# Acosta v. Board of Trustees of UNITE HERE Health

> District Court, N.D. Illinois · March 31, 2023

URL: https://www.frixlaw.com/law-library/cases/10148613

## Case

- **Court:** District Court, N.D. Illinois
- **Decided:** March 31, 2023
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

JOSE LUIS ACOSTA, et al.,

Plaintiffs, No. 22 C 1458

v. Judge Harry D. Leinenweber

BOARD OF TRUSTEES OF UNITE HERE
HEALTH, et al.,

Defendants.

MEMORANDUM OPINION AND ORDER
The Named Plaintiffs and bring this proposed class action
suit on behalf of similarly situated current and former Unite Hire
Health participants against Defendant Board of Trustees of UNITE
HERE Health and Does 1 through 10 for multiple violations under
the Employee Retirement Income Security Act (ERISA) statute.
Defendants move to dismiss all counts pursuant to under Federal
Rules of Procedure 12(b)(1) and 12(b)(6). (Dkt. No. 19).
For the reasons stated herein, Defendants’ motion to dismiss
is GRANTED IN PART AND DENIED IN PART.
I. BACKGROUND
Accepting the allegations in the Complaint as true, the
relevant facts are as follows.
Unite Hire Health (UHH) is a multiemployer employee welfare
benefit plan as defined in ERISA. 29 U.S.C. § 1002(1). (Compl. at
¶ 18, Dkt. No. 1.) Pursuant to ERISA, UHH was created and is

maintained pursuant to an Agreement and Declaration of Trust
(“Trust Agreement”). (Id. at ¶ 19; Compl. Ex. 1, 1 PTF 1-66, Dkt.
No. 1-1.) UHH is divided into approximately 16 to 19 functional
benefit programs called “Plan Units.” (Id. at ¶¶ 23-24.)
Defendant Board of Trustees is the “named fiduciary” of UHH
as defined in ERISA section 402(a)(1), 29 U.S.C. § 1102(a)(1).
(Id. at ¶ 21; Ex. 1, PTF 40.) Each trustee is a “plan fiduciary”
of UHH as defined in ERISA section 3(21)(A), 29 U.S.C. §
1002(21)(A). (Id.)
The Named Plaintiffs are current and former participants in
Plan Units 178, the “Los Angeles Plan Unit” and Plan Unit 278
covering Orange County and Long Beach. (Compl. ¶¶ 13-17, Dkt. No.
1.) Plan Unit 150 is the “Las Vegas Plan Unit.”

Each Plan Unit has its own operating budget that is set,
approved, and monitored separately by the Executive Committee of
the Board of Trustees. (Complaint ¶¶ 24, 26; Ex. 1, PTF 6, 22.)
UHH manages the assets of the Plan Units separately. (Id. at 23-
26, 31 53.) To participate in UHH, an employer must, among other
things, sign a Collective Bargaining Agreement (CBA) with a local
union or participating agreement that obliges the employer to
contribute to UHH at a rate greater than or equal to a minimum
contribution rate set by UHH; allow UHH to increase the
contribution rate at least every three years; bind itself to the
Trust Agreement; and ratify without notice acts taken by Trustees
to effectuate service and administration. (Id. at 60-68.)

Pursuant to the Trust Agreement, Defendants’ policy, referred
to as “Minimum Standards,” sets terms and conditions that must be
included in any employer’s CBA as a condition of participating in
UHH. (Id. at ¶ 56; Ex. 2, PTF 67-79; Ex. 1, PTF 7, 35.) Even if a
CBA is consistent with the Minimum Standards, “the Trustees may
reject any agreement that they determine, at their sole discretion,
to be detrimental to the interests of the Fund’s Participants and
Beneficiaries.” (Id. at ¶ 72; Ex. 2, PTF 69.)
The Minimum Standards document refers to CBAs that require
all increases to employee compensation be taken from a fixed pot
shared with UHH as “bucket allocation” provisions or “allocated

contribution rates.” At least eight CBAs, including those to which
several Plaintiffs are parties, use the “bucket allocation
method.” (Compl. at ¶ 87; Exs. 25-33, PTF 735-1133.) Under this
scheme, every increase in contributions to UHH necessarily reduces
participants’ other compensation by the same amount. A decision by
the union and employer to allocate to UHH less than it demands may
result in Defendants’ termination of health benefits. (Id. at ¶¶
62, 84, 85; Ex. 2, PTF 69, 75.) The Complaint identifies seven
CBAs that provide for predetermined contribution rates yet specify
that if UHH demands any more than the agreed-upon rates, the
difference will be taken from employee wages. (Id. at ¶ 88; Exs.
34-40; PTF 1161-1498.) Other Plaintiffs are parties to CBAs with
this method. (Id.)

“Self-insured” health plans are more expensive to administer
than “fully-insured” health plans. (Id. at ¶ 46.) Under a self-
insured plan, benefit claims (for example, the cost of a
prescription) are paid directly from plan assets, whereas under a
fully-insured plan, plan assets are used to pay premiums to an
insurance company, which in turn pays benefit claims. (Id. at ¶¶
46-49, 110, 127.) Participants in Plan Units 178 and 278 have a
fully-insured benefit plan. (Id.) Plan Unit 150, also known as the
Las Vegas Plan Unit, partially self- insured health benefits. (Id.
at ¶¶ 89-90.) Participants in the Las Vegas Plan Unit received
superior medical benefits, including the option for a free
appointment at an “exclusive clinic.” (Id. at ¶ 184.)

Over the six plan years covered by the Complaint, the annual
administrative expenses allocated by Defendants to Plan Units 178
and 278 were between $1,058 per participant and $1,064 per
participant. (Id. at ¶¶ 114, 116, 117, 132; Ex. 11, PTF 613; Ex.
12, PTF 636.) During the same period, the annual administrative
expenses per participant allocated to the Las Vegas Plan Unit
totaled between $531 and $582. (Id. at 183.)
The expenses did not appear to match the return on the
spending; the better health plans were found with the lower
administrative costs. (Id. at ¶¶ 114, 116, 117, 132, ¶ 183; Ex.

11, PTF 613; Ex. 12, PTF 636.)
In Plan Year 2018, UHH incurred overall administrative
expenses at a rate of $853 per participant. Compl. 156.
Administrative expenses of the average comparable self-insured
multiemployer health plan were $719, and for the median comparable
self-insured multiemployer health plan were $663. Compl. 154-56.
The In 2019, UHH’s rate was $899 per participant, while the average
comparator spent $765 and the median $718. (Id. at 147-49.)
Plaintiffs bring two counts for violation of fiduciary duties
of loyalty and prudence, pursuant to (ERISA §§ 502(a)(2),
502(a)(3), and 409; 29 U.S.C. §§ 1132(a)(2), 1132(a)(3), and 1109),
specifically, the unfair allocation of administrative expenses in

Count I and excessive administrative expenses in Count II. In Count
III, Plaintiffs claim prohibited transactions in violation of
ERISA § 406, 29 U.S.C. § 1106. Plaintiffs bring Count IV for
violation of exclusive purpose rule of ERISA § 403, 29 U.S.C. §
1103. Plaintiffs bring Count V for restitution and disgorgement,
pursuant to ERISA §§ 502(a)(2) and 502(a)(3), 29 U.S.C. §§
1132(a)(2) and 1132(a)(3)).
Defendants filed a motion to dismissal all counts pursuant to
under Federal Rules of Procedure 12(b)(1) and 12(b)(6).
II. LEGAL STANDARD
Standing

Article III limits federal courts' jurisdiction to “cases”
and “controversies.” U.S. Const. art. III, § 2. Constitutional
standing requires that the plaintiff has “(1) suffered an injury
in fact, (2) that is fairly traceable to the challenged conduct of
the defendant, and (3) that is likely to be redressed by a
favorable judicial decision.” Spokeo, Inc. v. Robins, 578 U.S.
330, 338 (2016) (cleaned up). “The party invoking federal
jurisdiction bears the burden of establishing these elements.” Id.
at 561. “At the pleading stage, general factual allegations of

injury resulting from the defendant’s conduct may suffice, for on
a motion to dismiss [courts] presume that general allegations
embrace those specific facts that are necessary to support the
claim.” Lujan, 504 U.S. at 561 (internal citations and quotations
omitted). “There is no ERISA exception to Article III.” Thole v.
U.S. Bank, N.A., 140 S. Ct. at 1620, 1622.
Failure to State a Claim

To survive a motion to dismiss under Rule 12(b)(6), a
complaint must state a claim to relief that is plausible on its
face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A
claim has facial plausibility “when the plaintiff pleads 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). A plaintiff's “[f]actual
allegations must be enough to raise a right to relief above the

speculative level on the assumption that all allegations in the
complaint are true.” Twombly, 550 U.S. at 555 (cleaned up).
Presuming the truth of the facts alleged in the complaint and
drawing all reasonable inferences in the plaintiffs' favor, a
district court may consider documents attached to a motion to
dismiss if the documents are referenced in the plaintiffs'
complaint and are central to the claim. Dean v. Nat'l Prod. Workers
Union Severance Tr. Plan, 46 F.4th 535, 543 (7th Cir. 2022).
“To take a claim of fiduciary duty violation from the realm
of possibility to plausibility, a plaintiff must provide enough
facts to show that a prudent alternative action was plausibly
available, rather than actually available.” Hughes v. Nw. Univ.,

2023 WL 2607921, at *8-10 (7th Cir. Mar. 23, 2023) (cleaned up);
see also Tibble v. Edison Int'l, 575 U.S. 523 (2015) (Determining
whether a plaintiff states plausible claims against plan
fiduciaries for violations of ERISA's duty of prudence requires a
context-specific inquiry of the fiduciaries’ continuing duty to
monitor investments and to remove imprudent ones.).
III. ANALYSIS

Standing
Defendants argue that Plaintiffs lack the requisite standing
for jurisdiction in federal court. To dispute that Plaintiffs
suffered an injury in fact, Defendants argue that Plaintiffs failed

to allege that their benefits were affected. However, Plaintiffs
allege other injuries including lost wages. Defendant contends
that Plaintiff’s allegations of lost wages were untraceable to
Defendants and otherwise conclusory. Defendants’ finally argue
that standing is foreclosed by the lack of redressability for lost
wages.
Lost wages suffice as an injury for standing purposes, and
Plaintiffs pled lost wages. Plaintiff explained, supported by
exhibits, that every penny they give in contribution is one less
penny of wages. Cf. Thole v. U.S. Bank, N.A., 140 S. Ct. 1615,
1619 (2020) ("every penny of gain or loss is at the beneficiary's
risk"). Plaintiffs explain how Defendants exert influence over the

CBAs that instrumentalize this wage loss in tandem with Defendant’s
actions. The explanation is more than a theory; it is supported by
agreements with these operative terms between UHH and employers.
A defendant’s actions need not be “the very last step in the chain
of causation” to establish standing. Bennett v. Spear, 520 U.S.
154, 168-69 (1997). Instead, the traceability requirement may be
satisfied even when the injury is “produced by [a] determinative
or coercive effect upon the action of someone else.” Id. at 169.
Defendants’ attempts to fit these facts to Thole v. U.S. Bank,
N.A., 140 S. Ct. 1615, 1619 (2020). In Thole, the Supreme Court
ruled that plaintiff participants in a defined-benefit plan lacked

standing when the benefits plaintiffs received were not tied to
the values of their accounts. Ultimately, the plaintiffs would be
positioned the same whether they won or lost the lawsuit. The Court
explained the distinction between a defined-benefit plan and a
defined-contribution plan. In the latter, the benefits fluctuated
in accord with the investment decisions. Here, Plaintiff alleged
that the conduct of Defendants impacted their end of the bargain,
including in terms of lost wages, higher cost-sharing and
coinsurance payments, and less valuable health benefits.
Counts I and II: Fiduciary Duties of Loyalty and Prudence

Plaintiffs bring two counts for violation of ERISA’s
fiduciary duties of loyalty and prudence. In Count I, Plaintiffs
claim unfair allocation of administrative expenses, and in Count
II, Plaintiffs claim excessive administrative expenses, both
pursuant to ERISA §§ 502(a)(2), 502(a)(3), and 409; 29 U.S.C. §§
1132(a)(2), 1132(a)(3), and 1109.

Under the Employee Retirement Income Security Act of 1974
(ERISA), 88 Stat. 829, as amended, 29 U.S.C. § 1001 et seq., ERISA
plan fiduciaries must discharge their duties “with the care, skill,
prudence, and diligence under the circumstances then prevailing
that a prudent man acting in a like capacity and familiar with
such matters would use in the conduct of an enterprise of a like
character and with like aims.” § 1104(a)(1)(B); Hughes v. Nw.
Univ., 142 S. Ct. 737, 739 (2022).

To state a breach of the fiduciary duty of prudence under
ERISA, a plaintiff must plead “(1) that the defendant is a plan
fiduciary; (2) that the defendant breached its fiduciary duty; and
(3) that the breach resulted in harm to the plaintiff.” Allen v.
GreatBanc Tr. Co., 835 F.3d 670, 678 (7th Cir. 2016). Plaintiffs
do not dispute that the named Defendants are plan fiduciaries under
29 U.S.C. § 1002(21). Defendants argues that there was no breach
because the allegations, taken as true, do not show that it acted
imprudently. As discussed, supra, Plaintiffs pled plausible harm
from this alleged breach.
The content of the duty of prudence turns on “the

circumstances ... prevailing” at the time the fiduciary acts, 29
U.S.C. § 1104(a)(1)(B), so the appropriate inquiry will be context
specific. Fifth Third Bancorp v. Dudenhoeffer, 573 U.S. 409, 425.
The Seventh Circuit clarified that a pleading need not show that
a prudent alternative was actually available; showing that an
alternative prudential option was plausibly available sufficed.
Hughes v. Nw. Univ., 2023 WL 2607921, at *8-10 (7th Cir. Mar. 23,
2023).
Here, Plaintiffs showed that similarly situated funds accrued
significantly lower administrative costs. This finding
demonstrates not only consistency but some likelihood that the
fiduciary failed to conduct regular reviews of its investment. See
Tibble v. Edison Int'l, 575 U.S. 523, 528. Because the national

average and median spend for was over ten percent lower across the
board, the Court finds that it is plausible that this difference
is explained by excessive administrative expenses, and alternative
acceptable explanations appear indeed less likely. Additionally,
the Court finds Plaintiff demonstrated irrational differences
between the allocation of administrative expenses.
Therefore, Counts I and II survive Defendants’ motion.
Count III & IV: Exclusive Purpose Rule & Prohibited Transactions

Plaintiffs bring Count III, prohibited transactions in
violation of ERISA § 406, 29 U.S.C. § 1106, and Count IV, violation
of exclusive purpose rule of ERISA § 403, 29 U.S.C. § 1103.
Subject to certain qualifications, “a fiduciary shall
discharge his duties with respect to a plan solely in the interest
of the participants and beneficiaries and ... for the exclusive

purpose of ... providing benefits to participants and their
beneficiaries.” 29 U.S.C. § 1104(a)(1)(A)(i). This is known as the
“exclusive benefit” rule. Halperin v. Richards, 7 F.4th 534, 545–
46 (7th Cir. 2021). Then, 29 U.S.C. § 1106 implements the exclusive
benefit rule by prohibiting various types of self-dealing and other
conflicts of interest. Id.
Defendants argue that Plaintiff failed to state a plausible

claim for either count. Regarding the excessive purpose rule,
Defendants dispute Plaintiffs’ contention that Plan Units 178 and
278 are separate benefit plans from Plan Unit 150. The Trust
Agreement does contradictory language regarding the agency of the
Plan Units and their relation to each other. Still, plenty of the
language there, and other allegations in the Complaint support
Plaintiff’s characterization.
Still, Plaintiffs must also allege facts calling into doubt
Defendants’ loyalty. Defendants argue that Plaintiffs failed to
plead facts that support their allegation that UHH funds were used
for anyone other than “participants in the plan and their
beneficiaries,” as is necessary for a violation of the exclusive

purpose rule. Furthermore, Defendants argue that Plaintiffs failed
to identify a single “prohibited transaction” and instead resorted
to vague allegations that identify neither the “party in interest”
and which part of the statute.
The Court agrees. Neither self-dealing nor any violation of
the duty loyalty is presumed with a violation of the fiduciary
duty of prudence. The claims are, of course, distinct and require
different allegations. Absent specificity regarding self-dealing
or other disloyal behavior, Plaintiff failed to state a claim for
either prohibited transactions or a violation of the exclusive
purpose rule. Counts III and IV are dismissed.

Count V: Restitution and Disgorgement
Plaintiffs bring Count V for restitution and disgorgement,
pursuant to ERISA §§ 502(a)(2) and 502(a)(3), 29 U.S.C. §§
1132(a)(2) and 1132(a)(3)). Defendants’ arguments for dismissal of
this count echo their arguments regarding standing. Furthermore,

Defendants argue that Plaintiffs did not plead that Defendants
have ever been in possession of funds belonging to Plaintiffs.
Plaintiffs admit that they do not yet know the identities of all
Defendants. The Court finds this issue is premature at this stage
in litigation and declines to decide at this time.
IV. CONCLUSION

Defendants’ motion to dismiss (Dkt. No. 19) is GRANTED IN
PART AND DENIED IN PART. In ruling on this motion, Defendants’
Motion to Supplement Authority (Dkt. No. 26) was GRANTED and
Plaintiff’s Motion to Supplement Authority (Dkt. No. 29) was
GRANTED.
Harry D. Leinenweber, Judge
United States District Court
Dated: 3/31/2023

14

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10148613. Public record. Not legal advice.