrator finds that the signature on the 2000 

form “does not match on the life insurance application or the 

[1998 beneficiary form].” CX 20 at 16 ¶ 81. A layman’s 

handwriting opinion should not be the basis for a denial of 

benefits.

The administrator finds that there is no official document 

that identifies anyone as Gretchen Castellano, and that there is 

no evidence Gretchen Hutto (Mrs. Castellano’s maiden name) ever 

changed her name to Castellano. Id. at 14 ¶¶ 66-67.

The notary public verified Castellano’s identity from 

personal knowledge, Castellano’s marriage certificate, and 

driver’s license. The administrator finds that the marriage 

certificate does not identify anyone as “Gretchen Hutto 

Castellano” (because Castellano’s maiden name is used), that the 

marriage certificate states there is a 25 year age difference 

between Dr. Castellano and his wife, and that no proof of prior 

divorce of either party as provided. Id. at 15 ¶¶ 71-75.

Case 2:03-cv-06903-WB Document 351 Filed 08/25/15 Page 23 of 34
24

litigation against the Plan and Plan administrators.” This 

reason makes no sense in view of the fact that the Koreskocontrolled entities initiated the litigation. Mrs. Castellano 

was entitled to defend herself and file counterclaims.

The fourth reason given for denial of benefits was 

that Mrs. Castellano “likely engaged” in a prohibited pledge of 

alienation of Plan benefits by allowing her past or present 

counsel to work on a contingent fee basis. This appears to be a 

forced reading of the anti-alienation clause. and an 

afterthought.

The plaintiff’s second reason for denial of benefits 

was that the Dental Practice terminated its participation in the 

REAL VEBA on October 22, 2003. See Settlement Agreement ¶¶ M, 

N, O (CX 53).

Section 3.01 of the Plan Document states: 

[An employee] shall be a participant . . . only during the 

period the Employer is a member of the League. Upon 

termination of the Employer’s League membership, whether 

voluntary or involuntary, the Employee shall have no 

further right to the benefits hereunder, including without 

limitation, those benefits for which claims have been made 

but not yet paid on the date League membership terminates. 

Plan Document § 3.01 (CX 7). This portion of the Plan Document, 

the plaintiff argues, means that because the Dental Practice 

terminated League membership, Dr. Castellano no longer had the 

Case 2:03-cv-06903-WB Document 351 Filed 08/25/15 Page 24 of 34
25

right to have his named beneficiaries receive benefits because 

he was no longer a participant. 

The difficulty in adopting the plaintiff’s argument, 

however, is that § 9.02 confounds the plain meaning of § 3.01.

Section 9.02 reads in pertinent part:

(a) Upon dissolution of the Plan and/or termination of 

the Employees’ association from the League by virtue 

of an Employer’s voluntary or involuntary termination 

of membership in the League, any assets remaining in 

the Plan after satisfaction of all liabilities to 

existing Beneficiaries shall be applied in one or a 

combination of the following, as selected by the 

Trustee or Plan Administrator in its discretion. 

[. . . .]

(b) In the event an Employer terminates it [sic] membership 

in the League, either voluntarily or involuntarily, any 

distribution to Employees of such Employer pursuant to 

section 9.02(a) shall be made only from the aggregate 

assets of the Trust constituting the Participant Account(s) 

attributable to such Employer’s Employees. Without 

limiting the generality of the foregoing, distributions to 

a particular Participant may be based upon a formula. . . . 

Plan Document § 9.02 (CX 7).

The language regarding “satisfaction of all 

liabilities to existing Beneficiaries” and “distribution to 

Employees of such Employer” raises the question as to why - if 

§ 3.01 is interpreted as written - there would be liabilities to 

existing beneficiaries or distributions to employees if the 

employer has terminated membership in the League. If benefits

terminate with employer membership in the League, as § 3.01 

seems to provide, then § 9.02 is superfluous as it refers to 

distributing benefits that would not exist. 

Case 2:03-cv-06903-WB Document 351 Filed 08/25/15 Page 25 of 34
26

At oral argument, counsel for the plaintiff argued 

that § 9.02 is not inconsistent with § 3.01 because it refers to 

the termination of the REAL VEBA Plan as a whole, not 

termination of league membership at the individual employer 

level. See Oral Arg. Tr. 30-31, Oct. 22, 2012.

The difficulty with that interpretation is that the 

use of the and/or conjunction in § 9.02(a) means that the 

section applies in the event that the employee’s association 

with the Plan is severed because of the employer’s voluntary or 

involuntary termination of membership in the league, even 

without the total dissolution of the Plan. 

Extrinsic evidence is also in conflict. The SPD 

states at one point:

Expulsion from the VEBA - IMPORTANT NOTICE

Under the terms of the Plan, you are only entitled to 

benefits so long as your Employer is a member of the League 

which sponsors this Plan. League membership can be 

terminated voluntarily or involuntarily. NO BENEFITS WILL 

BE PAID FOLLOWING TERMINATION OF LEAGUE MEMBERSHIP.

The League reserves the right to involuntarily expel your 

Employer from League membership. This could happen if your 

Employer made false statements in its documents connected 

with adopting this Plan. It could also happen if your 

Employer fails to fulfill its financial responsibilities to 

the Plan and Trustee. There are other reasons why 

expulsion could occur.

If your Employer is not in compliance with the League’s 

rule regarding contributions to the Plan, claims for 

benefits are not obligations of this Plan until after 30 

days after they are presented. If your employer is 

expelled or terminates League membership during that time, 

Case 2:03-cv-06903-WB Document 351 Filed 08/25/15 Page 26 of 34
27

the benefit will not be paid, even if a claim has been 

presented.

SPD § 11 (CX 6). 

In the above-quoted portion of the SPD, the first 

paragraph has a categorical statement that no benefits will be 

paid following termination of league membership. That statement 

seems belied by the third paragraph, however, which describes 

the termination of league membership as having the effect of 

cutting off benefits when that termination occurs within thirty

days of a benefit claim. The Court notes that the termination 

of league membership in this case occurred more than thirty days 

after the claim for benefits. 

Moreover, there is additional extrinsic evidence in 

favor of Castellano’s position as language from a part of the 

Penn-Mont website called a Benefits Case Study says, 

“[E]mployers should enter into these arrangements with the 

intention of providing valuable benefits. If termination does 

occur, all assets are allocated to those employees who where 

[sic] actively participating on the date of termination. 

Distribution is made pro rata, in proportion to each employee’s 

cumulative compensation during years of participation in the 

plan.” CX31. 

The conflict between § 3.01 and § 9.02 of the Plan 

Documents renders the Plan Documents ambiguous with respect to 

Case 2:03-cv-06903-WB Document 351 Filed 08/25/15 Page 27 of 34
28

the impact of termination of league membership on a claim for 

benefits, and the extrinsic evidence only adds to that 

ambiguity.

In this case, on the particular facts of this record, 

the Court finds that to deny benefits was an abuse of 

discretion. Three of the four specific reasons given for the 

denial appear to be make weight. None of them either 

individually or together would be an adequate basis to deny 

benefits under these circumstances. The fourth reason, 

termination of the plan by one of Mrs. Castellano’s stepsons,

does present a more serious issue. But under these 

circumstances, the Court finds that it was an abuse of 

discretion to rely on the termination.

Mrs. Castellano made her application for benefits 

almost three months before the termination of the Plan. The 

Plan was terminated by her stepson, who was antagonistic toward 

his stepmother, shortly before the filing of the lawsuit. Oral 

Arg. Tr. 38:21-39:6, Oct. 22, 2012; Koresko Stmt. ¶ 46; 

Castellano Stmt. Resp. ¶ 46; Settlement Agreement ¶¶ M, N, O. 

(CX53). The insurance company had already paid $751,266.18 to

the REAL VEBA Trust. The language of the documents is ambiguous 

and should be construed against the drafter, especially in this 

Case 2:03-cv-06903-WB Document 351 Filed 08/25/15 Page 28 of 34
29

case where there was a conflict of interest and procedural 

irregularities in the decision making.18

The Court is especially concerned about the procedural 

irregularities. The death benefit forms were sent on July 29, 

2003, and a proposed settlement agreement was sent on July 30, 

2003. Mrs. Castellano then retained Holland & Knight who 

attempted to represent her in discussions with Penn-Mont. PennMont responded with a letter dated September 24, 2003, 

threatening litigation and challenging Holland & Knight’s right 

to represent Mrs. Castellano because they were not Pennsylvania 

lawyers. Holland & Knight responded in a letter dated October 

8, 2003, in which Holland & Knight told Ms. Bonney to deal 

exclusively with them and setting out legal arguments as to why 

Penn-Mont was wrong about their right to represent Mrs. 

Castellano and about Mrs. Castellano’s right to receive the face 

value of the policy. Rather than continuing the discussion with 

Holland & Knight or going forward with the administrative 

process then, Koresko filed a lawsuit against Mrs. Castellano on 

November 26, 2003. Meanwhile, one of Mrs. Castellano’s step- 18 Cf. Heasley v. Belden & Blake Corp., 2 F.3d 1249, 1257 

(3d Cir. 1993), (“Adoption of contra proferentem as a federal 

common law rule in ERISA insurance cases makes sense because to 

do otherwise would require us to ... afford less protection to 

employees and their beneficiaries than they enjoyed before ERISA 

was enacted, a result that would be at odds with the 

congressional purposes of promoting the interests of employees 

and beneficiaries and protecting contractually defined 

benefits.”) (internal quotations omitted).

Case 2:03-cv-06903-WB Document 351 Filed 08/25/15 Page 29 of 34
30

sons, who had inherited the dental plan and was antagonistic 

toward Mrs. Castellano, terminated the Plan on October 22, 2003. 

Had there been a willingness to engage in discussion with 

Holland & Knight, the dispute may have been resolved before the 

termination. The Court limits its decision to the facts of this 

case.

The Court, therefore, rules that the Trust must pay 

$750,000.00 to Mrs. Castellano. The Court is not ordering that 

Koresko or the Koresko entities pay the benefits to Mrs. 

Castellano because in the Perez case, discussed above, the Court 

ordered them to pay restitution for losses and disgorgement of 

profits to the Trusts in an amount over $19 million. 

The Court does not need to decide whether it was 

improper under the trust documents for the trust, in the first 

instance, to refuse to pay Castellano the full amount of the 

policy but instead to offer a lesser amount up front or the 

$750,000.00 over ten years because this case has now been 

pending for twelve years, and Mrs. Castellano has received no 

benefits over those years.

The Court considered referring this matter to the 

Administrator or Trustee whom the Court has appointed but 

concluded that referral would not be fair to Mrs. Castellano 

Case 2:03-cv-06903-WB Document 351 Filed 08/25/15 Page 30 of 34
31

because this case has been pending for so many years.19 If the 

Trustee were to deny the claim or any part of it, the decision 

would be back before this Court. Under these particular 

 19 The plaintiff argues, based on the holding in Conkright 

v. Frommert, 559 U.S. 506 (2010), that if the Court concludes 

that there was an abuse of discretion, the Court should refer 

the matter back to the administrator to determine what benefits, 

if any, Castellano is entitled to. In Conkright, the Supreme 

Court held that lower courts erred when they did not apply a 

deferential standard of review to a plan administrator’s 

interpretation of plan provisions, even after the plan 

administrator’s previous interpretation had been invalidated 

under a deferential standard of review. Id. at 512-522. 

Conkright does not compel the Court to refer this matter to the 

administrator. Conkright holds that courts should apply a 

deferential standard of review to the interpretations of a plan 

administrator, not that courts must give plan administrators an 

opportunity to offer such an interpretation. Id.

One important concern motivating the Supreme Court’s 

decision in Conkright is not present in this case: the interest 

in predictability and consistent interpretations of plan 

provisions. Id. at 517-18. The Conkright Court was concerned 

with avoiding “a patchwork of different interpretations of a 

plan . . . that covers employee in different jurisdictions.” 

Id. at 517. The Court’s interpretation of the Plan in this case 

will not give rise to conflicting interpretations among 

different employees due to the unique factual circumstances that 

form the basis of the Court’s decision. The Court’s 

interpretation of the termination clause, for example, is based 

partly on the circumstances in which the clause was exercised in 

this case. Those facts are unlikely to be repeated in future 

claims.

The statutory language on which Castellano’s claims are 

based also shows that the Court is not required to refer 

Castellano’s claims to the administrator. Section 1132(a)(1)(B) 

states that a civil action may be brought by a beneficiary “to 

recover benefits due to [her] under the terms of the plan.” 

29 . U.S.C. § 1132 (a)(1)(B). ERISA, therefore, expressly 

provides that an award of benefits due a beneficiary is a proper 

remedy in a section 1132 (a)(1)(B) action.

Case 2:03-cv-06903-WB Document 351 Filed 08/25/15 Page 31 of 34
32

circumstances, the Court does not think it would be fair or 

equitable to delay payment any longer.

B. Other Claims

On August 29, 2011, Castellano filed a Motion to Amend 

that sought to add a count for equitable relief under ERISA 

Section 502(a)(3), citing the Supreme Court case Cigna v. Amara, 

131 S. Ct. 1866 (2011). The Court will grant the motion to add 

the claim but will not decide that claim in light of the Court’s 

conclusion that Castellano is entitled to benefits under the 

Plan documents.

Castellano’s counterclaim brought state law claims for 

breach of contract, common law breach of fiduciary duty, and 

conversion. These claims were alleged as an alternative theory 

to recovery under ERISA and are preempted by the Court’s finding 

that the Castellano Plan is governed by ERISA. 

The counterclaim complaint also brought a count under 

29 U.S.C. § 1132(a)(2), but such an action for breach of 

fiduciary duty is a derivative suit on behalf of the Plan. The 

remedy for such breach is for a fiduciary to make good on losses 

or restore profits to the Plan, not to the beneficiary. 

See 29 U.S.C. § 1109.

The counterclaim also brought a count under 29 U.S.C. 

§ 1132(a)(2), alleging a failure to provide a requested copy of 

Case 2:03-cv-06903-WB Document 351 Filed 08/25/15 Page 32 of 34
33

the life insurance policy for Castellano’s husband. That count 

has not been argued so the Court denies summary judgment to 

Castellano on that claim.

Finally, Castellano brought a civil RICO count, 

alleging a conspiracy among various Koresko-controlled entities.

One of the elements of a RICO claim is that the defendants 

engaged in a pattern of racketeering activity. 18 U.S.C. 

§ 1962(c). To establish a pattern of racketeering activity, a 

plaintiff must establish that the defendant committed at least 

two acts of prohibited racketeering activity, and that those 

predicate acts are both related and amount to or pose a threat 

of continued criminal activity. H.J. Inc. v. Nw. Bell Tel. Co., 

492 U.S. 229, 239, 109 S. Ct. 2893, 2900, 106 L. Ed. 2d 195 

(1989). 

Here, Castellano alleges that the Koresko parties 

committed predicate acts in the form of conversion and mail and 

wire fraud. The Court finds that the record does not establish 

the Koresko parties engaged in the requisite predicate acts in 

this particular matter. 

IV. Conclusion

For the foregoing reasons, the Court will deny the 

plaintiff’s motion for summary judgment on its declaratory 

judgment action regarding the claim that the REAL VEBA may 

Case 2:03-cv-06903-WB Document 351 Filed 08/25/15 Page 33 of 34
34

refuse to pay any benefit to Castellano. The Court will grant 

Castellano’s motion for summary judgment for relief under 

Section 502(a)(1)(B) of ERISA and award Castellano benefits 

under the Plan Documents. 

The Court will deny Castellano’s motion for summary 

judgment on its equitable ERISA claim, the common law 

counterclaims, and the civil RICO claims.

An appropriate order follows.

Case 2:03-cv-06903-WB Document 351 Filed 08/25/15 Page 34 of 34