Futterman v. United Employee Benefit Fund

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

Ronald Futterman,

Plaintiff,

Case No. 20-cv-6722

v.

United Employee Benefit Fund, et al., Judge Mary M. Rowland

Defendants.

MEMORANDUM OPINION AND ORDER

Plaintiff brings this case under the Employee Retirement Income Security Act

of 1974 (ERISA) against an employee benefit fund, the fund’s trustees, and the fund’s

plan administrator alleging that they breached their fiduciary duties, failed to

provide him documents upon written request, and failed to terminate the fund in

contravention of a governing trust agreement. Defendants have moved to dismiss

pursuant to Federal Rule of Civil Procedure 12(b)(6). [14]. For the reasons explained

below, this Court denies Defendants’ motion.

I. Background

This Court accepts as true the following factual allegations from the complaint

[1]. See Bilek v. Fed. Ins. Co., 8 F.4th 581, 586 (7th Cir. 2021).

Plaintiff participates in the United Employee Benefit Fund (Fund) which, until

Plaintiff turns ninety years old, entitles his beneficiaries to a death benefit worth

between $1 million and $1.5 million. [1] ¶ 1. Plaintiff is currently seventy-seven

years old. Id.

Defendant Fund constitutes an “employee benefit plan” under Section 3(3) of

ERISA, 29 U.S.C. § 1002(3). Id. ¶ 9. Defendants Gary Meyers and John Fernandez

serve as the Fund’s Board of Trustees. Id. ¶ 11. The Board has, at all relevant times,

been the plan administrator and plan sponsor of the Fund. Id. The Board appointed

Defendant David Fensler to act on its behalf as plan administrator in connection with

day-to-day operations and administration of the Fund. Id. ¶ 14. Certain plan

documents—such as the summary plan description (SPD) and the trust agreement—

govern Plaintiff’s Fund benefits and other rights concerning the Fund. Id. ¶¶ 3, 15,

34, 42.

On or around May 21, 2020, Plaintiff received a letter dated May 11, 2020 from

Trustee Meyers. Id. ¶ 39. The letter stated, in relevant part, that “for participants

65 and over there will be a 30% reduction of their life insurance death benefit.” Id.

Because he believed that the Fund had no right or authority to reduce his benefit,

Plaintiff began to write letters to Defendants, asking them to provide his plan

documents and requesting an explanation regarding the basis and authority for the

reduction in benefits. Id. ¶ 42. Plaintiff claims that his repeated efforts to obtain

necessary documents proved futile and that he received only some documents. Id.

Plaintiff also claims he received some documents more than thirty days after his

requests. Id.

Plaintiff also alleges that a 2020 annual statement for his life insurance policy

revealed a loan balance in the amount of $2,769.61 despite never requesting a loan.

Id. ¶¶ 73–74. As of the filing of Plaintiff’s complaint, neither Fensler nor anyone else

has provided any information to Plaintiff about the reason for the loan balance. Id.

¶ 76.

Plaintiff additionally asserts that he discovered other improprieties which

could threaten his rights to, or value of, his death benefit. Id. ¶ 77. Specifically,

Plaintiff alleges that the trust agreement requires that the Fund terminate when

there are no more employers required to make contributions to the Fund, and as of

2018, there were no longer any employers with such an obligation. Id. ¶ 92. Plaintiff

thus claims that the Fund trustees have failed to terminate the Fund in accordance

with the Trust Agreement. Id. ¶ 92.

Plaintiff brings a four-count complaint under ERISA to redress his alleged

statutory injuries. Count I alleges a failure to provide plan documents against

Defendants Fensler, Meyers, and Fernandez under ERISA section 104(b)(4); Count

II alleges breach of fiduciary duty against all Defendants based upon their purported

failure to administer the Fund in accordance with governing documents; Count III

alleges breach of fiduciary duty against Meyers, Fernandez, and Fensler based upon

the reduction of Plaintiff’s death benefit; and Count IV alleges failure to terminate

the trust in accordance with the trust agreement against all Defendants.

Defendants have moved to dismiss all claims against them. [14].

II. Legal Standard

A motion to dismiss tests the sufficiency of a complaint, not the merits of the

case. Gunn v. Cont’l Cas. Co., 968 F.3d 802, 806 (7th Cir. 2020). To survive a motion

to dismiss under Rule 12(b)(6), “the complaint must provide enough factual

information to state a claim to relief that is plausible on its face and raise a right to

relief above the speculative level.” Haywood v. Massage Envy Franchising, LLC, 887

F.3d 329, 333 (7th Cir. 2018) (quoting Camasta v. Jos. A. Bank Clothiers, Inc., 761

F.3d 732, 736 (7th Cir. 2014)); see also Fed. R. Civ. P. 8(a)(2) (requiring a complaint

to contain a “short and plain statement of the claim showing that the pleader is

entitled to relief”). A court deciding a Rule 12(b)(6) motion accepts plaintiff’s well-

pleaded factual allegations as true and draws all permissible inferences in plaintiff’s

favor. Degroot v. Client Servs., Inc., 977 F.3d 656, 659 (7th Cir. 2020). A plaintiff

need not plead “detailed factual allegations,” but “still must provide more than mere

labels and conclusions or a formulaic recitation of the elements of a cause of action

for her complaint to be considered adequate under Federal Rule of Civil Procedure

8.” Bell v. City of Chicago, 835 F.3d 736, 738 (7th Cir. 2016) (quoting Ashcroft v.

Iqbal, 556 U.S. 662, 678 (2009)).

Dismissal for failure to state a claim is proper “when the allegations in a

complaint, however true, could not raise a claim of entitlement to relief.” Bell Atl.

Corp. v. Twombly, 550 U.S. 544, 558 (2007). Deciding the plausibility of the claim is

“a context-specific task that requires the reviewing court to draw on its judicial

experience and common sense.” Bilek, 8 F.4th at 586–87 (quoting W. Bend Mut. Ins.

Co. v. Schumacher, 844 F.3d 670, 676 (7th Cir. 2016)).

III. Analysis

A. Exhaustion of Administrative Remedies

Defendants first argue that Plaintiff’s claims should all be dismissed for failure

to exhaust mandatory administrative remedies available under the Plan. [14] at 6–

7.

ERISA requires benefit plans to implement administrative dispute resolution

processes. Di Joseph v. Standard Ins. Co., 776 F. App’x 343, 348 (7th Cir. 2019); 29

U.S.C. § 1133. Although ERISA’s text is silent on the issue, the Seventh Circuit has

long “interpreted ERISA as requiring exhaustion of administrative remedies as a

prerequisite to bringing suit under the statute.” Id. (quoting Schorsch v. Reliance

Standard Life Ins. Co., 693 F.3d 734, 739 (7th Cir. 2012)); see Zhou v. Guardian Life

Ins. Co. of Am., 295 F.3d 677, 679 (7th Cir. 2002) (“As a pre-requisite to filing suit,

an ERISA plaintiff must exhaust his internal administrative remedies.”). Failure to

exhaust is, however, not an element of an ERISA claim but rather an affirmative

defense. Lange v. The Univ. of Chi., No. 15 C 7303, 2015 WL 7293588, at *2 (N.D. Ill.

Nov. 19, 2015). Accordingly, this Court can only dismiss an ERISA case for failure

to exhaust if it appears that way from the face of the complaint. Id.

There is no dispute that an administrative process exists in this case. The

trust agreement governing the Fund provides: “All questions or controversies of any

kind arising between any parties or persons in connection with the Trust or its

operation, whether as to any claim for benefits, the construction of this Agreement,

the Plans of Benefits, or any decision, or accounts in connection with the operation of

the trust, shall be submitted to the Trustees for decision.” [1-1] at 21. The allegations

here suggest that Plaintiff sufficiently exhausted this process.

Plaintiff submitted his written dispute concerning the Trustees’ decision and

authority for reducing his benefits by letter to Trustee Meyers, and emailed a copy to

the Plan Administrator, Fensler, on May 22, 2020. [1] ¶ 42. He also invoked his right

under ERISA to receive pertinent documents within 30 days of his written request.

Id. ¶¶ 42–43. Plaintiff also set forth a list of questions about the Trustees’ decision

in an email on June 9 to Fensler, noting that Meyers had not responded to him. Id.

¶¶ 45–46. Plaintiff emailed Fensler again on July 6 noting that Meyers had failed to

respond to his May 22 letter. Id. ¶ 48. On July 8, Fensler told Plaintiff he forwarded

Plaintiff’s questions to Fund counsel. Id. ¶¶ 58–59. On July 17, Plaintiff received

another notice about his benefit cut, stating that “inquiries should be directed to”

Fund counsel. Id. ¶ 63. Following this notice, Plaintiff communicated with Fensler,

and Fensler disclosed that Defendants had not reviewed Plaintiff’s life insurance

policy when deciding to reduce benefits by 30%. Id. ¶ 70. Fensler also never

responded to Plaintiff’s inquiries about the loan balance on his annual statement. Id.

¶ 75. Thus, construing all allegations in Plaintiff’s favor, it appears that Plaintiff did

submit “questions and controversies” to the trustees “for decision,” and the trustees

never responded. His actions sufficiently satisfied the trust agreement’s

administrative process.

Defendants also invoke an administrative procedure for claim resolution found

in the SPD, arguing that Plaintiff did not satisfy a multi-step review and appeals

process set forth therein. The SPD states: “Prior to filing a claim for benefits and

exhausting his or her rights to review . . . , your beneficiary will not be able to seek

review of a denial of benefits or to bring any action in any court to enforce a claim for

benefits.” [1-1] at 43. The Plan then outlines a process for submitting a claim and

then for appealing a denial of a claim. See id. at 44 (“If a claim is denied, in whole or

in part, your beneficiary has the right to request that the Plan Administrator review

the denial.”). Id. at 44. Defendants argue that Plaintiff never went through this

multi-step administrative process. But as Plaintiff points out, that process, by its

plain terms, applies only to beneficiaries, and Plaintiff is not a beneficiary but rather

a Plan participant. See [1] ¶ 1. The SPD’s administrative review procedure therefore

is inapplicable to Plaintiff.

For these reasons, this Court declines to dismiss the complaint based upon a

failure to exhaust.

B. Pleading Relief for Breach of Fiduciary Duty in the Alternative

In Counts II and IV, Plaintiff has asserted breach of fiduciary duty claims and

has requested relief under ERISA section 502(a)(1)(B), as well as equitable relief

under section 502(a)(3) and section 502(a)(2). Section 502(a)(1)(B) authorizes a

participant to sue “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.” 29 U.S.C. § 1132(a)(1)(B). Section 502(a)(3) permits

civil actions to be brought “(A) to enjoin any act or practice which violates any

provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate

equitable relief (i) to redress such violations or (ii) to enforce any provisions of this

subchapter or the terms of the plan.” 29 U.S.C. § 1132(a)(3). In Varity Corporation

v. Howe, the Supreme Court held that the equitable relief contemplated under section

502(a)(3) is available only when ERISA does not otherwise elsewhere provide

“adequate relief.” 516 U.S. 489, 515 (1996).

Against this statutory backdrop, Defendants contend that Plaintiff’s breach of

fiduciary duty claims fail because he impermissibly asserts recovery under both

section 502(a)(3) and section 502(a)(1)(B). [14] at 8–10. True, at the conclusion of the

suit, “a plaintiff is not entitled to equitable relief for claims already covered by the

statute, such as a claim to recover benefits owed under a plan.” Day v. Humana Ins.

Co., 335 F.R.D. 181, 195 (N.D. Ill. 2020). But this case is still at the pleadings stage.

District courts in this circuit permit plaintiffs to plead claims under both subsections

as alternative theories. Id. (collecting cases); see also Crista v. Wis. Physicians Serv.

Ins. Corp., No. 18-CV-365-WMC, 2021 WL 3511092, at *18 (W.D. Wis. Aug. 10, 2021).

This Court declines to dismiss Counts II and IV due to Plaintiff’s pleading of

alternative theories of relief.

C. Ripeness

Defendants argue that Plaintiff’s breach of fiduciary duty claims in Counts II–

IV are unripe because the Plan only provides benefits payable to beneficiaries upon

Plaintiff’s death, and Plaintiff is still alive. [14] at 7–8. This argument lacks merit

because it erroneously assumes that a participant or beneficiary must have an

immediate claim to a benefit in order to sue under ERISA. To the contrary, ERISA

allows any “participant or beneficiary” to “bring suit generically to ‘enforce his rights’

under the plan, or to clarify any of his rights to future benefits.” Aetna Health Inc. v.

Davila, 542 U.S. 200, 210 (2004) (emphasis added). Thus, as a plan participant,

Plaintiff can sue “even if benefits are not presently due.” Neuma, Inc. v. Wells Fargo

& Co., 515 F. Supp. 2d 825, 846 (N.D. Ill. 2006).

D. Plan Documents Pursuant to a “Written Request”

Defendants next move for dismissal of Plaintiff’s claim in Count I pursuant to

29 U.S.C. § 1024(b)(4). [14] at 10. Section 1024(b)(4) requires an administrator,

upon written request, to furnish a beneficiary with certain plan documents. Killian

v. Concert Health Plan, 742 F.3d 651, 658 n.23 (7th Cir. 2013); see 29 U.S.C. §

1024(b)(4) (“The administrator shall, upon written request of any participant or

beneficiary, furnish a copy of the latest updated summary, plan description, and the

latest annual report, any terminal report, the bargaining agreement, trust

agreement, contract, or other instruments under which the plan is established or

operated.”).

Defendants argue that Plaintiff never submitted a “written request” for

documents to a plan administrator because the complaint alleges that Fensler (the

plan administrator) was merely copied by email on a May 22, 2020 letter Plaintiff

sent to Meyers requesting copies of the CBA, union documents, and trust documents.

[14] at 11; see [1] ¶ 43. No authority exists for the notion that a carbon copy to the

plan administrator fails to satisfy “written request” requirement. And in any event,

Plaintiff’s email requests for documents following the May 22 communication

addressed Fensler directly. See [1] ¶ 45 (June 9 email to Fensler requesting union

documents), ¶ 47 (June 26 email to Fensler requesting a follow-up to his May 22 letter

and June 9 email)), ¶ 48 (July 6 email to Fensler concerning the failure to respond to

Plaintiff’s May 22 letter).

Defendants also incorrectly suggest that Plaintiff’s email communications

cannot qualify as “written” requests. [14] at 12. An email is plainly a form of written

communication, and the Seventh Circuit has affirmed penalties against an

administrator who failed to respond to an emailed request for a summary plan

document in a timely fashion. See Huss v. IBM Med. & Dental Plan, 418 F. App’x

498, 509 (7th Cir. 2011).

Defendants also argue that Plaintiff sought a larger universe of documents

than contemplated under section 1024(b)(4). [14] at 12. To be sure, Plaintiff

requested an “explanation regarding the basis and authority for the reduction in

benefits” and “Union Documents,” and these requests may fall outside of the scope of

section 1024(b)(4). But Plaintiff also asked for the master bargaining agreement and

trust documents. [1] ¶¶ 43, 49. Those documents fall squarely under section

1024(b)(4).

Finally, Defendants contend that Plaintiff does not allege prejudice or

detrimental reliance based upon their failure to provide documents. [14] at 13. This

argument also lacks merit. Section 1024(b)(4) does not require a plaintiff to plead

and prove prejudice or detrimental reliance. See Mondry v. Am. Fam. Mut. Ins. Co.,

557 F.3d 781, 806 (7th Cir. 2009); Harsch v. Eisenberg, 956 F.2d 651, 662 (7th Cir.

1992).

IV. Conclusion

For the reasons stated above, the Court denies Defendants’ motion to dismiss.

[14]. Defendants are ordered to answer the complaint by November 23, 2021.

ENTER:

Dated: November 5, 2021 “4

MARY M. ROWLAND

United States District Judge

11