The opinion
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
SECRETARY OF U.S. DEPARTMENT CASE NO. 1:19-CV-00968
OF LABOR,
Plaintiff, JUDGE PAMELA A. BARKER
-vs-
ROBERT KAVALEC, et al., MEMORANDUM OF OPINION AND
ORDER
Defendants.
This matter comes before the Court upon the parties’ simultaneous briefing regarding the
appropriateness of a stay of this case. Plaintiff Secretary of U.S. Department of Labor (the “DOL”)
opposes a stay. (Doc. Nos. 40, 46.) Defendants/Third-Party Plaintiffs Robert Kavalec, Charles
Alferio, Victor Collova, the Board of Trustees of the Fleet Owners Insurance Fund (“the Board”),
and the Fleet Owners Insurance Fund (the “Fund”) (collectively, “Defendants”) all request that a stay
be granted until March 1, 2020. (Doc. Nos. 38, 41, 43, 44, 45, 47.) Third-Party Defendant Medical
Mutual Services, LLC (“MMS”) has not taken a formal position, but, on balance, believes a stay is
appropriate. (Doc. No. 39.) For the following reasons, it is hereby ORDERED that this case be
STAYED until March 1, 2020.
I. Background
This case arises under the Employee Retirement Income Security Act of 1974 (“ERISA”), as
amended, 29 U.S.C. § 1001, et seq. According to the DOL, the Fund is an employee benefit plan
within the meaning of ERISA and a multiemployer health and welfare plan that provides health,
welfare, and death benefits to covered members and eligible dependents, including employees of the
Fund’s participating employers. (Doc. No. 1 at ¶¶ 3, 5.) Kavalec, Alferio, and Collova all either
served or continue to serve as Trustees of the Fund. (Id. at ¶¶ 12-14.) The DOL alleges that the
Board, Kavalec, Alferio, and Collova, as fiduciaries of the Fund, violated multiple provisions of
ERISA by, among other things, authorizing and approving the payment of their own compensation
and administering the Fund in violation of the Health Insurance Portability and Accountability Act
and the Patient Protection and Affordable Care Act. (Id. at ¶¶ 22-96.)
On April 30, 2019, the DOL filed its Complaint against Defendants based on the above
allegations. (Id.) Defendants all answered the Complaint and asserted third-party claims against
MMS. (Doc. Nos. 5, 20, 21, 32.) MMS served as the claims administrator for the Fund and was
generally responsible for processing and paying, according to the terms of the Fund’s benefits book
and summary plan description, claims for medical and health expenses incurred by covered persons
who participated in the Fund. (Doc. No. 28-1 at 3.) MMS has moved to dismiss Defendants’ Third-
Party Complaints against it. (Doc. Nos. 28, 33.) The DOL has also filed motions to strike the jury
demands and certain affirmative defenses asserted by Defendants. (Doc. Nos. 17, 23, 42.)
On August 27, 2019, the parties participated in a Case Management Conference with the
Court. During that conference, counsel for the Fund, the Board, and Kavalec (in his capacity as
employee Administrator and not as Trustee), Kavalec, pro se, counsel for Collova, and Alferio, pro
se, orally requested a stay of proceedings until March 1, 2020. The Court directed the parties to
advise the Court by September 10, 2019 regarding whether they were agreeable to such a stay. (Doc.
No. 34.) On September 11, 2019, the parties filed a Joint Status Report in which they advised the
Court that they were unable to come to an agreement regarding a stay of this matter. (Doc. No. 35.)
As a result, the Court directed the parties to engage in simultaneous briefing regarding the
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appropriateness of a stay. (Doc. No. 37.) In particular, the Court asked the parties to address the
three factors courts typically consider: (1) any prejudice to the non-moving party if a stay is granted,
(2) any prejudice to the moving party if a stay is not granted, and (3) the extent to which judicial
economy and efficiency would be served by the entry of a stay. (Id.)
Pursuant to the Court’s Order, Defendants filed briefs in support of a stay, and the Fund and
Collova also filed responses to the DOL’s brief. (Doc. Nos. 38, 41, 43, 44, 45, 47.) Although
Defendants filed briefs individually, the Court will address their relevant arguments together, as all
are in favor of a stay. First, Defendants argue that the DOL will not be prejudiced by a stay because
the DOL started investigating the Fund four to five years ago and delaying this case several more
months would not prejudice the DOL in any way. (Doc. No. 38 at 2; Doc. No. 41 at 3; Doc. No. 43
at 2; Doc. No. 47 at 2.) Defendants also point out that the DOL has not alleged any imminent danger
to the Fund from mismanagement that would exacerbate any shortage in funds, and delay alone is not
a sufficient reason to deny a stay. (Doc. No. 44 at 5-6; Doc. No. 38 at 2.)
Next, Defendants contend that the Fund would be prejudiced if a stay is not granted.
Defendants assert that the Fund has an obligation to pay Kavalec, Alferio, and Collova’s legal fees
in this action, and that such payment is legally permissible. (Doc. No. 44 at 12-13.) In addition, there
is an existing insurance policy that potentially provides coverage for both the Fund and the individual
Defendants in this case, but the Fund’s initial claim was denied by the insurer. (Doc. No. 41 at 3.)
Thus, Defendants contend that, without a stay, the Fund would be prevented from attempting to obtain
coverage from its insurer before additional legal fees are incurred, which would deplete the Fund’s
limited resources and harm the Fund’s participants. (Doc. No. 38 at 3-4; Doc. No. 44 at 12-13.)
Defendants have represented that the Fund has approximately $2.2 million in total resources, and
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there is already litigation pending against the Fund for over $2 million, in addition to roughly
$550,000 in open claims. (Doc. No. 38 at 3; Doc. No. 43 at 3.) Defendants also claim that the
individual Defendants would be prejudiced by the lack of a stay because without the opportunity to
obtain payment for their legal fees from either the Fund’s insurer or the Fund itself, they likely will
have to proceed in this litigation without counsel. (Doc. No. 41 at 3; Doc. No. 44 at 13-14.) Collova’s
counsel has not been compensated for representing Collova to date, but will not be able to continue
its representation without compensation indefinitely. (Doc. No. 44 at 4 n.1.) In addition, Kavalec,
in his capacity as Trustee, and Alferio have already been representing themselves pro se.
Finally, Defendants assert that a stay would promote judicial economy and efficiency for
several reasons. First, because the Fund ceased accepting premiums as of February 28, 2019, no
additional claims will be eligible to be paid after February 28, 2020. (Doc. No. 41 at 2.) As a result,
as of March 1, 2020, the Fund will know with relative certainty its payment obligations to its
members. (Id.) Defendants argue this knowledge will significantly advance this litigation, as it will
affect how the parties and the Court view the claims and alleged damages in the case. (Id. at 4.)
Second, Defendants contend that a stay will promote settlement by providing the Fund time to resolve
outstanding claims and Defendants time to secure insurance coverage that would ensure that the
maximum funds are available for any potential settlement. (Doc. No. 38 at 4; Doc. No. 44 at 15; Doc.
No. 47 at 3.) Third, Defendants argue that judicial efficiency is enhanced when all parties are
represented, and a stay again provides time for Defendants to obtain insurance coverage and, thus,
representation. (Doc. No. 44 at 15-16.)
As noted above, the DOL filed a brief in opposition to a stay, as well as a response to
Defendants’ briefs. (Doc. Nos. 40, 46.) The DOL argues that it would be prejudiced by a stay because
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it has brought its claims in a representative capacity on behalf of the Fund, and a stay would delay
the adjudication of this case and the restoration of losses to the Fund, which could cause Fund
“participants to be responsible for the full amount of their unpaid health claims.” (Doc. No. 40 at 8.)
Moreover, the DOL asserts that the Fund would not be prejudiced were the case to proceed
because the DOL does not allege any violations against the Fund itself and the Fund is prohibited by
law from paying or advancing legal fees to the other Defendants. (Id. at 9.) Thus, contrary to
Defendants’ claims, the DOL asserts the Fund’s assets would not be depleted through legal fees.
(Doc. No. 46 at 2.) The DOL contends that Kavalec, Alferio, and Collova also would not be
prejudiced if a stay was not granted, as the only effect would be that they would continue to incur
their own defense costs if they were unable to resolve their disputes with their liability insurer, and
this is not a legally cognizable reason for a stay. (Doc. No. 40 at 14.) The DOL also questions the
propriety of the Fund engaging in coverage suits that may be meritless or only benefit the individual
Defendants. (Doc. No. 46 at 4-5.)
Finally, the DOL argues that a stay would not promote judicial economy or efficiency because
the other litigation currently pending against the Fund will not resolve any issues in this case. (Doc.
No. 40 at 15.) In the event that the Court finds that a stay is warranted, the DOL requests that any
stay be limited to sixty days. (Id.)
MMS also filed a position statement regarding the potential stay of this action. (Doc. No. 39.)
MMS notes the potential prejudice that the various parties may face, including the fact that a stay
would prevent MMS from seeking expedited dismissal of what it believes are meritless claims against
it. (Id. at 2.) While MMS believes, on balance, a stay is appropriate, it “has no formal position as to
the propriety of a stay.” (Id. at 3.)
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II. Analysis
The Supreme Court has held that “the power to stay proceedings is incidental to the power
inherent in every court to control the disposition of the causes on its docket with economy of time
and effort for itself, for counsel, and for litigants.” Landis v. North American Co., 299 U.S. 248, 254
(1936). Moreover, “[t]he decision to enter a stay ‘ordinarily rests within the sound discretion of the
District Court.’” Georgia-Pacific Consumer Products LP v. Four-U-Packaging, Inc., No.
3:09CV1071, 2010 WL 55973, at *2 (N.D. Ohio Jan. 5, 2010) (quoting Ohio Envtl. Council v. U.S.
Dist. Ct., 565 F.2d 393, 396 (6th Cir. 1977)). In exercising that discretion, “a district court generally
considers three factors: (1) ‘any prejudice to the non-moving party if a stay is granted,’ (2) ‘any
prejudice to the moving party if a stay is not granted,’ and (3) ‘the extent to which judicial economy
and efficiency would be served by the entry of a stay.’” Griffin v. Portaro Grp., Inc., No. 1:18-CV-
2786, 2019 WL 1577929, at *1 (N.D. Ohio Apr. 12, 2019) (quoting Williams v. City of Cleveland,
No. 1:09CV02991, 2011 WL 2848138, at *2 (N.D. Ohio July 14, 2011)).
Having considered all of the parties’ arguments, the Court finds that a stay of this case is
appropriate. Initially, the DOL has failed to establish that either it or the Fund would be prejudiced
by a stay. The DOL offers no evidence that a stay would prejudice it, besides indicating that a stay
would delay the adjudication of its claims. But delay alone is generally not sufficient to prevent a
stay, as it is inherent in any stay. See Automated Packaging Sys. v. Free-Flow Packaging Int’l, No.
5:14CV2022, 2016 U.S. Dist. LEXIS 194647, at *10 (N.D. Ohio Apr. 15, 2016) (“Plaintiff indicates
that a stay will not prejudice Defendant or present it with a clear tactical disadvantage, beginning by
correctly asserting that delay in itself is not enough to deny a stay.”). Moreover, the DOL’s lengthy
investigation prior to bringing suit suggests that there is no pressing need to resolve its claims against
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Defendants. With regard to the Fund, for which the DOL brings its claims in a representative
capacity, the DOL asserts a stay may result in Fund participants not being fully reimbursed for their
unpaid health claims. However, the DOL does not identify any way in which a stay would exacerbate
the Fund’s shortage of resources. As Defendants point out, the DOL does not allege that Fund assets
are currently being misused. Finally, MMS indicates that the only potential prejudice it would face
from a stay is the delay of its dismissal, but does not oppose a stay, and has stated it believes a stay
is appropriate. Thus, the Court concludes that this factor does not weigh against a stay.
While the DOL would not be prejudiced by a stay, multiple Defendants would be prejudiced
if the Court does not grant a stay. First, although the parties highly contest whether it is legally
permissible for the Fund to pay the other Defendants’ legal fees—and the Court takes no position on
that issue at this time—continuing litigation would eliminate any opportunity for the Fund to avoid a
legal dispute and to obtain coverage from its insurer for these expenses before they start to incur.
Relatedly, if the Court does not stay the case, Kavalec, Alferio, and Collova will not have time to
obtain coverage for their legal fees and will likely have to proceed in this litigation without counsel
based on their lack of funds to pay for a defense. This prejudice to Defendants supports the grant of
a stay. See Pan Am Sys., Inc. v. Hardenbergh, No. 2:11–cv–00339–NT, 2012 WL 4855205, at *2
(D. Me. Oct. 12, 2012) (granting a stay pending the resolution of the defendant’s duty to defend claim
against his insurer).
Additionally, judicial economy and efficiency would be served by the entry of a stay. By
March 1, 2020, the Fund will know its total payment obligations to its members and will have had
time to resolve many members’ claims, which will help facilitate settlement. The potential for
Defendants to obtain insurance coverage will also maximize the potentially available funds, further
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increasing the chances that the parties will be able to reach a settlement. Finally, efficient
adjudication of the issues will be improved if all of the parties are represented by counsel. As such,
this factor also favors a stay in this case.
Accordingly, the Court finds that a stay of this case is warranted. In addition, the Court
declines to adopt a stay of only sixty days, as advocated by the DOL. The Court agrees with
Defendants that sixty days is an arbitrary number. Many of the benefits from a stay of this case, as
discussed above, only arise if the case is stayed through March 1, 2020. Thus, the Court will stay
this case until March 1, 2020.
III. Conclusion
For the reasons set forth above, it is hereby ORDERED that this case be STAYED until March
1, 2020. Further, the Fund is ORDERED to provide the Court with a status report on December 1,
2019 and every thirty (30) days thereafter during the stay of proceedings. The parties are to meet and
confer by November 15, 2019 to reach an agreement as to the content of the status reports.
IT IS SO ORDERED.
s/Pamela A. Barker
PAMELA A. BARKER
Date: November 1, 2019 U. S. DISTRICT JUDGE
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