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Chavez v. Plan Benefit Services, Inc.

United States District Court, W.D. Texas, Austin Division

June 15, 2018




         BE IT REMEMBERED on this day the Court reviewed the file in the above-styled cause, and specifically Defendants' Motion to Dismiss [#56], Plaintiffs' Response [#63] in opposition, and Defendants' Reply [#65] in support. Having reviewed the documents, the governing law, and the file as a whole, the Court now enters the following opinion and order.


         Plaintiffs Heriberto Chavez, Evangelina Escarcega on behalf of her disabled son Jose Escarcega, and Jorge Moreno bring this action on behalf of themselves and a proposed class of similarly situated participants and beneficiaries under the Employee Retirement Income Security Act of 1974 (ERISA) against Defendants Fringe Insurance Benefits, Inc., Plan Benefit Services, Inc., and Fringe Benefit Group (Defendants). Am. Compl. [#42] at 1.

         Defendants market and administer retirement, health, and welfare benefit plans to the employees of nonunion employers seeking to compete for government contracts. Id. at 10. Nonunion employers seeking to bid on such government contracts are often required to pay their workers "prevailing wages"-the wages and benefits paid to the majority of similarly situated laborers in the area during the relevant time period-in order to qualify for government contracts. Id. at 10. Defendants offer a "Contractors Plan" to such employers through which the employers can affordably provide retirement, health, and welfare benefits to their workers and thereby submit competitive bids for government work. Id. at 10; Resp. [#63] at 3.

         Once they have enrolled in the Contractors Plan, employers can offer retirement benefit plans to their employees through the Contractors and Employee Retirement Trust (CERT) and can offer health and welfare benefit plans to their employees through the Contractors Plan Trust (CPT). Am. Compl. [#42] at 1, 10; Resp. [#63] at 3. CERT is a "master pension trust, which sponsors a prototype defined contribution plan" for employees, while CPT is a multiple-employer trust that serves as a vehicle for marketing, administering, and funding the provision of health and welfare benefits to employees. Am. Compl. [#42] at 10-11. Defendants serve as Master Plan Sponsor and Recordkeeper for both CPT and CERT. Am. Compl. [#42] at 8-13. In their capacity as Master Plan Sponsor, Defendants entered into trust agreements with institutional trust companies for both CPT and CERT. American National Bank of Texas Trust Division (ANB) served as Trustee of CERT from June 2, 2014 until July 1, 2016, when it was replaced by Pentegra Trust Company (Pentegra). Mot. Dismiss [#56-7] Attach. G (ANB Master Trust Agreement) at 10; id. [#56-8] Attach. H (Pentegra Master Trust Agreement) at 10. Pentegra currently serves as the Trustee of both CPT and CERT. Am. Compl. [#42] at 11.

         Plaintiffs' employer, Training, Rehabilitation & Development Institute, Inc. (TRDI) enrolled in Defendants' Contractors Plan to facilitate the provision of retirement benefits as well as health and welfare benefits to TRDI employees. Id. at 1-2; Resp. [#63] at 3. Upon enrolling in the Contractors Plan, TRDI established a health and welfare plan (TRDI Health and Welfare Plan) and a retirement plan (TRDI Retirement Plan) by executing adoption agreements with CPT and CERT, respectively. Am. Compl. [#42] at 11; Mot. Dismiss [#56-1] Attach. A (CPT Adoption Agreement); id. [#56-2] Attach. B. (CERT Adoption Agreement).

         The documents governing CERT, CPT, and the TRDI plans distribute various responsibilities and duties among TRDI, the Trustee, and Defendants. Relevant here, Plaintiffs allege Defendants possessed the ability to (1) control disbursements from the trusts and direct the Trustee to make disbursements, including for Defendants' own fees; (2) select the investment platform options made available to employers;[1] (3) appoint and remove the Trustee; and (4) select and remove service providers. Am. Compl. [#42] at 9-10.


         Plaintiff Heriberto Chavez is employed by TRDI and was a participant in the TRDI Health and Welfare Plan.[2] Am. Compl. [#42] at 4-5. For every hour Chavez worked for TRDI, TRDI contributed a certain amount of money to a fringe benefit account. Id. This fringe benefit account was used to help pay Chavez's premiums incurred through his enrollment in health and welfare plans provided through TRDI. Id.

         Fees charged by Defendants in connection with the administration of Chavez's account were deducted directly from Mr. Chavez's account. Id. Though Chavez did not make any contributions to the TRDI Retirement Plan, Plaintiffs contend contributions should have been made to the plan on Chavez's behalf because excess funds in Chavez's account were supposed to be contributed to an individual CERT retirement account in his name. Id. Plaintiffs allege Chavez received no such contribution because of the excessive fees charged by Defendants. Id.

         Jose Escarcega and Jorge Moreno are employed part-time as custodians for TRDI. Id. at 6-8. From August 2014 through May 2015, Escarcega and Moreno were participants in the TRDI Retirement Plan, and from June 2015 through July 2016, they were participants in the TRDI Health and Welfare Plan. Id. For every hour Escarcega and Moreno worked, TRDI made contributions to their fringe benefit accounts under either the TRDI Retirement Plan or the TRDI Health and Welfare Plan. Id. With respect to both plans, Defendants' fees for plan administration services were subtracted from Escarcega and Moreno's individual accounts. Id. Plaintiffs allege that if Defendants had not charged excessive fees, Escarcega and Moreno would have accrued greater retirement savings in their accounts. Id.

         Procedural Posture

         In July 2017, Plaintiffs filed this suit against Defendants in federal court alleging violations of ERISA. Compl. [#1]. In October 2017, Defendants filed a motion to dismiss Plaintiffs' original complaint, which the Court granted. Mot Dismiss [#27]; Order of November 6, 2017 [#36]. Plaintiffs subsequently filed an amended complaint. Am. Compl. [#42]. Defendants now move to dismiss Plaintiffs amended complaint. Mot. Dismiss [#56]. This pending motion is ripe for review.


         I. Legal Standard

         The Federal Rules of Civil Procedure require each claim in a complaint include "a short and plain statement.. . showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). The claims must include sufficient factual allegations, accepted as true, to state a claim for relief that is facially plausible. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). "A claim has facial plausibility when the plaintiff pleads sufficient factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 566 U.S. at 678. Although a plaintiffs factual allegations need not establish the defendant is probably liable, they must establish more than a "sheer possibility" a defendant has acted unlawfully. Id. Determining plausibility is a "context-specific task, " and must be performed in light of a court's "judicial experience and common sense." Id. at 679.

         Motions to dismiss for failure to state a claim are appropriate when a defendant attacks the complaint because it fails to state a legally cognizable claim. Fed.R.Civ.P. 12(b)(6). When a district court reviews a motion to dismiss pursuant to Rule 12(b)(6), it must construe the complaint in favor of the plaintiff and take all well-pleaded facts as true. Gonzalez v. Kay, 577 F.3d 600, 603 (5th Cir. 2009). However, a court is not bound to accept legal conclusions couched as factual allegations. Papasan v. Allain, 478 U.S. 265, 286 (1986). While all reasonable inferences will be resolved in favor of the plaintiff, the plaintiff must plead "specific facts, not mere conclusory allegations." Tuchman, 14 F.3d at 1067. In deciding a motion to dismiss, courts may consider the complaint, as well as other sources such as documents incorporated into the complaint by reference and matters of which a court may take judicial notice. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007).

         II. ...

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